How to Fight the Global Wall Street Landlords

By Cat McShane, a journalist and filmmaker based in London, Yiannis Panagiotopoulos, a journalist in Athens and Pere Rusinol and Esperanza Escribano, journalists in Barcelona. Originally published at openDemocracy

Banks and vulture funds make money from ordinary people’s distress. The only way to fight back is to outsmart them.


Activists from PAH in Barcelona. Credit: Esperanza Escribano. All rights reserved.

Thank you, for making the impossible, possible,” a beaming Ada Colau told thousands of whooping supporters packed tight on the cobblestones of central St. James Square in Barcelona’s old town. It was June 13th 2015, and she had just been sworn-in as Mayor of Barcelona.

Colau won on a wave of support for the way she had fought the housing crisis as founder of Spain’s Platform for People Affected By Mortgages (PAH), an extraordinary movement that has mobilised thousands of ordinary citizens to take direct action against forced evictions and rising mortgage costs.

Its target are Wall Street giants—the so-called ‘vulture funds’—that have been on a house-buying spree across Europe and the United States since the 2008 financial crash. According to the New York Times, Goldman Sachs, Cerberus Capital Management, Lone Star Funds, Blackstone Group and other US companies have bought more than €223 billion worth of troubled real estate loans in Europe in the last four years.

The profits made by these institutions from ordinary people’s distress have made them the target of a backlash that has bought together homeowners, renters and housing activists across the world. Campaigners have one common fight—to protect the right to decent and affordable housing for everyone.

“Capital operates globally, as Blackstone does, and we must set up a global movement too. People have the same problems in Madrid, Dublin and New York and they face exactly the same actors,” said Santi Mas de Xaxàs in an interview with us, a PAH activist and speaker for its international network.

Blackstone and the others have quickly proved themselves to be ruthless landlords. Paquita Rivas, for example, is retired and is now a PAH activist. During the recession, her daughter was forced to sell the apartment she’d bought during the boom times but for a rock bottom price, leaving her owing €55,000 to the bank. When Blackstone took over the mortgage, they came after her parent’s home as payment.  “I spent day and night crying until a friend put me in contact with PAH. We were very afraid, but ultimately we decide to fight and we won. Yes, we can!”

The PAH has sought to create alliances with groups like Right to the City in the USA, a network of grassroots organisations from some of the poorest communities in America. Blackstone began buying up the homes that were vacated by people no longer able to pay their mortgages in the aftermath of the 2008 crash cheaply and in volume—up to a 1,000 homes a day—and then rented them back to the newly dispossessed. Almost overnight, Blackstone became the biggest landlord in the United States.

Tony Romano is Right to the City’s executive director. He told us that organising tenants is tough because Blackstone’s purchases were spread out across the country, but a visit to Spain proved transformative:

We went to learn about the movement and their model of organisation. There are few examples of activist led movements that have reached scale. We made a partnership, and put that into a manifesto of seven international demands against Blackstone.

This partnership turned into the first ever day of action against Blackstone in New York, Dublin and London, along with a drive to jam their phone lines and to speak to or email Blackstone CEO Stephen Schwarzman with this message:

Mr. Schwarzman, I stand with Blackstone tenants and community organizations around the world. Stop buying up our foreclosed homes and public housing, stop all your unjust evictions and make your rents affordable. I support this important struggle and will not let up until you meet the tenants’ demands. Homes are NOT a commodity!

Since then, Right to the City has acted more aggressively in mobilising tenants across the US. “We’re moving into places that are not organised and starting from scratch,” Romano told us.

In September 2017 it held its first nationwide ‘Renters Week of Action,’ with groups across the country holding marches, staging sit-ins and confronting landlord lobbying associations with demands that included rent controls, the prevention of unjust eviction and the right of tenants to bargain collectively with landlords without fear of reprisals.

Romano and his army of grassroots activists can expect no support from the current US administration. Blackstone founder Schwarzman is a close ally of President Trump and donated $5.5 million to the Republicans in the 2016 election. In January 2017, Fannie Mae (the US government agency responsible for expanding homeownership) announced that it would underwrite Invitation Homes, the company Blackstone set up to purchase all of its new rental housing, so if Invitation goes bust, American taxpayers will bail it out.

