When Private Equity Becomes Your Landlord
When Private Equity Becomes Your Landlord


                    


        
        
        




                    
Daniel Cooper could barely afford a tiny apartment at the 13-story Olume building in downtown San Francisco. But the expansive view from the roof deck captivated him.
        
    
                    
Raised in a small city in Kentucky, Cooper was struck by the grandeur of the skyline before him, from the soaring heights of Salesforce tower, San Francisco’s largest skyscraper, to the gleaming gold cupolas atop St. Joseph’s Church, one of the city’s historic landmarks.
        
    
                    
The sense of opportunity he felt when looking out on his new hometown helped convince the software engineer to become one of the glassy new building’s first tenants in 2016. He joined Mévis Mousbé, a driver for a ride-sharing service who had been the first to move in. She admired the high ceilings in her new junior studio on the sixth floor, which she shared with her Shih Tzu, Roxie-Jolie. A few months later, “Specs” Titus, an entrepreneur whose eyeglasses inspired her nickname, settled happily into a corner unit on the eighth floor with her daughter. She’d won it in a lottery for apartments with below-market rents.
        
    
                    
But prospective tenants weren’t the only ones eyeing the new apartment building, with its 121 units, gym and rooftop fire pits.
        
    
                    
In July 2017, Cooper received an email announcing that Greystar, the property management and real estate investment behemoth, was taking over the building. The private equity-backed firm was buying the Olume’s owner, Monogram Residential Trust, and its investments in four dozen properties scattered across 10 states. Cooper worried his new community was about to change.
        
    
                        
        
    
                    
As Greystar took charge, his alarm grew. Rents soared. Trash collected in the hallways and on the rooftop deck, Cooper said. The security guard showed up less often. One tenant said she was frightened when she encountered a large, seemingly drunk man she didn’t know dancing in a leotard and tutu in the parking garage. Another renter described having to heat her bathwater on the stove after she woke several times to find only cold water flowing from her tap.
        
    
                    
“I understand that rent goes up, cost of living goes up, everything goes up,” Cooper said. “But with that, we would expect the quality of the building, and the quality of the management, would stay the same, and that was not what we saw.”
        
    
                    
Greystar did not respond to questions about tenant complaints, except to say that resident satisfaction was “very important” to the company.
        
    
                    
            
    
                    
Cooper and his fellow tenants were experiencing firsthand the effects of a dramatic, though mostly unnoticed, shift in control of a vital portion of America’s housing stock, according to a first-of-its-kind analysis by ProPublica.
        
    
                    
During the past decade, private equity-backed firms such as Greystar have stormed into the multifamily apartment market, snapping up rentals by the thousands and becoming major landlords in American cities, according to ProPublica’s analysis of National Multifamily Housing Council data on the nation’s biggest owners of apartment buildings with five or more units.
        
    
                    



    
Private Equity Firms Were Behind 85% of Freddie Mac’s Biggest Apartment Complex Deals


                        
            
    

    
    
    
    




        
    
                    
Private equity is now the dominant form of financial backing among the 35 largest owners of multifamily buildings, the analysis showed. In 2011, about a third of the apartment units held by the top owners were backed by private equity. A decade later, half of them were.
        
    
                        
        
    
                    
Private equity-backed firms in the top 35 cumulatively held roughly a million apartments last year, the analysis showed. That is likely an undercount, because private equity giants like Blackstone, Lone Star Funds and others don’t participate in the National Multifamily Housing Council’s annual survey.
        
    
                    
Private equity firms often act like a corporate version of a house flipper: They seek deals on apartment buildings, slash costs or hike rents to boost income, then unload the buildings at a higher price.
        
    
                    
The influx of private equity comes during a national affordable housing crisis and has dire consequences, tenants and their advocates say. Such firms use economies of scale to more aggressively squeeze profits from their buildings than traditional landlords usually do, tenant advocates say. The firms’ tactics can include sharply increasing rent or fees and neglecting upkeep. Sometimes landlords force out existing tenants and replace them with those who can pay more.
        
