Middle-class suburban neighborhoods are being gobbled up by global investors, so enriching wealthy investors and turning would-be homeowners into lifetime, no-equity renters.
In Rutherford County, Georgia, the Washington Post reported on December 15, Rob Mitchell, the county property assessor, says nearly 1 in 10 homes there are now owned by a real estate investment trust, and that these investments are jacking up house prices.
These ventures are “equity-mining our community — removing generational wealth for an entire demographic of people,” said Mitchell, a Republican elected official. “For the average person starting out wanting to start their family, the choice is no longer: Can I purchase a house? It’s instead: Can I afford to rent a house?”
Under the headline, “Progress Residential reaps big profits from stressed American renters amid national affordability crisis,” the Post articles explains the phenomenon focusing on one suburb in Tennessee.
A map of a neighborhood in La Vergne, Tennessee, shows that an investment venture, Progressive Residential, owns 19 houses in one small suburban neighborhood, including nine in a row on one street. When the houses were built 15 years ago they sold for under $200,000, offering working class families a chance at home ownership.
Now some of those houses are renting for over $2,000 a month, revealing how global investors are outbidding families with cash purchases and driving up prices as a result.
“They’re preying on all these people,” Cindy Hicks, a hospital revenue specialist who lives in a Progress home near Tammy Sue Lane, said. Hicks said that when she was late paying rent, the company filed for an eviction and charged her a related fee of hundreds of dollars even after she said she caught up on the rent.
“There’s just no human decency,” said Victoria Bates, an Amazon warehouse worker who lives on Tammy Sue Lane with her husband and 10-year-old daughter. She said the company regularly failed to make repairs.
Behind Progress Residential is Pretium Partners, a New York-based investment firm whose business plan and investors are documented in the Pandora Papers, a massive database of offshore financial records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with the Post.
The Post reported on some of what it saw in the documents and also how the company pushing back on its reputation as a wealthy “landlord” of Americans:
The plan sought to exploit the 2008 U.S. housing crash, which forced millions of homeowners into foreclosure and left a glut of cheap houses for sale. The financiers’ plan called for buying up tens of thousands of these properties at depressed prices and renting them to families who had lost their homes or, because of tightened lending practices, could no longer qualify for a mortgage.
To raise money for the project, Pretium Partners sent confidential invitations to people wealthy enough to put up at least $2 million. Executives projected annualized returns of 15 to 20 percent, according to a 238-page solicitation to investors in 2012. In total, Pretium Partners raised more than $1 billion, and the resulting real estate venture became Progress Residential. The venture would “capitalize on the severe distress in the residential real estate market in the United States,” according to the pitch memo. The homes would be rented to families “who have been displaced by foreclosure or are otherwise unable to obtain financing despite being able to afford a home purchase.”
Among those who profited from America’s housing crash, according to the documents, was a Cayman Islands trust funded by one of Canada’s most powerful political donors, Stephen Bronfman, an heir to the billion-dollar Seagram spirits fortune. Another was Vikrant Bhargava, who co-founded an online gambling company that debuted on the London Stock Exchange valued at $8.5 billion. Pretium made legal arrangements so such foreign investors would have limited exposure to U.S. taxes, according to tax experts.
In a statement, Progress Residential defended itself, including the treatment of tenants and said that its rents and fees “are in line with industry standards and market rates.”
“All of our entities conduct business according to the highest ethical and legal standards,” the company said.
Pretium said in the Post report that it treats tenants fairly and responds to their complaints in a timely manner. The company said that the tenants who are at “very small portion of its 200,000 residents.”
“Pretium is dedicated to being a part of the solution to our nation’s housing crisis through unparalleled efforts to support our residents and communities,” the company said.
Breitbart News has reported on similar efforts to eliminate single family homes in other American cities, including in Maryland.
One third of Montgomery County, Maryland, is made up of single family home neighborhoods where families have porches and yards for gathering. But if the Thrive Montgomery 2050 plan is put into place by the Montgomery County City Council by the end of the year, residents could see those neighborhoods transformed with the introduction of multi-unit housing.
Oakland also is moving toward the forced diversity of middle class neighborhoods. Oakland’s Vice Mayor, Rebecca Kaplan, recently introduced a resolution to direct the city’s administration and planning department to study how it can place four-plexs in otherwise single-family home neighborhoods.
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