Romano is honest about his chances: “We’ve won some victories but the reality is that our power to influence is limited.” Since the beginning of the last recession a decade ago, the number of poor families in the United States struggling to pay their monthly rents or living in “deplorable accommodations” has grown by 41 percent.

Across the Atlantic in Ireland, vulture funds now own 48,199 mortgage accounts, with one in ten homeowners behind with their repayments. Byron Jenkins is one of them, though he’s an unlikely hero—a construction boss who went bankrupt after the 2008 crash and faced eviction in 2013. He and his wife set up a non-profit organization called ‘The Hub’ above a shop in Dublin to help others like them by advocating for people to stay in their homes and fight proceedings brought against them by banks or vulture funds.

The Hub gives people the tools to represent themselves at court and has also learned from the PAH. “We were watching other countries experience the same as us but it didn’t sink in what we could learn,” Byron told us, “we wanted to know how to bring a country together.”

In Ireland, he added, pride has prevented people from talking about their financial problems, often suffering in silence until eviction day looms. James and Kathleen, for example (not their real names) are being chased by a vulture fund for  €150,000 despite receiving an original loan of only €55,000, the total escalating through interest and fees. Negotiating through official routes hasn’t worked.

“It’s the mental strain of what those people do to you,” Kathleen sobbed down the phone, “they will chase you until the day you die.” We heard this refrain many times. This year, legal actions against borrowers in Ireland have rocketed: Goldman Sachs, Cerberus and CarVal (another US fund) have already pursued 370 prosecutions compared to 160 in 2016.

One of the first things The Hub did after its visit to Barcelona was to explore ways to help people feel less intimidated by a courtroom setting. They wrote a free guide and instigated role-plays of court scenarios for those representing themselves. Kathleen told me a visit to Byron was the first piece of hope she had of keeping the family home. Today they have a legal team and are fighting in the high court.

Renters too have found that the old ways of negotiating don’t wash in post-crisis Ireland, which has seen the private rental sector (PRS) become the target of large corporate landlords backed by international finance. “The PRS in Dublin is a home run,” said a US investor in a recent report issued by accountancy firm PWC; equity is flowing into Europe “from all corners of the globe and all types of investors… residential is on the radar and is undervalued because it gives long-term, stable returns.” As a consequence of this growing power, rents have steadily risen, with Dubliners this year spending an average of 55 per cent of their income on rent.

When we met one of them, Mariana, in a busy cafe in Dublin, she was still reeling from losing her home after her apartment block was bought by a corporate landlord called IRES. Set up by a huge Canadian firm called CAPREIT to buy homes in Ireland in 2014, it’s now the country’s biggest private landlord. IRES raised her rent by nearly €300 a month and acted aggressively to remove her when she attempted to negotiate.

“Their attitude was, we don’t care about you, you’re not a person, you’re just a number,” she told us. IRES argued that the rent increase was ‘in line with the local market,’ but the reality was that the company had distorted the local market through buying so many apartments and raising the rent every time someone moved out. The new rent would have taken up over half of her pre-tax pay packet.

IRES forced Mariana to give three months notice at the new level of rent and took that extra money out of her deposit. She told us that she was too scared to fight them any longer. In the last year IRES has made 43 applications to the courts to evict people, mainly those refusing to pay the higher rents. These tactics are effective: in 2016, IRES’ profits rose by over half to €47 million.

At the time we talked Mariana was sofa-surfing with friends’ until she could raise the money for a deposit, her belongings stored in a basement at work. “I know I’ll get through it but it’s embarrassing. You feel like you’ve failed at something but you’ve done nothing wrong.”

The Irish Housing Network (IHN) is a loose affiliation of activist groups that also went to Barcelona last year, where they heard about PAH’s “Obra Social”—direct  action to help evicted people occupy empty apartments owned by bailed-out Spanish banks.