    
                    
The companies’ size allows them to influence market rates and lobby against reforms that could dilute their power. And their goals — quickly hiking a building’s profits so they can sell it at a premium — are often at odds with those of the tenants who need to live in them. In contrast, so-called mom-and-pop landlords usually look for steady streams of rental income over time while their buildings grow in value.
        
    
                    
Another difference comes in profits. Private equity firms boast about outsize returns, and the most aggressive funds seek a profit of 20% or more on investors’ contribution, minus management fees. That compares to publicly traded real estate investment trusts, which, on average, pay an annual dividend yield of 4.33% and allow investors to hold the value of the trust’s stock.
        
    
                    
ProPublica found that the private equity buying spree has been fueled in part by Freddie Mac, the nation’s largest rental housing financier.
        
    
                    



    


                    
    


    

            
    

        Freddie Mac’s headquarters in McLean, Virginia.
    
        
        Credit: 
        Andrew Harrer/Bloomberg/Getty Images
    
    
    
    



        
    
                    
Freddie Mac is a publicly traded corporation with a congressional charter that helps support home and apartment purchases by buying loans off private lenders so they are free to make more mortgages. A new federal overseer, the Federal Housing Finance Agency, was created in 2008 after problems with single-family mortgages almost sent Freddie Mac and Fannie Mae into the government equivalent of bankruptcy.
        
    
                    
Large private equity firms accounted for 85% of Freddie Mac’s 20 biggest deals financing apartment complex purchases by a single borrower, according to a ProPublica analysis of data from the industry publication Commercial Mortgage Alert.
        
    
                    
All but one of those deals occurred in 2015 or later, as low interest rates propelled private equity firms to seek billions in Freddie-backed loans for mass apartment purchases.

In 2016, the biggest loans involving private equity firms made up at least 11% of Freddie’s total deal volume, data shows. In 2017, they accounted for at least 6%.
        
    
                    
Greystar’s purchase of the Olume that year was part of a deal worth nearly $1.8 billion, which set a record as the biggest Freddie Mac had ever done with a single borrower, according to Commercial Mortgage Alert.
        
    
                    
Repercussions from the surge in such mortgages continue today. Large loans to private equity firms, researchers and advocates fear, are helping drive industry concentration and pushing up the cost of renting. The loans typically do not include provisions that increase tenant protections or that keep affordable housing rents low over the long term.
        
    
                        
        
    
                    
Freddie’s loan terms generally allow building owners to raise the rent in the years after the loan is issued. Freddie does not track rent levels over time in the buildings it finances. The Federal Housing Finance Agency does not require the company to do so.
        
    
                    
“Why wouldn’t we put even minimal tenant protections in place?” said Sofia Lopez, deputy campaign director for housing for the Chicago-based Action Center on Race and the Economy. The absence of such rules raises questions about the priorities of Freddie Mac’s regulator, she said. The FHFA “seems much more interested in protecting profits than ensuring basic protections for the people living in the housing that they are helping to finance.”
        
    
                    



    


                    
    


    

            
    

        Daniel Cooper, right, and his partner, Kevin Haney, were tenants of the Olume building in downtown San Francisco.
    
        
        Credit: 
        Laura Morton, special to ProPublica
    
    
    
    



        
    
                    
Affordability is supposed to be central to Freddie Mac’s mission, said Jim Baker, whose organization, the Private Equity Stakeholder Project, has been tracking the industry’s foray into apartment ownership. “To the degree that they are financing purchases by private equity firms that then dramatically raise rents, they are working directly counter to that goal,” Baker said.
        
    
                    
A spokesperson for Freddie Mac downplayed the large private equity deals, saying its lending program has a much broader reach. Freddie’s median loan size for multifamily apartments is $6.4 million, and it typically only processes two or three large “portfolio” loan deals each year, he said. In 2020, a year marred by market volatility because of the pandemic, such transactions amounted to less than 1% of Freddie’s total $82.5 billion deal volume.
        
    
                    
“In addition to our affordability mission, Freddie Mac was created to provide liquidity and stability to the housing markets and must provide consistent support throughout the market to achieve that goal,” said the spokesperson, who declined to be named, citing the government-backed corporation’s policy.
        
