Vulture Landlords: an in depth interview with Desiree Fields


The crisis in Ireland’s private rented sector keeps gathering steam, and recent additional regulations introduced by Alan Kelly are not going to make much of a difference. One of the most novel aspects of what’s happening currently is the emergence of a new type of landlord: financial institutions buying cheap real estate and becoming mega-landlords. We’ve written an overview of this for the irelandafternama blog. But to understand what this means for tenants and for tenants organising, we thought we’d have a chat with Desiree Fields, a leading researcher and activist whose work focuses on this issue in the US context. She was involved in a recent global action against the vulture fund Blackstone, in which we also took part. Her work has uncovered the meteoric rise of private equity firms in the US rental sector, as well as analysing how and why this is happening and what the implications for tenants’ activism.

The provisional university: Why are private equity firms currently so interested in investing in the private rented sector in the US?

Desiree Fields: The private rented sector is attractive right now because of the fallout from the global financial crisis. The interplay of depressed and discounted prices, constrained mortgage credit, and declining rates of home ownership and increasing rental demand make for some powerfully attractive market fundamentals. Property can be acquired cheaply, especially relative to pre-crisis prices. The role property development played in the housing bubble (in the US we saw this mainly in the Sun Belt region) means the property is often new or recently built, and may not require significant rehabilitation expenses to get it to market. In light of how mortgage lending has tightened up since the crisis, fewer would-be owner-occupiers are in a position to take advantage of depressed prices (or to compete significantly with institutional capital). Constrained mortgage credit, together with high levels of foreclosure, negative equity, and mortgage distress, plus the lingering effects of recession, mean that homeownership rates are falling (in the US, all ownership gains since the 1990s have been wiped out) and rental demand is increasing, so it’s a good time to become a landlord.


PU: But why are private equity firms in particular becoming landlords?

DF: In the US the crisis created opportunities for all kinds of investors, but institutional investors enjoy advantages over smaller investors in the present landscape. First, they have access to far greater amounts of capital generally, but they have also been aided by monetary policy: with central banks holding interest rates close to zero for close to eight years, yield-hungry capital (including that of pension funds, who comprise the largest category of investors in the Blackstone fund focusing on distressed real estate acquisition) has poured into riskier investment strategies such as private equity. In turn, this equity helps firms to access cheap debt from banks (helped again by monetary policy). Second, acquiring and restructuring distressed assets is a key private equity strategy, so private equity firms have considerable experience in navigating the marketplace for distressed assets. Finally, their capital and expertise with distressed assets position private equity firms to take advantage of government programs selling distressed property and loans in bulk (the Distressed Asset Stabilization Program in the US, IBRC and NAMA in Ireland, SAREB in Spain) to quickly scale up their operations.

Given their advantaged position, private equity firms have emerged as key actors in rebuilding the link between finance and real estate in the wake of the global financial crisis.


PU: Who are the main players and what are their business strategies?

DF: The biggest player in the US is Invitation Homes, which is the rental subsidiary of Blackstone. Invitation Homes rents out about 50,000 single-family homes. Through Bayview Asset Management Blackstone has also been purchasing non-performing mortgages in bulk. There are about six other “private equity landlords” akin to Invitation Homes. The second and third largest firms are American Homes 4 Rent with about 47,000 homes (previously about 38,000 before the company acquired American Residential Properties in December 2015) and Colony Starwood with approximately 30,000 homes (reflecting a larger wave of consolidation in the single-family rental industry, this is the result of a September 2015 merger between  Colony American Homes and Starwood Waypoint Residential Trust).

As private equity firms moved in to the rented sector, there was a lot of debate about whether they really wanted to be landlords or were engaging in a short-term trade to capitalize on market fundamentals and then sell off properties once prices recovered. However, firms are now leveraging their purchases by selling shares of the future rental stream, which increases returns on equity. The roll-out of novel rent-backed financial instruments (rental-backed securitized bonds and Real Estate Investment Trusts) signal that firms like Blackstone, Colony Capital, American Homes 4 Rent and others are engaged in a longer-term project to consolidate and institutionalize what has long been a fragmented part of the rental sector in the US.

Private equity and hedge funds are also investing in distressed real estate in the US through acquiring non-performing mortgages in bulk; Lone Star Funds is a key player here, as is Blackstone. Based on recent critiques by housing advocates, lawyers, and lawmakers, the business model appears to rely heavily on rapid pursuit of foreclosure, potentially in order to resell the properties or to package the distressed loans into bonds that can then be sold on to other investors.


PU: What effects does this have on tenants?

DF: We don’t yet have a good base of knowledge about impacts on tenants. However, some academic and grassroots research is emerging that gives a picture of what we know so far. Given the need for affordable rental housing, one important question is how accessible the units owned by private equity landlords are to low-income tenants, and how their rent levels compare to rents in the surrounding area. My research on SFR securitization shows that only 1% of the 84,000 properties whose rental stream was securitized as of June 2015 were rented to tenants with Section 8 vouchers (like Rent Allowance in Ireland or Housing Benefit in the UK). This implies that rents are either beyond the fair market rates set by the Section 8 program, or that private equity landlords are reluctant to accept the vouchers. In either case it is a concern for low-income renters.