IHN’s most notable success is “Home Sweet Home,” the occupation of an empty former government building called Apollo House in Dublin by 90 people without homes. When the Irish government threatened HSH with eviction they organised a rally to defend themselves.  Apollo House was only returned to the government once its demand for every occupier to be properly housed had been met.

Activists internationally will need to work hard over the coming years to defend the right to housing, since Wall Street has made clear that its appetite for real estate is undimmed. Over the last year, both Cerberus and Blackstone have made major incursions into the UK with the purchase of mortgages held by failed banks like Northern Rock and Bradford & Bingley, with further sales pencilled in for 2018. In the United States, Blackstone has expanded into multi-family developments like Stuyvesant and Kip Bay.

For most people, the economy has never recovered from the crash of 2008. Others are too young to have known a more financially secure way of life.  Meanwhile, some of the richest people in the world like Schwarzman continue to profit handsomely. Now they want to make more money from our homes, and they’ll devise endless innovative tactics to do so. The only way to fight back is to outsmart them.

This article was developed with the support of Journalismfund.eu.

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21 comments

  1. PlutoniumKun

    Renters too have found that the old ways of negotiating don’t wash in post-crisis Ireland, which has seen the private rental sector (PRS) become the target of large corporate landlords backed by international finance. “The PRS in Dublin is a home run,” said a US investor in a recent report issued by accountancy firm PWC; equity is flowing into Europe “from all corners of the globe and all types of investors… residential is on the radar and is undervalued because it gives long-term, stable returns.” As a consequence of this growing power, rents have steadily risen, with Dubliners this year spending an average of 55 per cent of their income on rent.

    (my bold)

    Its an important topic, but it doesnt help the argument when the article uses unsupported statements like this. Institutional investors in Irish residential property almost exclusively focus on new build or abandoned Celtic Tiger schemes, and have almost certainly helped to increase supply and so keep rents down. Given how damaged the Irish banking system was (and is), this infusion of investment has been vital in ensuring more more residential is built.

    The sharp rise in the cost of renting in Dublin is primarily caused by austerity – the failure of the government to take advantage of surplus capacity in the system to provide public housing, resulting in both a shortfall in social and affordable housing, and an inability of the private sector to be able to build fast enough for rising demand due to a crippled building finance and construction sector.

    Institutional residential developers are actually very popular in Dublin with renters in my experience. Traditionally most landlords used to be small investors who could be a nightmare to deal with. At least with professional letting companies you know who you are dealing with, so there is an element of legal certainly for renters, and those companies are much better at managing residential blocks.

    Reply
    1. False Solace

      > Traditionally most landlords used to be small investors who could be a nightmare to deal with. At least with professional letting companies you know who you are dealing with…

      Totally the opposite of my experience.

      When I rented from a small-time leasing operator I knew the owners, they knew me, and any problems were quickly resolved.

      When I was later forced to move for unrelated reasons I ended up in a property owned by a large REIT-style company, it was a nightmare. They raised rents in lockstep 8% every year, which means renters are forced to make a serious decision to either pay the significant costs involved in a move, or swallow an increase that means rent would potentially double in under a decade. Plus, this company was very aggressive at pushing sleazy rental insurance on everyone. If you did not want their terrible forced place insurance you had to provide updated documentation on your own policy every year sent directly from your agent to a mysterious fax number, which they would accidentally “lose”. Plus, they made a side deal with the local cable monopoly and forced every renter to pay for cable TV whether you used it or not.

      These individuals are utter sleazeballs defined by unrestrained greed. Size only makes them worse.

      Reply
      1. sgt_doom

        Exactly my very own personal experiences, compounded by the dual sordid facts that I frequently found when I had been laid off due to a private equity/leveraged buyout “pump and dump” — on the work side, coincidentally (or not, given the frequency) my apartment building was also in the same circumstances, with rental increases but no job making my undesirable to other landlords!

        Reply
    2. FluffytheObeseCat

      Totally the opposite of my experience.”