    
                    
A spokesman for FHFA declined to comment. 

Greystar did not respond directly to a list of questions from ProPublica. In a brief statement, the company said it pays close attention to residents’ concerns.
        
    
                    
“Resident satisfaction is very important to us, and we regularly survey our residents to gauge their level of satisfaction, to help us address issues and identify opportunities to make improvements in our services,” the statement said.
        
    
                    
But that was not the experience of Cooper or other former tenants who spoke with ProPublica.
        
    
                    
“Our building was recently acquired by a new firm which has shown nothing but contempt for existing residents,” Cooper wrote in an online review the year after Greystar completed its purchase, “and a desire to increase profits.”
        
    
                    
    A New Way to Profit


        
    
                    
The Great Recession that ended in 2009 was a financial sinkhole for millions of Americans. More than 3.7 million households went through foreclosure. But it was not such an unmitigated disaster for private equity-backed companies.
        
    
                    
At bargain-basement prices, the firms scooped up tens of thousands of single-family homes lost to foreclosure and turned them into rentals.
        
    
                        
        
    
                    
The practice generated a backlash. Housing advocates and renters said the companies charged exorbitant rents and fees, neglected repairs and bullied tenants by aggressively threatening eviction. Fannie Mae’s $1 billion deal with a Blackstone-owned home rental company in 2017 elicited so much criticism that Fannie Mae and Freddie Mac stopped financing such transactions the next year. Blackstone denied engaging in tenant abuse and no longer owns the company.
        
    
                    
But by then, private equity firms had set their sights on other types of housing, expanding into senior and student residences, manufactured homes and large apartment buildings, said Patrick Woodall, a senior researcher with Americans for Financial Reform, a nonpartisan nonprofit advocating for measures such as consumer protections and accountability for banks.
        
    
                    
Big apartment complexes aren’t symbols of the American Dream the way single-family houses are. But they are home to a sizable share of the 44 million households who rent. And Cooper’s new landlord had, decades before, figured out a way to transform that demand into cash.
        
    
                    
Before other private equity firms rushed in, Bob Faith, the founder and CEO of Greystar, was a pioneer in connecting large-scale investors with the market for buying, selling and managing big apartment complexes. He raised funds from Wall Street’s biggest pots of money: institutional investors such as pension funds, hedge funds and life insurance companies. The money from such investors is known as private equity.
        
    
                    



    


                    
    


    

            
    

        Bob Faith, the chairman and CEO of Greystar Real Estate, during a Bloomberg Television interview in 2020.
    
        
        Credit: 
        Christopher Goodney/Bloomberg/Getty Images
    
    
    
    



        
    
                    
Money flooded into the industry post-recession, when financing and renters became plentiful. Between 2016 and 2021, Greystar nearly doubled the size of its portfolio of apartments to more than 75,000, ascending through the ranks of big owners to become the nation’s sixth largest.
        
    
                    
Faith has bragged about his ability to squeeze money from the buildings he buys and manages.
        
    
                    
“Many times we take over an asset that perhaps was, you know, managed by a, you know, a smaller organization that hasn’t been focused on the bottom line,” Faith said during an interview at a conference in 2010. “We can drive dramatic savings out of the expense side of the equation, even in a flat or even slightly declining market.”
        
    
                    
Greystar declined to make Faith available for an interview.
        
    
                    
Renters have accused the company of deploying questionable tactics to reap profits. One lawsuit in California alleged that the company charged illegal fees on top of rent so that the total tenants owed would escalate each month — a practice the claim called “pyramiding.”
        
    
                    
Greystar denied the allegations, saying it had not engaged in illegal conduct. The case is ongoing.
        
    
                    
Other private equity firms have focused on driving up income through a process some in the industry call “re-tenanting,” in which new landlords force out existing renters to make room for others who can afford higher rents.
        
    
                        
        
    
                    
In 2018, private equity-backed Lone Star Capital (which is unrelated to Lone Star Funds) bought a Houston apartment complex where many tenants were delinquent or paying below-market rates. All were evicted or gone within a year, the company said.
        
