The Los Angeles Times reports tonight that a local couple has sued the private equity giant’s single family home rental unit, Invitation Homes, over the appalling condition of a home it leased and the further damage they suffered.
Recall that Blackstone is biggest player in single family home rentals, now with 44,000 houses in its hands. And this is hardly the first time it’s been accused of renting homes in appalling shape and leaving tenants to fend for themselves. Some might argue that as the largest operator, Blackstone will naturally get more complaints than its competitors simply by virtue of its size. But the speed with which horror stories have piled up suggest that Blackstone using its market position to lead a race to the bottom in terms of doing as little as it can as a landlord beyond making sure the rent checks arrive on time. For instance, we discussed in April how activists in Chicago had found Blackstone to be a serial tenant abuser:
But the biggest fish in this ocean, Blackstone, is clearly taking the opposite approach, of doing as little as they can to maintain the houses and trying to fob off the responsibility onto the tenant, even when local regulations clearly prohibit it. So managing dispersed homes is no problem if you never planned to do the job in the first place….
Now to the update on Blackstone’s latest escapades, via some original reporting at In These Times. The article, Game of Homes, makes for good one-stop shopping if you want to get friends and colleagues up to speed on this topic. For NC readers, the first two-thirds of the article covers familiar terrain. Here are the sections that discuss how Blackstone, which is using “Invitation Homes” as its brand for its single-family rentals, is trying to evade its duties as landlord:
Antonio Hernandez, 34, moved with his family into an Invitation Homes-owned property in Chicago’s Belmont Cragin neighborhood in February 2013. He says the company has tried to shift most of the responsibility for maintenance of the home onto him….
When Hernandez began renting from Invitation Homes, he was also perplexed by a section of his lease that says he must rent the property “as is.” He isn’t the only one. In These Times obtained a copy of Invitation Homes’ lease and presented it to Mark Swartz, legal director at the tenants’ rights organization Lawyers’ Committee for Better Housing, and Kelli Dudley, director of the nonprofit Resistance Legal Clinic. Both housing attorneys told In These Times that several sections of the lease violate Chicago’s Residential Landlord Tenant Ordinance (RLTO), a longstanding document that establishes the baseline of tenants’ rights and governs most residential agreements in the city.
In response to inquiries from In These Times about the legality of the lease given to Chicago tenants, Invitation Homes spokesperson Andrew Gallina wrote in an e-mail, “Invitation Homes complies with all fair housing laws and regulations. We use standardized leases adopted by state and local real estate associations, which comply with local statutes.”
But Dudley notes, for example, that while commercial leases sometimes say that tenants have to rent a property “as is,” putting this stipulation in a residential lease “is a violation of the RLTO, which clearly places the greatest responsibility for repairs on the landlord. … [Invitation Homes] is definitely overreaching and trying to shift all the risk and the expense to the tenant,” she says. Swartz adds that the lease’s attempt to indemnify Invitation Homes for any damages, including those caused by its own negligence, violates Illinois’ Landlord and Tenant Act. He also points to several other sections of the lease that are illegal under the RLTO, including a stipulation that tenants must pay the associated fees in the event that Invitation Homes employs an attorney to enforce an eviction or collection of rent.
Keep in mind that unlike New York and San Francisco, which have strong protections for tenants, Chicago does not have a reputation of being a pinko, pro-tenant town. It’s not hard to imagine that its tenant-related laws are middle of the road. Thus Blackstone and any of the other PE players that are joining its race to the bottom in major cities are likely in violation of local ordinances. And Doug Terpstra’s Arizona example suggests that even low-density, supposedly conservative states aren’t necessarily any landlord-friendlier. I welcome comments from any readers who can give a reading as to whether their state or municipality would permit Blackstone “the tenant eats most problems” style leases.
Back to the current post. It appears that Blackstone had tried imposing commercial lease terms on residential tenants in single family home rentals. Readers thought that was not going to wash in much of any jurisdiction if challenged. But Blackstone seems to be relying on the notion that renters can’t muster up the funds to litigate.