      Yes. I have the same account. My prior rental townhome was purchased by an out-of-state corporation from bankruptcy in c. 2011. The Houston based ‘professional’ landlords were careless, rapacious, did not empower their local management to negotiate, and commonly bent or skirted local laws regarding habitability of the dwelling space. Where I rent now, from a locally-based, individual property owner, any problems are quickly and honorably resolved.

      False Solace did not indicate what rental or real estate market he/she is in, but I’m in Reno, Nevada, which is functionally part of the greater northern California market. I’ve dealt with small-time cheats in the past, specifically in the ‘Inland Empire’ of L.A. in the 1980s. However, when small time, local landlords try to cheat one, they do have to show up in small claims court when one files against them. (Speaking from experience. It was not a remunerative experience, but it was heart-warming to see them standing beside me before the magistrate, nonetheless.)

      Reply
  2. Ned

    The local courts are the key to fighting the vultures. For example, what if the Barcelona Mayor worked with local officials to logjam eviction proceedings by any landlord controlling more than say 100 units?

    Another thing is to get people mad by educating them, stripping them of shame, getting them to consider the corporate landlords like rats, to be controlled or eliminated at any cost.

    “The Ten Commandments Do Not Apply to Corporations.”

    Reply
    1. perpetualPOOR

      Have you sat in on any foreclosure courtrooms? The local courts are assisting the bankers in their quest for houses.

      Reply
      1. Ned

        Courts in Spain and other countries are quite different than in the U.S. There is a possibility of waivering from the law in such places. Outbreaks of civility and commonsense often occur in Latin based countries.

        That said, a couple hundred people chanting and demonstrating in a U.S. eviction proceding might get the attention of the judges.

        Reply
  3. perpetualPOOR

    I was told by a real estate agent who works for Blackrock that in one poor suburban area of Seattle, Blackrock owns 1 out of every 5 houses. Talk about power….

    Thanks, Obama.

    Reply
  4. Democrita

    My grandfather was in real estate here in suburban NY, back when individuals used to take out mortgages with other individuals.

    When the Depression hit, many families could not pay. He did not evict them, but told them to pay when they could.

    He was ultimately paid in full by all. I have the little notebook with the payment records.

    It’s hard to see that playing out in our time. Money may not trickle down, but culture seems to, and our elites are utterly infected with greed and arrogance. Festering pustules of selfishness.

    Different times.

    Reply
    1. perpetualPOOR

      Yes. It would have involved Obama and Holder not bending over for the bankers. But, Obama wanted to hang out with Branson on his private island and yacht, so that would not do.

      Thanks, Obama!

      Reply
  5. audrey jr

    I’ve been following the rental market with Wolf Richter, as has NC, for a long time now. I relocated a few years ago to San Diego from Santa Rosa.
    Here in S.D. I have had to pay a ten percent increase on our apt. for 3 years running. Although prices for rentals are falling throughout California overall you will see only increases in S.D. County.
    I walk everyday and I live in an area concentrated with apt. complexes, some of which are now for sale. There is a nice smallish complex on my route which has had a 2 bdrm 2 ba at $1795 per month for over a year now.
    To my eye these are little signs that property management firms are not going to be able to sustain the constant increase in rents that they are currently getting away with.
    Thanks again to Yves for covering a topic that few others seem to.

    Reply
    1. perpetualPOOR

      2 bdrm, 2 bath at under $2000? CHEAP!
      Seattle you can’t touch anything for $2000. Studios 300sf go for $900.

      Reply
  6. D

    Let alone Wall Street, there are all of those bipartisan politicians who profit off the despair and fraudulent home losses of their own citizens; like Powerful US Senator Feinstein, through her husband Dick Blum:

    072914 By Darwin Bond Graham Richard Blum and Dianne Feinstein Make Big Investment in Foreclosure to Rental Housing

    One of the biggest investors in foreclosed single family homes has been Colony Capital, the private equity firm controlled by Thomas Barrack, Jr. Colony has purchased thousands of foreclosed houses in California and other states. Colony has also sustained recent complaints from tenants who accuse the company and its rental property managers of running slum housing and charging above-market rents. Activists in Los Angeles and other cities are now pressing local and federal officials to take a closer look at the Wall Street landlord business.

