Wall Street’s Frightening New Plan To Become America’s Landlord

[Starry Messenger]

http://thinkprogress.org/economy/2014/01/24/3203471/wall-street-landlord/

Anyone who has ever struggled to get her landlord to fix a broken appliance can imagine how much worse it could have been if she were paying rent to a faceless hedge fund based thousands of miles away. That tenant’s nightmare may be on its way to reality for hundreds of thousands of Americans, as Wall Street firms have snapped up 200,000 family houses with the intention of renting them out.
Banks, hedge funds, and private equity firms have been amassing those real estate holdings for a few years now, but their plan for wringing profit out of the rental market is just starting to draw real scrutiny. The New York-based hedge fund Blackstone Group is now the nation’s largest landlord after purchasing over 40,000 foreclosed family homes for the purpose of renting them out.

While firms like Blackstone often farm out the day-to-day management of the rental properties to third-party companies, those intermediaries are often also based in faraway states. Some have a track record of being unresponsive to basic things like broken sewer pipes, as the Huffington Post has reported. The banks and their intermediaries may neglect basic upkeep of these properties. In that worst-case scenario for renters, local and attentive property managers and building supers will get replaced with “Wall Street-based absentee slumlords,” in David Dayen’s phrase.

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But firms like Blackstone aren’t just renting the homes, of course. The real money for the firm is in turning the rent payments it will receive from those 40,000 units into financial products called securities that it can sell to other investors. The practice could prove to be a broadly beneficial way to allocate scarce housing resources — or it could mirror the casino culture that turned the subprime bubble into an economy-wrecking conflagration.

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"History repeats itself, first as tragedy, second as farce."

Karl Marx

[hunter]

1. How to destroy communities...

... first buy all the property, then suck out all the money.

It's not sustainable, and really ought to be illegal.

[Spider Jerusalem]

2. Sure, what could go wrong? Rent-backed securities should be a safe bet, right?

After all, it worked so well with mortgages...oh, wait.

[Starry Messenger]

3. Right?

I wonder who will get the blame when this goes bad.

[Starry Messenger]

4. Kick for the weekend crowd

[FarCenter]

5. It's temporary - they will sell them when the prices go up.

[ConcernedCanuk]

6. Nope - more money in renting . . .

.
.
.

Real Estate value always goes up - the land is usually worth more than the buildings on it nowadays,

ergo - no big financial incentive to upkeep the buildings.

Rape the tenants and carry on.

Ain't capitalism great?

CC

[FarCenter]

13. Slumlords are usually smaller proprieters -- too much adverse publicity for big banks

E.g. an apartment complex in Detroit was owned by a small LLC of real estate investors from NY. It was going down hill. They went bankrupt.

Now the lenders have brought in a professional real estate management company and the complex is coming back.

[Starry Messenger]

7. I live in CA. This practice is driving up home prices.

Investors can make high cash bids that single family buyers can't match.

[FarCenter]

12. The old "pump and dump"

[TransitJohn]

8. Here we go again.

it sure would be nice if we had some sort of government regulatory agency that would keep these scum from going after the cheap, easy, dirty money.

[Starry Messenger]

9. Instead of rewarding them when they crash the economy with their stupid recklessness.

Yes.

[Jesus Malverde]

10. Bump..nt

[Starry Messenger]

11. Thanks. I thought this was a pretty big deal.

I need to figure out how to make catchier subject lines.

[TBF]

14. It's kind of like recycling -

they did this with mortgages the first time around - now they'll do it with rentals. They're resourceful.

[Starry Messenger]

15. Capitalism is a one-trick pony.

Get one idea and wring it out until it is dead. The only thing innovative is that they find new ways to make this bullshit smell like roses every 5 years.

[Shandris]

16. Sounds to me like they're volunteering to be Section 8 Housing.

Somehow I don't think that they'll like that idea, but it would be a nice method to keep them honest, as it were. After all, they're a lot closer to Washington than they are to central Indiana (for instance).

[Initech]

17. How are these greedy hedge fund managers not in prison yet?

[Starry Messenger]

18. Because they are too big to fail?

Personally, they seem more like the drunk dad who gambles away his whole paycheck and then passes out. But evidently they are our betters and are important and stuff.