    
                    
“If you don’t pay, it’s a pretty straightforward process to getting new tenants,” said Rob Beardsley, a founder and principal at Lone Star Capital.

Advocates say private equity’s aggressive pursuit of short-term profits makes them quicker to kick tenants out.

“Some of the worst actors in terms of evictions that we saw were private equity-owned,” said Baker, of the Private Equity Stakeholder Project.
        
    
                    
Private equity funds typically have a lifespan of about 10 years, said Jeffrey Hooke, a former investment banker, a professor at Johns Hopkins Carey Business School and the author of the recently published “The Myth of Private Equity.” That gives firms just a few years to pick properties to invest in, then a few more to make changes that will drive income higher before a sale.
        
    
                    
“That’s a very short time frame,” Hooke said. “You’ve got to have results.”
        
    
                    
Emily Schillinger, a spokesperson for the American Investment Council, a private equity industry group, said the firms were brightening prospects for renters. “These investments help improve properties, strengthen environmental sustainability, and support jobs in local communities,” she said.
        
    
                    
But private equity’s apartment binge comes amid a housing shortage that is leaving many renters vulnerable. The nation needs 328,000 new housing units a year to keep up with demand, said National Multifamily Housing Council vice president of research Caitlin Sugrue Walter. Builders have fallen short most years since the Great Recession.
        
    
                    
Rents nearly doubled in many major cities over the decade, despite slow wage growth that often failed to meet the rising cost of housing. That put renters in a financial vise, with the Joint Center for Housing Studies at Harvard reporting that nearly half paid rent equal to 30% or more of their income in 2019. That was up from 2001, when roughly 4 in 10 households were paying that much.
        
    
                    
When rents rise, well-off tenants take cheaper properties that would otherwise be available to people making less money. The renters with the least sometimes fail to find housing altogether.
        
    
                    
Research shows that the homelessness rate accelerates once average rent in a community passes a threshold of about 32% of income. Just a 5% increase in rent, another study found, could lead to thousands more homeless people in a city like New York.
        
    
                    
“There’s a lot of competition at the bottom of that ladder,” said Chris Glynn, a co-author of the homelessness research and a senior manager at Zillow.
        
    
                    
    Rents Go Up


        
    
                    
After moving into the Olume — just months ahead of Greystar’s purchase — Specs Titus was thrilled. Light from two tall, corner windows brightened one of her two bedrooms. She had landed a good unit with a good landlord, she thought.
        
    
                        
        
    
                    
Monogram, a publicly traded real estate investment trust, seemed committed to its tenants. These trusts often hold properties for longer because, unlike private equity firms, they are not trying to resell for a big windfall after just a few years.
        
    
                    
“I adored Monogram, I had a great relationship with them,” she said. The staff held gatherings for tenants, she said, taking care to stock kid-friendly food and drinks, like fruit punch, for her elementary school-aged daughter. “They were really, really considerate,” Titus said.
        
    
                    
Monogram encouraged its employees to be responsive to tenants, said Arielle McHenry, who worked as a leasing agent at the Argenta, another Monogram building just a few blocks away from the Olume. The company offered discounts to staff to live in its apartments, she said, “so you can speak to the issues and empathize.” McHenry moved into a one-bedroom unit in the Olume shortly after the building opened.
        
    
                    
The Olume was slightly less expensive than the Argenta, according to McHenry. Where most Argenta residents were single professionals and families making at least $100,000, the Olume attracted more people who needed roommates to make rent.
        
    
                    
The neighborhood, known as SoMa, for South of Market, was part of a higher-crime area of the city. As recently as 2020, the city sued 28 alleged drug dealers in an effort to banish them from the neighborhood.
        
    
                    
But as tech businesses and restaurants have proliferated, the neighborhood has gained a reputation as up-and-coming. Twitter moved its headquarters to a massive art deco building there in 2013. Residential towers like the Olume, with its tall clusters of windows framed by burnt-orange rectangles reminiscent of the Golden Gate Bridge, soon rose among older, lower-slung buildings.
        