    But some Washington D.C. insiders have already done due diligence with respect to the new corporate landlords. A recent financial disclosure filing by Richard C. Blum, husband of California Senator Dianne Feinstein, shows that Blum and Feinstein have made a major investment in Barrack’s Colony American Homes. As a member of the University of California Board of Regents Blum is required to disclose his economic interests each year. In his filing for 2014, Blum listed an investment in Colony American Homes Holdings, LP of over $1,000,000, making Blum and Feinstein major owners of one of the largest Wall Street landlord corporations.

    (Colony Capital is now named Colony NorthStar, after a January 2017 3 way merger. Per the linked Wiki Page: Colony NorthStar invests in real estate and real estate-related debt investments, real estate-dependent operating companies, non-performing loans, distressed assets and select development opportunities throughout the world. )

    ************
    Sends a big hug from horrid Silicon Valley to Audrey Jr, above this comment.

    Reply
    1. sgt_doom

      They have a decidedly large presence in Washington state in the two counties bordering King County (Seattle and Redmond, etc.):

      Snohomish County and Pierce (Tacoma) County

      Reply
  7. Larry Coffield

    Those still possessing a whit of common sense know the best way to fight the banksters is not to prop them up again, e.g., Obama in 2008 via his inverted debt jubilee. These too-big monopolists will bring themselves down pursuant to capturing market share by gobbling up unsocialized prey and creating more debt to leverage structural reforms into privatized theft. Another dump from this multi-bubble pump will prove we are incapable of governing ourselves when confronted with neoliberal authoritarianism.

    In other words, demand the politicos do what they do so well, absolutely nothing. Refusing to bail out a nest of warmongering feudalists is as close to peaceful revolution as it gets. Either we save neoliberal gangsterism via disaster capitalism never letting a good crisis go to waste, or we end perpetual austerity and odious debt before we become bondservants.

    Reply
  8. BVian

    I can never decide if the people commenting or the articles on this site are crazier. Obama didn’t create this mess, 30+ years of deregulating the banks and Wall St created this mess, compounded by monetary policy that favored wealthy investors over workers.
    Now that I got that out, you are always better off with mom and pop landlords than vulture capitalists and LLCs. They are not perfect, but no one in life is perfect and at least you can reach an actual human when there is a problem. Rent control tends to force out the mom and pop landlords who can’t come up with large sums of money for major repairs and are unable to recoup those costs through rent under strict rent control. Either way, this new Wall St landlord system is probably going to remain just like the vast military industrial complex.

    Reply
    1. Yves Smith Post author

      Obama did facilitate the acquisition of residential real estate by private equity. He is responsible for the fact that most of the 9 million foreclosures that took place could and should have been prevented, and the Administration had the leverage to force servicers to make loan modifications to viable borrowers due to massive failure of mortgages to get to securitization trusts in the legally required time frame, informally called “securiitization fail”. We chronicled that at length. And the resulting massive level of foreclosures resulted in Fannie and Freddie contemplating bulk sales (which wound up being “mini bulks”) which is what got the PE guys interested.

      Reply
  9. Brian Ploszay

    This article is somewhat misleading. I have to disclose that I am in the single family rental industry, but I don’t work for a large corporate company like Invitation Homes. I am a smaller investor, which constitutes the majority of the buyers of foreclosed homes.

    1. Invitation Homes and a few other Wall Street backed companies did buy a lot of foreclosed homes. But in reality, they only bought a small percentage of the foreclosed housing stock.

    2. The majority of foreclosed homes went to either new owners or smaller landlords.

    3. I am skeptical about a large corporation running a company owning lots of single family homes. It’s complicated and almost every house is different. The operating costs are much larger than running apartment buildings.

    The performance of public single family housing companies has been mediocre. Invitation might be the best. I suspect that they will sell the houses to the general market when conditions improve. End users of houses will always pay more per unit than investors.

    Reply

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