Hedge Funds: The Ultimate Absentee Landlords

[Disir]

SEVERAL YEARS AGO,community groups began noticing the growing presence of Wall Street speculators in their neighborhoods, one of the aftershocks of the epidemic of foreclosures. Several local groups examined records, interviewed tenants, and issued reports—including “Blackstone: Atlanta’s Newest Landlord,” by Occupy Our Homes; “The New Single-Family Home Renters of California,” by Tenants Together; “The Rise of the Corporate Landlord,” by the Right to the City Alliance; “Renting from Wall Street: Blackstone’s Invitation Homes in Los Angeles and Riverside,” by Strategic Actions for a Just Economy; “REO to Rental in California: Wall Street Investments, Big Bank Financing, and Neighborhood Displacement,” by the California Reinvestment Coalition; and “When Wall Street Buys Main Street,” by the Center for American Progress.

These reports have documented that in areas where Wall Street investors own a significant number of these single-family homes—including Atlanta, Las Vegas, Phoenix, Miami, Tampa, Orlando, Charlotte, Dallas, Chicago, Detroit, Denver, and Los Angeles and nearby Riverside—their practices have harmed tenants and undermined long-term neighborhood stability.

In April of this year, for example, one-quarter of all home sales were to cash-carrying investors. Since 2010, institutional investors backed by Wall Street have purchased a total of 528,369 single-family homes nationwide, led by Florida (78,155), California (52,802), Georgia (46,914), Arizona (35,979), and North Carolina (34,769), according to RealtyTrac. These represent about 4 percent of all single-family homes sold during that period, and a higher percentage in distressed markets. Together, these Wall Street entities have raised close to $70 billion to buy these homes. Rents are expected to increase by 3 percent a year on average through the next decade, and to rise even higher in parts of the country that the Wall Street firms are targeting.

Blackstone is the largest institutional investor in single-family homes, followed by American Homes 4 Rent, Colony American Homes, Fundamental REO, Progress Residential, Starwood Waypoint Residential, American Residential Properties, and Silver Bay Realty Trust. These and other hedge funds and private equity firms accumulate most of their single-family homes by buying them through foreclosure sales and at auctions of properties by financial institutions.

The most discouraging part of the story is that the U.S. government now views hedge funds as useful partners, to clean up the inventory of distressed housing wholesale rather than helping distressed residents. The Obama administration sponsored several iterations of programs intended to help homeowners at risk of foreclosure keep their homes. But the programs benefited mainly bankers. (See David Dayen’s “A Needless Default” from The American Prospect’s Winter 2015 issue.) According to the special inspector general for the Troubled Asset Relief Program, by June 2015 fewer than 1.3 million homeowners out of 5.7 million eligible applicants actually received permanent loan modifications through the largest of these programs, and only about 900,000 are still in the program.
Hedge Funds: The Ultimate Absentee Landlords

But, that's ok, right? I mean the vast majority of Dems and Republicans are down with this.

 

[Jomama]

It's a tough situation; Great mistakes were made, banks need an expeditious way to dump their vast inventories and our economy needs efficient ways to process these properties back to individual owners. Bailouts risk moral hazard, which exacerbates what brought us to this situation. Accountability is one of the few core tenants of our economy that make it work so well.

Sure, as a human, I'd like to give people a chance, preserve home ownership, etc. But I don't see you offering a clean solution to do this. And maybe there's not, maybe only a profit incentive can accomplish the mission. Lenders need clean and expeditious ways out of bad investments or they will scale back risk and fewer future businesses will find the funding they need.

 

[EdwardBaiamonte]

But, that's ok, right? I mean the vast majority of Dems and Republicans are down with this.

and you have a better plan???

 

[Disir]

It's a tough situation; Great mistakes were made, banks need an expeditious way to dump their vast inventories and our economy needs efficient ways to process these properties back to individual owners. Bailouts risk moral hazard, which exacerbates what brought us to this situation. Accountability is one of the few core tenants of our economy that make it work so well.

Sure, as a human, I'd like to give people a chance, preserve home ownership, etc. But I don't see you offering a clean solution to do this. And maybe there's not, maybe only a profit incentive can accomplish the mission. Lenders need clean and expeditious ways out of bad investments or they will scale back risk and fewer future businesses will find the funding they need.

Can you explain to me who this aids?

