New Orleans The financial meltdown in the real estate market of 2007, marked by foreclosures triggered by speculation and broker scams and wiping out the citizen wealth of millions of families, continues to carry a legacy of community and family disasters. Once again Wall Street and the unregulated, robber baron private equity industry is the face of more disaster in communities. As part of the ACORN Home Savers Campaign, we joined experts from the Federal Reserve Bank and elsewhere last fall in Memphis at the Hooks Institute to present the evidence of their attempt to corner huge segments of the housing market in Memphis, leading to high eviction rates and disastrous and predatory market concentration. All of which made reading “The Great Wall Street Housing Grab” by Francisco Mori, a very painful, déjà vu experience.
The backstory is well-known. Private equity companies, led by Blackstone, took advantage of the glut of foreclosed properties among single-family homes in working class and moderate communities and suburbs to buy properties in bulk at fire sale prices. Using subsidiaries, like Invitation Homes, which has made them billions as they sold out their interests, they consolidated market share making the homes into rentals units, attaching predatory fees and practices with low maintenance, and bleeding the neighborhoods.
Peter Kuhns, a former ACORN California organizer is quoted early in the report talking about the impact on the greater Los Angeles area where he has long worked, most recently as regional director for the Alliance of Californians for Community Empowerment (ACCE), the California ACORN successor.
“Neighborhoods that were formerly ownership neighborhoods that were one of the few ways that working-class families and communities of color could build wealth and gain stability are being slowly, or not so slowly, turned into renter communities, and not renter communities owned by mom-and-pop landlords but by some of the biggest private-equity funds in the world.”
The stories in the article were horrific about the exploitation of tenants, including in some cases the former owners of the same homes who had been swept up in foreclosure during the crisis. Their efforts to bribe and induce activists to coverup their bad behavior was shocking.
More concerning is the predatory way they have concentrated in various markets and among minority areas. Our colleague, Elora Raymond, at the Atlanta Federal Reserve found that “a third of all Colony American tenants in Georgia’s Fulton County received an eviction notice in 2015. One of the strongest predictors was the concentration of African-Americans in their neighborhood.” A Los Angeles research effort found that neighborhoods where 15% of the homes “are owned by large single-family-rental companies have an average black population of 30 percent.” It’s not hard to follow this trail!
Another researcher from Cornell found that “Institutional investors own 11.3 percent of single-family rental homes in Charlotte, 9.6 percent in Tampa and 8.4 percent in Atlanta.” Add Memphis to that list, and perhaps a city near you. A California study found that “if single-family rental ownership in a neighborhood went up by 10 percent, property values went down by 4 to 7 percent.”
Meanwhile the private equity folks are securitizing these properties in large tranches. What could go wrong? Where have we seen this movie before?
We need to block the tracks and stop this train before it runs over our neighborhoods and cities.
Wade Rathke is founder and chief organizer of ACORN and ACORN International. You can find Wade’s recent past posts here Chief Organizer Reports. And you can link to his website here Chief Organizer ACORN/ACORN International