    
                    
Shortly after Monogram sold, residents’ rents began to increase.
        
    
                    
McHenry’s lease came up soon after Greystar took over. “The renewal rate was extremely high,” she said. Like Greystar, Monogram used a pricing algorithm to set apartment rents, but it was willing to negotiate with tenants, she said. Greystar wasn’t. Her rent had grown to about $3,000 after Monogram sold, and it was set to jump again to almost $4,000, she said.
        
    
                    
She found she could no longer afford to live in the building.

“There wasn’t really room for negotiation,” said McHenry, who left for another apartment. 

Other residents’ rents were jumping up, too. “The studios were moving like hotcakes,” Mousbé said.
        
    
                    
The initial rent for Cooper’s 535-square-foot unit, which had a sliding door between the living room and bedroom, was $2,800 a month. By 2018, he and his partner were paying $3,400 and looking at another increase. Keeping a dog at the apartment cost more, too.
        
    
                    
“Pet rent even went up by 25%,” Cooper recalled, in an email.

But he and his neighbors discovered that rent hikes weren’t the only problem after Greystar took over.
        
    
                        
        
    
                    
A security guard had been reliably stationed in the Olume’s lobby on nights and weekends, when building staff were gone. After the sale, Titus said, the Olume and the Argenta shared a guard. “I’m like, ‘Wow, this person is now responsible for 600 people,’” she recalled.
        
    
                    
She felt less safe. Homeless people had set up a number of encampments in the area. Sometimes, she said, people who weren’t tenants would wander in through the parking garage door, which sometimes malfunctioned and stayed open. The building didn’t require an identification badge to enter the apartment hallways from that door. Titus was the one who said she’d once found a stranger dancing wildly in a ballet outfit in the garage.
        
    
                    
The number of calls to police from the Olume ticked up slightly, emergency management records show, with some months logging as many as eight calls — a number never reached under Monogram.
        
    
                    
Titus wasn’t the only Olume resident to feel less safe. One day around sunset, when Daniel Cooper was on the roof he so loved with some neighbors, an apparently inebriated man appeared, saying he needed a place to stay. Other tenants escorted him downstairs and outside.
        
    
                    
And former tenant Justin Skoryi said he opened the stairwell door on the 11th floor once to walk up to the roof, only to find a shopping cart full of a homeless person’s belongings parked on the landing.
        
    
                    
There were other changes to the atmosphere at the Olume, tenants said.
        
    
                    
The building had door-to-door trash service, Cooper said, but it didn’t operate on weekends. After Greystar staff locked up a dumpster that tenants used when the service wasn’t running, bags of garbage appeared along its hallways, in the elevator, on the roof and in the gym. Amenities like a rooftop fire pit, television and a dog park were frequently left dirty or in disrepair, too, he said.
        
    
                    
“We would be told for weeks on end that requests for repairs were awaiting corporate approval,” Cooper said. Even small things seemed to fall victim to budget cuts. The coffee maker in the lobby had an “out of order” sign for weeks, he said, and the machine eventually disappeared.
        
    
                    
Cooper’s partner, Kevin Haney, said the Olume became “like a college dorm.” “It was so absurd we were paying so much money to live in that kind of environment,” Cooper said. 

Don Wood, another former tenant who lived there at the time, said he noticed more raucous parties taking place on the roof. “All of a sudden it started to feel like a frat house.”
        
    
                    
When Titus’ refrigerator and, later, her washing machine broke, she said building staff simply scavenged replacements from other apartments instead of getting the broken ones fixed or buying new ones. The shuffling was so extensive that when she had a problem with a replacement refrigerator and staff brought yet another one to her unit, she peered inside to find labels she had affixed there herself, months before. She realized staff had given her back her original appliance. It still leaked, she noted.
        
    
                    
At one point, staff directed her to go use washing machines in empty units. Calling herself “a nomad with dirty laundry,” Titus said that for eight to 10 months, she went up to the 11th floor and down to the second floor to wash clothes for herself and her daughter. Sometimes, her clothes would be moved or missing when she came to retrieve them from the dryer.
        