Grassroots research conducted by California advocacy group Tenants Together and the Ant-Eviction Mapping Project has investigated property transaction data to map California single-family homes now owned by Blackstone, Waypoint, and Colony Capital and to survey their tenants, who pay higher housing costs than other renters in their communities. This may be due not only to rent, but to tenants having to take on responsibilities of ownership, including paying for yard maintenance and utilities such as sewer and trash.

One concern rarely addressed in debates about the new private equity landlords is their reliance on cloud computing and remote technologies to meet the challenges of managing large, geographically dispersed portfolios of heterogeneous properties. Their tenants can pay rent and submit maintenance requests online or using a smartphone or tablet. This is convenient for tenants, but also serves an important purpose for landlords, who need a constant stream of property-level data to communicate with capital markets. As consumers are all too aware, such data systems are vulnerable to glitches and breaches; grassroots research with Invitation Homes tenants in Atlanta found that multiple tenants received eviction notices based on a system error that failed to record their rent payment. Such errors can impact on credit records, potentially affecting employment, credit, and housing opportunities down the line. Given the economy of data and information seen in the practices of technology companies, we should also be asking whether private equity landlords are selling tenant information to data brokers for marketing purposes.

Despite the use of technology to support property management, responsiveness to maintenance issues with plumbing, insects, and mould have been a concern for Invitation Homes tenants in Atlanta as well as Los Angeles and Riverside. Tenants rarely have the opportunity to speak with company staff in person, and their offices are often difficult to access without driving a significant distance; the tenant-landlord relationship is truly a corporate one.


PU: Are there any examples of tenants organising against ‘financial landlords’?

DF: Yes, but there is space for much more! I would argue that the grassroots research mentioned above, all being carried out by members of the Right to the City alliance, is a critical mode of organizing. Increasingly housing organizers need to be able to produce data to substantiate their arguments; elsewhere I have argued that in a war of ideas dominated by neoliberal market logics, this kind of alternative knowledge production helps shape rhetoric and contributes facts to bolster organizing, make connections with other important actors, and constitute a public around their concerns. Especially given the lack of data on private equity landlords, such efforts are hugely important.

One of the interesting thing about what’s happening now is that private equity firms are snapping up a lot of homes that have been repossessed or were built for owner occupancy, what we call ‘single family homes’. This is a new development because while single-family homes have always been part of the rental housing landscape in the US, they are typically owned in small numbers by small investors, rather than at scale by institutional investors. There are some important challenges that confront efforts to organize single-family renters. Perhaps most important are questions of space and geography. Unlike tenants of apartment buildings, single-family renters are much more spread out, and with each occupying their own home, opportunities for interaction in common areas are few and far between. Tenants of private equity landlords have no way of knowing who among their neighbours has the same landlord, much less connecting with tenants of the same landlord in other areas. The lack of legal protection for renters is also a barrier to organizing tenants against financial landlords, who have mostly purchased in states without rent control and just-cause eviction protection (California does have rent control, but the protections don’t extend to single-family structures). This puts tenants in a very vulnerable position for organizing efforts!

One arena where organizing has been effective is pressuring the government to modify its sales of nonperforming mortgages. A recent report by the Center for Popular Democracy and Right to the City highlighted that the Department of Housing and Urban Development was auctioning government-owned nonperforming mortgages in bulk at discounts of 25-50%, and argued that their policy of considering only the highest bids shut out community-oriented bidders such as non-profit organizations. This research, along with demonstrations and attention from lawmakers like Elizabeth Warren, successfully pressured the government to make changes to the program that will benefit non-profit purchasers.


PU: US private equity firms have also become major landlords in Ireland and Spain and have bought up a lot of distressed mortgages in both countries. What implications might this have for transnational housing activism?

DF: This is probably the most exciting development in terms of organizing, because we are seeing housing activists go beyond relationships of solidarity to actually coordinating actions. Most visibly, Right to the City in the US and the Platform of Mortgage-Affected People in Spain co-organized three global days of action in 2015 targeting Blackstone as the biggest private equity landlord, with demonstrations in New York, San Francisco, Barcelona, Dublin, and Tokyo. They also issued a set of international demands to Blackstone. This kind of organizing is so important, because what we often see with housing struggles is that they are very locally-focused, even when the problems are the result of broader structural forces. While the impacts of financialization depend on the context, we know that it is a global process. The emergence of transnational organizing against private equity landlords not only makes this clear, it shows how when landlords assemble portfolios of thousands or tens of thousands of properties, they are also drawing together the fates of many thousands of tenants with the capacity to coordinate and make demands globally.


[Provisional University Note: Lone Star Funds, Blackstone and Starwood Capital (mentioned in the interview) are all active in Ireland.]




  1. Reblogged this on Dublin Tenants and commented:
    This was originally posted over on the site, but we thought we’d share it here as it’s very relevant to tenants in Dublin. We have already been getting contacted by some tenants who have these kinds of landlords (e.g. I.RES) and are suffering big rent increases.

  2. […] of the Ireland After NAMA blog might be interested in this interview, over on Provisional University, with Geographer Desiree Fields on the topic of ‘Vulture […]

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