Wall Street and Big Corporations Go Rental and It Means Trouble

ACORN Home Savers Campaign Crew in Atlanta gets organized to hit doors in metro Atlanta suburbs
l to r: Fred Brooks, Karimah Dillard, Marcus Brown, and Lou Sartor

Atlanta   Marcus Brown from North Carolina is new to the Atlanta area, and he has yet to fall in love with it. Marcus was my navigator as we teamed up to hit the doors on rent-to-own contract buyers in metro Atlanta as one of ACORN’s Home Buyers Campaign teams visiting throughout the area. I’ve hit a lot of doors in urban America and around the world. I’ve even hit a good number in rural areas on different campaigns and organizing drives. On union organizing drives I always knew we were in trouble when I drew names in the suburbs of this city or that, but I would never put my name on the top of any master list as a suburban organizer, but that may have to change. Marcus and I were in for a learning experience and some miles to drive it turned out as we plowed through our list. We were a half-hour outside of Atlanta working our way in through one small community after another, and we were in grassy yards, and cookie-cutter, aluminum siding suburbs, and never saw a white family all day. We also saw more “for rent” signs than we saw “for sale” signs, and, frankly, we didn’t see many of either in this red hot real estate market.

But, we started connecting the dots as we looked at the cases in point.

Freddie Mac announces a billion dollar fund to back up efforts to create rental housing last week. The article was scratching its head from sentence to sentence.

 

Even while we were walking up to the doors in Atlanta suburbs, I had an article I had pulled out of the Wall Street Journal in my pocket entitled “Wall Street is the New Suburban Landlord.” In the wake of the housing crisis a lot of Wall Street money and big time realty firms are specializing in renting single family homes in the suburbs. They are betting that in the wake of the Great Recession and housing implosion of 2008, the bloom is off the rose of housing ownership for many families. They estimate that more than 200,000 homes have been bought in a $40 billion spree of bottom fishing from the foreclosure crisis and flipping the homes into rental units. Where the foreclosure epidemic went viral in the South and Southwest, they fed at that trough.

In Atlanta, we were at ground zero it would seem. In a June 2017 estimate of the top markets for the largest single-family-home rental companies, Atlanta led with 24,075 homes on offer, Tampa-St. Pete had over 14,000, Phoenix, over 13,000, Miami almost 11,000, Charlotte right behind at 10, 570, Orlando over 9000, Dallas almost 9000, and Houston over 8000. You get the picture.

This also dovetails with a research report written by Elora Raymond at the Atlanta Federal Reserve Bank that found that the eviction rate in greater Atlanta was over 20% for rental units, and, hear the drumbeat now that will surprise no one, corporate owned rental properties evicted tenants at a significantly higher rate than privately owned landlords. She also noted that eviction rates are increasing significantly in markets all over the country.

Connecting the dots leads to some frightening conclusions where vacancy rates are low in hot markets and affordable housing is a mirage for working and lower income families. The business model depends on quick evictions and the extra cash from late payment fees as tenants try to scrounge to catch up with their landlords, who are now using the courts to pad their payments.

Just the kind of business that Wall Street would love obviously. But, just as we found on the doors, don’t think this is just an urban problem, it’s in the suburbs as well, and as gentrification has increased and rents have soared, many suburban neighborhoods are now populated with our families as well.

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Government at all Levels Needs to Act on Contract Purchase Predators – Now!

New Orleans   Advocates and lawyers are firing more and more bullets at contract purchase predators and the Home Savers Campaign has raised the ante on its demands to Fannie Mae (FNMA) in yet more signs that the offensive against these real estate robber barons is gaining increased traction.

Another front has opened with the filing of a lawsuit by Fair Housing Center of Central Indiana at the end of May. They went after local operator Empire Holding Company and its subsidiary Rainbow Realty, that has acquired over 1000 dilapidated houses in the Indianapolis area and is marketing them as contract purchase rent-to-own properties. The owner admits that virtually all of them are uninhabitable. The Fair Housing Center argues that they are breaking a pile of laws, but also makes the claim that a huge percentage of these houses are in African-American areas and that the contract sales push is directed at these same populations in a discriminatory manner.

Sarah Mancini and Margot Saunders, both of the National Consumer Law Center, and experts in this area, make a similar case in looking at the metro Atlanta area in an article pointedly entitled, “Land Installment Contracts: The Newest Wave of Predatory Home Lending Threatening Communities of Color,” in a recent issue of Communities & Banking. They call attention to the work of the Atlanta Legal Aid, saying,

Atlanta Legal Aid attorneys conducted a search of property tax records in six metro Atlanta counties and found 94 properties currently held by Harbour Portfolio in the Atlanta area; most of these homes were likely being sold through land installment contracts as that is Harbour’s business model.9 Nearly all those properties (approximately 93 percent) were located in census blocks that are at least 60 percent nonwhite, and a significant majority were in census blocks that are at least 90 percent nonwhite.

It’s hard to avoid underlining the obvious. First, the scale of this activity is huge, when you are talking about a local company in Indianapolis alone handling more than 1000 such houses. In an evil local market, they dominate any other national players. Secondly, these are not equal opportunity predators, but are de facto discriminators.

For these reasons and others, the Home Savers Campaign is also increasing the pressure by sending a letter to the head of Fannie Mae today, asking that the agency investigate and bar not only Vision Property Management, as they did recently, but also Harbour Portfolio. In addition the campaign named a number of companies using the same practices in the Detroit market and demanded that they also be barred, indicating as well they they wanted a meeting with FNMA in order to push for clearer standards to block access to government auctions in the future to any company that plans to sell them “as is” through land installment contracts. Home Savers Campaign also indicated that it intends to make similar demands city to city in other markets for FNMA bans, as they understand the FNMA criteria better.

It’s bad, and it’s on!

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