Now to the Los Angeles Times’ horror story. The charges all come from 28 year old Edit Novshadyan and her husband who rented a home in Sun Valley near University of Southern California. They were quite pleased with the three bedroom home when they looked at it. What they found when they moved in was another matter.
According to the filing, the house was strewn with trash and the bathroom floors had urine on them, meaning Blackstone couldn’t be bothered to do even the most superficial clean-up before the tenants moved in. And it went downhill from there:
Then came the leaks and more. Cockroaches infested the house, the air conditioner failed, tap water turned brown and a bathroom flooded, the lawsuit alleges.
In late May, 10 days after the couple reported the first leak, Invitation Homes sent a technician to repair leaks in two bathrooms, according to court documents. It was then, the lawsuit alleges, that a worker cut into a wall to fix a broken pipe without first checking for asbestos. The fibers spread throughout adjacent rooms, the lawsuit alleges.
In early June, Invitation Homes informed Novshadyan that the house needed extensive piping work, according to the lawsuit. A month later, the family moved in with relatives so their house could be fixed. They planned to return in two weeks and left their belongings behind. When they left, the white moldings in the newborn’s room had turned brown, Novshadyan said. The moldings ran parallel to a pipe on the home’s exterior.
Several days later, Invitation Homes told Novshadyan that workers had found mold in the house, the lawsuit alleges. The couple scrapped their plans to return.
Ten days to fix a leak? It was almost certain the house was compromised by then. No one who cares about the condition of a building would allow a leak and the related water damage go unaddressed that long.
But the Blackstone’s effort to make a defense actually proves that they don’t have enough remotely enough staff to do the job properly. The Invitation Homes spokeperson tried making it sound like a point of honor that they have “more than 1,500 property management professionals nationwide” for 44,000 homes. That’s 3.4 for every 100.
My 65 unit building has the equivalent of 4 full time maintenance workers, including a live-in superintendent. That’s a ratio of 6.1 to 100, close to double Blackstone’s ratio of staffing in a much denser, hence vastly easier-to-manage setting. Similarly, when I lived in townhouses, in both cases, the manning provided by a landlord and his team that covered several buildings on the same block or by the owner who lived in the building was even a higher ratio of staff to apartments.
As bad as the couple’s story sounds so far, it got even worse.
When the pair said they weren’t going back to a moldy home, they though they had reached a deal with Invitation Homes to lease another house in Tujunga, but Invitation Homes rented it to someone else instead. In the meantime, the landlord has changed the locks on the moldy house, with the couple’s property trapped inside. It took months to get access, and when they finally did, most of their belongings tested positive for mold. Both members of the couple also score positive on medical tests for mold contamination.
And what is Blackstone’s response? From the Los Angeles Times:
In a court filing last month, attorneys for Invitation Homes said the lease required the couple “to pay rent while they did not occupy the property.”
I’m no landlord/tenant exert, but it seems to me that Blackstone breached the lease by not keeping the home in a habitable condition and not providing an alternative place to live when it was making essential repairs. It also sounds as if Blackstone was keeping the couple’s goods hostage to try to extract the disputed rent from them.
I hope the judge throws the book at Blackstone.
But there is a bigger lesson to take from this. The sort of squalid conditions that this Sun Valley couple experienced and the lack of responsiveness and accountability by the landlord isn’t something members of the middle class expect to experience. To be blunt, that’s sort of thing is supposed to happen only to poor people, and then only when local housing laws are weak. Middle income people expect better treatment, either out of unspoken class assumptions, or out of their faith in their power as consumers (“no one would dare treat me/us that badly, we are valuable customers”).
But the thinning of the middle class, and its diminished standing relative to the super wealthy means that they really are the nouveau pauvre. And the likes of Blackstone are working hard to educate them as to their real place in the pecking order.