The Ugly Truth About America's Housing "Recovery" -- It's Wall St. Buying Homes to Rent Back to Their Former Owners
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The rental market has traditionally been dominated by mom-and-pop investors, most with fewer than a couple dozen properties. Many landlords build relationships with their tenants, and the communities in which the homes are located. They hire local contractors to do maintenance work, and spend the income generated from rent back in the local economy.
That’s not how Riverstone operates. Its Web site touts the array of services it offers in-house for property owners, from contracts with telecom and utility providers, and exclusive partnerships with suppliers, to in-house screening and debt collection. Riverstone is a one-stop shop for property management.
Probably the most disturbing of all is the partnership between Riverstone and credit reporting agency Experian. Riverstone entered into an agreement last year with Experian Rent, to turn over real-time payment history on all of its residents to be compiled into a national database.
A press release Experian put out when the deal was announced stated that, “by furnishing resident rental payment history data to Experian RentBureau, Riverstone will immediately enhance the effectiveness of its rental collections while decreasing bad debt levels and encouraging proactive rental payment practices among its residents, leading directly to increases in net operating income (NOI) and the bottom line.”
This kind of data will help Blackstone and other large firms to eliminate some of the doubt and uncertainty around renters and their stability to investors. For the average renter, however, the consequences could be detrimental. Gone are the days of calling up your landlord to let them know rent will be there on the 7th instead of the 1st this month. As more and more Americans live paycheck to paycheck, and wages continue to decline or remain stagnant, paying rent a few days late could lead to a negative credit score, impacting their ability to secure resources and move up the ladder of the middle class.
Blackstone’s Jonathan Gray wouldn’t know much about that. He made $36.5 million in 2011. His boss, Blackstone CEO Stephen Schwarzman made $213.5 million. This new plan further grows the disconnect between Wall Street and Main Street, and the difference between the 1 percent and the 99 percent.
Interestingly enough, purchasing single-family homes isn’t Blackstone’s only recent foray into the housing market. In the lead-up to the crash, Blackstone’s hedge fund group, BAAM, chose to bet against the subprime market, purchasing credit default swaps and collecting billions in profits when the cards fell.
Blackstone’s hedge funds are now spending millions purchasing those very same subprime mortgage bonds for pennies on the dollar, betting on home prices going up, leading more homeowners to refinance and reinstating the value of these junk bonds. It's a constant game of speculation for Wall Street, which culminates in bubbles being created, the rich getting richer, and communities losing control over the places they live.
In the wake of one of the greatest financial disasters in modern times, you’d think we’d have learned our lesson. Like they say, fool me once, shame on you. Fool me twice, shame on me. Maybe what we need this time around are solutions that help people find long-term housing stability, instead of chasing short-term fixes that will land us right back where we started.