    
                        
        
    
                    
Some building-wide services went on the fritz, too. Mousbé woke up on more than one morning to find no hot water in her apartment. She had grown up one of 12 kids in Seychelles, an island nation and tourist haven in the Indian Ocean. Her family routinely warmed water on the stove for baths during the coolest months. So that’s what she did. “I called it my cavewoman moment,” she said.
        
    
                    
One tenant’s complaint about the hot water problem prompted a revealing exchange between Greystar and city officials charged with enforcing housing codes.
        
    
                    
The tenant, who filed a complaint anonymously with San Francisco’s building department, griped that “it’s forced me to shower at a friend’s apartment across the street.” The building manager said one of two boilers was down but couldn’t say when it would be fixed, according to the tenant.
        
    
                    
A city inspector visited and found other violations, records show, involving building features including the fire alarm control panel and the HVAC system. Though some work was done, the building still hadn’t corrected all the issues when the inspector visited weeks later, or again a few months after that, prompting the city to hold a hearing.
        
    
                    
After the city issued an abatement order, all the building’s violations were finally addressed, records show.
        
    
                    
Greystar’s reaction to the enforcement action stood in contrast to the way Monogram had operated. Building department records show that under Monogram, the two complaints about building malfunctions — a leak and a broken door lock — were resolved in a matter of days, without repeated visits from an inspector or a hearing.
        
    
                    
Despite tenants’ gripes, the Olume looked like a success to Greystar.
        
    
                    
Between 2018 and 2019, data from Freddie Mac shows, the complex’s profits rose to $2,330,407 a year, a 24% increase. The building achieved that boost by both shrinking expenses and raising its revenue, according to the data.
        
    
                    
“Year over year, that’s a large increase,” said Kevin Riordan, a financing expert and real estate professor at Montclair State University.

That’s just one building. The overall return for Greystar investors isn’t publicly known.

Greystar did not comment on any tenant complaints.
        
    
                    
    Freddie Mac and Fannie Mae Help the Big Guys


        
    
                    
Just a few private equity firms benefited from most of the megadeals Freddie Mac did in recent years.
        
    
                    
Greystar, based in Charleston, South Carolina, was one of five such companies to appear more than once on the list of Freddie’s largest 20 deals with single borrowers. The four others — Lone Star Funds, Starwood Capital, Brookfield Asset Management and Harbor Group International — were the beneficiaries of half the deals on the list. Combined, they borrowed roughly $16 billion.
        
    
                    
The deals were massive, involving thousands of apartments and multiple states. Greystar’s acquisition of the Olume was part of a deal involving more than 8,500 apartments in 10 states and Washington, D.C., according to Freddie Mac records. It closed in late 2017.
        
    
                    



    


                    
    


    

            
    

        The entrance to Freddie Mac’s headquarters.
    
        
        Credit: 
        Alex Wong/Getty Images
    
    
    
    



        
    
                    
In another top deal, private equity giant Lone Star Funds bought Home Properties, also a real estate investment trust, in 2015, in part using a nearly $1.5 billion package of Freddie-backed mortgages for roughly 10,400 apartments in seven states.
        
    
                        
        
    
                    
By 2019, Lone Star had already sold off the properties — many to buyers who also obtained Freddie financing. The firm declined to comment further for this story.

Starwood Capital, Brookfield Asset Management and Harbor Group International could not be reached for comment.
        
    
                    
Financing from Freddie and Fannie offers advantages that private banks often can’t match, including lower interest rates. The government-backed corporations typically buy multifamily loans off private lenders, package them into bonds, and resell them to investors.
        
    
                    
While those investors share risk and massive defaults are highly unlikely, ultimately, American taxpayers stand behind much of the debt. The two corporations needed a $190 billion bailout after the last housing crisis but later paid back the money.
        
    
                    
But some experts question whether Freddie and Fannie have been making too many loans to too few players — and whether those loans help the government-backed corporations meet their obligations to produce stable and affordable housing.
        
    
                    
“If they are financing mostly the big guys,” said Daniel Immergluck, a real estate and public policy professor at Georgia State, “it really does raise policy questions about why.”
        
