U.N. blasts Blackstone Group for worsening the U.S. housing crisis
- A top U.N. official for housing sent a letter to giant private equity firm Blackstone blasting its practices in renting single-family homes
- Blackstone is the largest such rental operation in the U.S.
- The firm's practices are "having devastating consequences for tenants," the letter said
- Blackstone said the letter "contains numerous false claims, significant factual errors and inaccurate conclusions," but it rebuts few of the facts
No less an entity than the U.N. is wading into the U.S. housing affordability crisis. In a pair of letters to the U.S. government and Blackstone Group, Leilani Farha, the UN Special Rapporteur on the right to adequate housing, calls out the role of private equity in the housing market and blasts the federal government for failing to protect the right of people to housing.
Blackstone, the world's largest private-equity fund, also owns the largest single-family rental operation in the U.S. through its Invitation Homes unit. It's not the only private equity firm to invest in housing, but Blackstone's large size and concentration in a few metro areas has made it a dominant player in the rental market, where "it is having devastating consequences for tenants," the letter said.
"Blackstone's and its subsidiaries' business model is pushing low-income, and increasingly middle-income people from their homes," the rapporteur wrote. Among the tactics it ascribes to Blackstone, drawing on news reports, are purchasing housing for low-income renters and deeming it "undervalued," renovating it, dramatically increasing the rent and forcing out residents if they can't pay. Farha also cites the addition of processing fees, automatic late fees and "immediate" eviction notices if tenants are late with payments. Blackstone disputes the last assertion, calling it "absolutely false."
More likely to evict
"There are fulsome consumer protections and often lengthy legal processes that Invitation Homes follows to the letter in the rare instances when an eviction becomes unfortunately necessary," Blackstone wrote in a response. However, large institutional investors are significantly more likely to evict families than smaller landlords, an Atlanta Federal Reserve study found in 2016.
The actions of Blackstone, and other single-family rental companies, displace low-income residents, create instability and have a disproportionately harmful effect on African Amercians, who bore the brunt of the 2007 housing collapse, the rapporteur wrote. And it's not only Blackstone, she added, noting that the very model of a profitable investment backed by thousands of renters runs counter to the idea of housing as a human right, which the U.S. purports to endorse.
"Contrary to international human rights obligations, investment in housing in the United States of America has disconnected housing from its core social purpose of providing people with a place to live in with security and dignity," Farha wrote.
In its response, Blackstone said Farha's letter "contains numerous false claims, significant factual errors and inaccurate conclusions," but it rebuts few of the facts. Blackstone pointed out that in many of the areas where it operates -- such as Seattle and California -- renting is cheaper than owning. It also said the assertion that Invitation Homes overcharges rent is unfair and "is not supported by economic theory."
In a separate letter to regulators, Farha took aim at countries, including the U.S., that encouraged the formation of the single-family rental market. The U.S. Department of Housing, for instance, sold nearly 180,000 delinquent mortgages to private equity groups shortly after the financial crisis, in a transaction that required no protections for current or future residents in those houses.
She also criticized reliance on tax breaks to finance U.S. homeownership -- a tactic that benefits the wealthy -- and the government's reluctance to protect renters. And the rapporteur called out the Czech Republic, Denmark, Ireland, Spain and Sweden, where Blackstone also operates. Said Farha in a release: "We want to alert States and private equity and asset management firms that the financialisation of housing in its current form runs afoul of international human rights norms and cannot continue."