 

[Jomama]

Who what aids?

Let's revisit the facts; Debt and lending has been around for thousands of years, banking about 5,000 years and the term bankruptcy dates back to Roman times. Debt is a two-way street when until payment stops, then all power reverts to the lender. This is the basis of all commercial law. The gears of collections grinds blood out of people, businesses, assets. There would be ZERO lending without the ability to collect under the law. You simply cannot have lending without collections.

The institution of lending exists separate from people until those people consciously and voluntarily borrow money and pledge repayment under terms. In many cases, greed and human insecurity causes people to borrow money when they shouldn't. But the Constitution guarantees people the right to make bad decisions. People who leverage the equity in their homes to buy consumer crap, and then cant repay their loan - should be drained of their blood.

Who does it aid? The institution of lending aids the Institutions of Lending. It also benefits some entrepreneurs and consumers (me at times) and sometimes does not benefit entrepreneurs and consumers (me at other times).

If you want to save people from the responsibility of borrowing, save them before they borrow.

 

[Toro]

Those aren't hedge funds.

Also, most of the money raised by companies such as Blackstone and Colony come from large pension funds, which invest the savings of workers in America.

Ergo, the owners of those housing rentals are every day American workers.

 

[Disir]

Those aren't hedge funds.

Also, most of the money raised by companies such as Blackstone and Colony come from large pension funds, which invest the savings of workers in America.

Ergo, the owners of those housing rentals are every day American workers.

Did you read the article?

 

[Disir]

Who what aids?

Let's revisit the facts; Debt and lending has been around for thousands of years, banking about 5,000 years and the term bankruptcy dates back to Roman times. Debt is a two-way street when until payment stops, then all power reverts to the lender. This is the basis of all commercial law. The gears of collections grinds blood out of people, businesses, assets. There would be ZERO lending without the ability to collect under the law. You simply cannot have lending without collections.

The institution of lending exists separate from people until those people consciously and voluntarily borrow money and pledge repayment under terms. In many cases, greed and human insecurity causes people to borrow money when they shouldn't. But the Constitution guarantees people the right to make bad decisions. People who leverage the equity in their homes to buy consumer crap, and then cant repay their loan - should be drained of their blood.

Who does it aid? The institution of lending aids the Institutions of Lending. It also benefits some entrepreneurs and consumers (me at times) and sometimes does not benefit entrepreneurs and consumers (me at other times).

If you want to save people from the responsibility of borrowing, save them before they borrow.

I just want to make sure that I am absolutely clear about your stance. You see absolutely no wrong doing by these same institutions that led to the crash.

 

[Toro]

Those aren't hedge funds.

Also, most of the money raised by companies such as Blackstone and Colony come from large pension funds, which invest the savings of workers in America.

Ergo, the owners of those housing rentals are every day American workers.

Did you read the article?

Yes.

I know all about those funds and investments, far more than the author.

 

[Jomama]

I just want to make sure that I am absolutely clear about your stance. You see absolutely no wrong doing by these same institutions that led to the crash.

Just to be clear, you don't think the borrowers share at least half the blame? My neighbors who were taking out home equity lines of credit to pay for new patios or invest in real estate or the stock market or vacations or cars or other bullshit - because housing prices were going up forever... ?

Of course I primarily blame law makers for allowing Wall Street to treat our economy like a casino. Congress repealed Glass Stegal and other sensible laws. Personally, I would prefer a Canadian style of banking.

But, back to the borrowers... borrowing is a voluntary pursuit. This is not old ladies getting mugged, this is (mostly) greedy people acting foolishly.

 

[Disir]

I just want to make sure that I am absolutely clear about your stance. You see absolutely no wrong doing by these same institutions that led to the crash.

Just to be clear, you don't think the borrowers share at least half the blame? My neighbors who were taking out home equity lines of credit to pay for new patios or invest in real estate or the stock market or vacations or cars or other bullshit - because housing prices were going up forever... ?

Of course I primarily blame law makers for allowing Wall Street to treat our economy like a casino. Congress repealed Glass Stegal and other sensible laws. Personally, I would prefer a Canadian style of banking.

But, back to the borrowers... borrowing is a voluntary pursuit. This is not old ladies getting mugged, this is (mostly) greedy people acting foolishly.

But not Wall Street?