    
                    
While it makes sense for Freddie to serve a broad swath of apartment owners, Immergluck said, its financing may not come with enough conditions to promote its affordable-housing goals when it lends to big private equity players. Such firms should be required to abide by certain tenant protections, such as those restricting eviction, for instance, and bad actors should be identified, warned and denied further financing if they refuse to comply, he said.
        
    
                    
There is precedent for such conditions. FHFA announced in July that it would require landlords for apartment buildings financed by Freddie Mac and Fannie Mae to give tenants who are being evicted at least 30 days’ notice before forcing them to leave.
        
    
                    
In mid-September, Freddie went even further for another type of housing, unveiling new protections for tenants renting pads for their manufactured homes from park owners who received Freddie financing. They included requiring a 30-day notice of rent increases and a five-day grace period for late rent, as well as a right to make up missed payments.
        
    
                    
Several housing advocacy groups have urged Freddie and Fannie to adopt similar measures for renters in the apartment buildings they finance. In October letters to the FHFA, the regulator for Freddie and Fannie, housing advocates said the corporations should take steps to minimize evictions by requiring grace periods and allowing subleases, for instance. The groups want Freddie and Fannie to implement their recommendations through new Equitable Housing Finance Plans expected to be made public this year.
        
    
                    



    


                    
    


    

            
    

        Fannie Mae’s headquarters in Washington, D.C.
    
        
        Credit: 
        Andrew Harrer/Bloomberg via Getty Images
    
    
    
    



        
    
                    
Freddie and Fannie should also make sure the profit expectations underlying their loans aren’t such a stretch that owners must hike rents sharply to meet them, said David Dworkin, president and CEO of the National Housing Conference, a nonprofit promoting safe and affordable housing. Dworkin said the agencies shouldn’t make mortgage loans to an apartment project “that clearly requires raising rents for it to be viable,” he said.
        
    
                    
Critics have also questioned whether private equity even needs help from Freddie Mac and Fannie Mae.
        
    
                    
Private equity firms in 2020 reported a record amount of unallocated capital on hand — called “dry powder” in the business — for real estate, according to the research firm Preqin. The total was $389 billion at the end of the year. The 10 private equity firms involved in the biggest Freddie deals are holding $74 billion of that, according to Preqin.
        
    
                        
        
    
                    
The private equity interest group, the American Investment Council, said “dry powder is simply retiree pension and college endowment money that has not been invested yet.”

A spokesperson for Fannie Mae declined to comment.
        
    
                    
A Freddie Mac spokesperson said that more than 95% of rental units backed by loans Freddie has purchased deliver market-rate rents that are affordable to low-, very-low- and middle-income households.
        
    
                    
The spokesperson also said that Freddie requires borrowers to abide by tenant protection laws and regulations that cover properties with mortgages it backs.

“Freddie Mac’s mission is to provide liquidity, stability and affordability to the housing market in all economic conditions and all our activities are in furtherance of that goal,” he said.
        
    
                    
    Consolidation and Political Power


        
    
                    
The multiple, big Freddie deals by a few large firms raise questions about whether those transactions are helping drive consolidation in the rental industry as a whole.
        
    
                    
In 2015, the share of apartments where individuals were landlords fell below 50%, a U.S. census survey found, as mom-and-pop landlords were displaced by corporate players — especially in bigger buildings. Three years later, the same survey found the portion of units owned by individual landlords had continued to drop, to 41%.
        
    
                    
Some big landlords were targets, too. Private equity firms bought up publicly traded real estate investment trusts like Home Properties and Monogram. “The consolidation we’ve been talking about is finally starting to happen,” an executive at Brookfield told the Multifamily Executive in 2015.
        
    
                    
The phenomenon is almost impossible to track, since the ownership of each apartment complex is typically obscured by layers of limited liability corporations.
        
    
                    
But for the last five years, the total number of apartments owned by the top 50 firms on the National Multifamily Housing Council’s list has steadily risen. In 2017, they collectively held just under 2 million units. By 2021, that number had climbed to 2.3 million, representing about 10% of the nation’s apartment stock in buildings with five or more units. The top five owners held 439,118 apartments, 22% more than the top five owners did in 1990.
        
