From Santiago G. via e-mail:
The Spanish PAH (Plataforma de Afectados por la Hipoteca / Mortgage Damnified Platform) has released this video. It gives a good idea of the level and intensity of fights developing in Spain, and I think it gives a good idea of the damage that austerity is causing in places like Spain, and I guess in Greece. One of the first measures Syriza adopted was stopping evictions, and I guess Podemos will do the same in November in Spain.
In addition to the use of #BlackstoneEvicts, there is a related page on Facebook, “International Action Against Blackstone” Protestors staged actions against Blackstone in Barcelona, New York, and San Francisco on Wednesday. In Spain, the protests center around mortgages that Blackstone bought last year. As the Wall Street Journal described it:
Blackstone paid €3.6 billion to buy €6.4 billion of the Catalunya home loans in a government-run auction, outbidding investors including Oaktree Capital Management LP and Apollo Global Management LLC. The deal is expected to close by the end of this year.
The purchase expands on Blackstone’s growing presence in Spain. In July 2013, the New York firm run by billionaire Stephen Schwarzman bought 1,869 government-subsidized rental apartments from the city of Madrid for €125.5 million.
That deal already has brought headaches. Foreclosures by Blackstone have triggered protests by renters and the Platform for Mortgage Victims, an advocacy group known by its Spanish acronym PAH.
Opponents of the Blackstone evictions have taken to squatting in vacant foreclosed homes as a form of protest. If you watch the video, a bone of contention is that the mortgages were sold to Blackstone at a price where many borrower could have met the payments if the mortgage had been restructured. It’s an echo of the picture here, where servicers refused to do mortgage modifications, as banks routinely did in the stone ages when they retained the mortgages they had originated. Given the large losses incurred as a result of servicer bad incentives and outright theft from investors, there were clearly many cases where a deep principal reduction would still have left both investors and borrowers better off. Huge amounts of unnecessary homeowner stress and wealth destruction, as well as investor losses, were the direct result of the Administration decision to paper over pervasive abuses in servicing.
In the US, Blackstone, as the buyer of over 40,000 houses, is the biggest private equity landlord, and by most accounts, the worst. We’ve written about their misconduct repeatedly. An example from last April:
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.
Blackstone tries to evade this duty formally, through lease terms, and informally, by making themselves inaccessible. And because Blackstone is the largest and highest profile player in this space, they may be hoping that if enough PE landlords follow their lead, communities will accept the new finance-dictate bad standards, just as they have with foreclosure abuses.
But the difference here is while stressed borrowers were the ones that were hurt in foreclosures, and foreclosures and bankruptcies are seen as shameful event, there’s no reason for a victim of a bad landlord to be seen as unsympathetic. Moreover, deliberately negligent PE landlords like Blackstone traditionally have hurt the value of neighboring properties. If this trend continues, abused tenants and their neighbors face a common threat.
Notice that contracts that violate local law are almost certain to fail a legal challenge. In New York, which has more extensive tenant protections than other cities, landlords sometimes try to include provisions that are impermissible, like prohibiting a tenant from having a roommate. Housing court judges exhibit a bit of zeal in smacking down landlords when challenges to those leases come before them.
NC readers got early warning that this strategy in a March 2012 post, via this comment, which we flagged in later posts, from someone clearly affiliated with a PE fund:
In many markets, the maintenance obligations fall to the tenant. Grab a sample set of local real estate board form leases and you’ll find this to be the case. Moreover, while these same form leases do place the burden of capital repairs on the landlord’s side (as is the case with multi-family properties), this is an identifiable risk that can be assessed just as it would be by a skilled operator acquiring larger-scale multi-family properties. Falling trees are non-discriminatory – they will crush the roof of a single-family home and a two or three story garden-style apartment building with equal vigor. The previous run of the “for sale” cycle has created legions of well-qualified providers of ownership related services, from inspectors to repair specialists, many of whom are thrilled to raise the tenor of their operations by contracting locally and regionally on a bulk basis with professional owners. At the risk of introducing cliche, don’t overlook how frictionless the management oversight of this type of service effort has become in this age of pervasive connectivity.
We’ve been to a couple of conferences where PE landlords keep saying they’ve found these great local guys to handle the maintenance. But this sounds an awful lot like those bank servicers who hire firms to secure vacant homes….that often wind up falling into disrepair and being stripped of appliances and copper.
Your perception of being able to put all maintenance responsibility on plantation tenants only goes so far. Beyond neglect, a whole lot can go wrong in a hurry from a disgruntled or distressed tenant. And even in regressive red states like Arizona, there’s a lot of legal wiggle room for a put-upon tenant who might decide to get uppity:
“The landlord and tenant of a single family residence may agree in writing, supported by adequate consideration, that the tenant perform the landlord’s duties specified in subsection A, paragraphs 5 and 6 of this section, and also specified repairs, maintenance tasks, alterations and remodeling, but only if the transaction is entered into in good faith, not for the purpose of evading the obligations of the landlord and the work is not necessary to cure noncompliance with subsection A, paragraphs 1 and 2 of this section.” (Subsection A, BTW, is quite comprehensive and affords tenants considerable leverage, including damages for untimely compliance)
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.
Back to today’s post. The effort to organize against Blackstone in different cities around the world is in its early stages. I hope you’ll tweet #BlackstoneEvicts and otherwise circulate this post to help the effort along.