 

[Jomama]

Of course Wall Street. But they are sharks so what's your point? I don't expect boy scout behavior from sharks but I expect law makers to keep them in check, regulators to regulate them and civilians to be wary of them. Again; Personally, I would prefer a Canadian style of banking - which is run like a utility and not a casino.

 

[EdwardBaiamonte]

Of course Wall Street. But they are sharks so what's your point? I don't expect boy scout behavior from sharks but I expect law makers to keep them in check, regulators to regulate them and civilians to be wary of them. Again; Personally, I would prefer a Canadian style of banking - which is run like a utility and not a casino.

dear, America is a huge and successful because of our free wheeling capital markets. Capitalism is a casino wherein huge bets are placed on the direction the world will take. Should we invest billions in the self driving car or Novacure's brain cancer technology or 1 million other new ventures!!.

Do you understand now??

 

[Jomama]

Dear, a western nation is huge and successful because of well designed and properly regulated capital markets. America took a 50% hit in stock market value, a 30% hit in real estate value, millions lost their jobs, millions lost their homes and tens of millions no longer trust our financial system - because the actions of Wall Street were not properly regulated.

Ed, since you've never been an entrepreneur or capitalist you are unqualified to comment on these subjects.

 

[Disir]

Of course Wall Street. But they are sharks so what's your point? I don't expect boy scout behavior from sharks but I expect law makers to keep them in check, regulators to regulate them and civilians to be wary of them. Again; Personally, I would prefer a Canadian style of banking - which is run like a utility and not a casino.

I would expect them to be kept in check too. When Wallstreet owns the government then we have a problem. Unfortunately, the only way that we can keep that in check is by keeping a watch on them. If it doesn't come to our attention then it will not be given any attention by lawmakers. Nonetheless, this little experiment has failed because the purchases devalued homes in the neighborhood. They do not maintain the properties as they are most often not local. The management companies do not maintain the properties. They are most often not local. Three, over time they have acquired so much property in a given local that they push for lower taxes or exert pressure on local governments. It's a problem. It's been a problem. Further, this little sham of the inability to acquire a loan for less than 50,000 is a hold up but, these homes aren't for sale. It's renting.

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[Jomama]

In 2009 - 2010 I tried like hell to buy a foreclosed home in my town from Bank of America. I made fair offers which they kept rejecting. I tried to get them to give me a price but they wouldn't. I encouraged them to auction it off so I could bid, they didn't. My offer was around $400k with the land worth maybe $100k. The house has since filled up with mold and is a teardown, the lawn is overgrown, windows fogged up with mold - it's a big eyesore and bringing down property values.

In this situation BofA lost $300k. They should have sold it to me or a hedgefund, or someone. The have a fiduciary duty to their shareholders to handle these situations better.

 

[EdwardBaiamonte]

- because the actions of Wall Street were not properly regulated.

of course that's very very stupid. The liberals had 132 programs to get people into homes that the Republican free market said they could not afford, and when they could not afford them you blame the Republican free market??

See why we are positive that liberalism is based in pure ignorance?? Is any other conclusion possible??

 

[EdwardBaiamonte]

- because the actions of Wall Street were not properly regulated.
.

100% stupid and liberal of course! The Soviets and Chinese tried as hard as possible to regulate their economies and only succeeded at slowly starving 120 million to death. In America we got very very rich with unregulated capitalism but had a huge housing collapse precisely because housing was so heavily regulated in a soviet way.

Now do you grasp your ABC's??

 

[Disir]

In 2009 - 2010 I tried like hell to buy a foreclosed home in my town from Bank of America. I made fair offers which they kept rejecting. I tried to get them to give me a price but they wouldn't. I encouraged them to auction it off so I could bid, they didn't. My offer was around $400k with the land worth maybe $100k. The house has since filled up with mold and is a teardown, the lawn is overgrown, windows fogged up with mold - it's a big eyesore and bringing down property values.

In this situation BofA lost $300k. They should have sold it to me or a hedgefund, or someone. The have a fiduciary duty to their shareholders to handle these situations better.

BofA is very difficult to do business with. I, personally, would not do business with them at all. But, the response to the housing crisis was to benefit the banks.

 

[EdwardBaiamonte]

. But, the response to the housing crisis was to benefit the banks.

you mean the banks that survived so that we would not trigger another Great Depression