    
                    



    
The Total Number of Units Belonging to the 50 Companies That Own the Most Apartments Has Gone Up 16.4% Over Five Years


                        
            
    

    
    
    
    




        
    
                    
Researchers and tenant advocates say the effects of consolidation are most noticeable at the local level.
        
    
                    
Sara Myklebust, research director at Bargaining for the Common Good Network, an initiative of labor and community groups, worked with Woodall, of Americans for Financial Reform, to try to survey units owned by large-scale corporate landlords in major cities across the country in 2019. Myklebust and Woodall were interested in whether they could document the consolidation of the market for single-family rentals, manufactured homes and apartments.
        
    
                    
Myklebust said they found higher concentrations of apartments owned by large-scale landlords in 10-15 cities, including Atlanta; Phoenix; Denver; Seattle; Boston; Washington, D.C.; Houston; Dallas; Austin, Texas; and some big cities in Florida and California.
        
    
                        
        
    
                    
“There’s a large number of companies overall in multifamily, but these really big companies that tend to be owned by or associated with private equity firms specialize in particular regions,” she said. “And then they own a lot in those regions.”
        
    
                    
Some of those big landlords appeared to be trendsetters, she said, whose cues on rent prices are followed by smaller operators. That means that landlords with big-money backing seem able to drive up rents even when their market share isn’t huge.
        
    
                    
Another advantage for Wall Street-backed landlords is their ability to wield influence in state and local politics, she said, shaping decisions that make a big impact on renters.

In 2018, for instance, Blackstone spent more than $6.2 million fighting a ballot initiative that would have allowed rent control in California cities. 

Blackstone executives said that while steps were needed to address housing affordability, the measure would have exacerbated the state’s housing shortage by discouraging new construction.
        
    
                    
Overall, opponents spent nearly $83 million to defeat the measure, more than three times what supporters spent.
        
    
                    
The rent control initiative failed, with 60% of voters against and 40% for.
        
    
                    
    “Forced Out the Door”


        
    
                    
At the Olume, tenants had to make painful financial decisions. In 2018, Cooper knew his rent was going to increase another $400 to $3,800 if he and his partner, an information technology manager for an autonomous car company, renewed their lease.
        
    
                    
They were both under 30 and loved the urban lifestyle of San Francisco. But the cost didn’t make sense. So they packed up their belongings and moved out of their junior one-bedroom apartment. They relocated with their dog, Mallory, a Dalmatian mix, to a larger apartment in Fremont, southeast of San Francisco, where they paid almost $1,000 a month less.
        
    
                    
Eventually, they moved into a single-family home, which they rent from a local couple for $3,400 a month. The rent hasn’t gone up once in two-and-a-half years.

“It’s kind of bittersweet,” Cooper said recently. “We’ve enjoyed the perks of living out of the city, but we miss the city.”
        
    
                    



    


                    
    


    

            
    

        Cooper and Haney in their new neighborhood outside San Francisco.
    
        
        Credit: 
        Laura Morton, special to ProPublica
    
    
    
    



        
    
                    
Even the pandemic didn’t completely dampen the upward march of rents in many buildings across the country. From January through July 2021, the asking price of rents jumped 8.3% nationwide — marking the steepest increase in decades, according to data from Yardi Matrix.
        
    
                    
Titus realized in late 2020 that she had reached her limit at the Olume. The security concerns, the appliance problems and what she considered lackluster cleaning practices during the pandemic no longer seemed worth what she was paying, even with her reduced rental rate. She and her daughter decided to head for the suburbs.
        
    
                        
        
    
                    
She declined to renew her lease in December. A property manager at the Olume told her he would waive any penalties if she moved out in February. Her place would re-rent quickly, he said. But after she penned an unfavorable review that she thought was anonymous, she said the manager yelled at her in front of other tenants. Greystar then told her she owed another $1,400 above her usual charges, saying the rent had gone up during the short time she was on a month-to-month lease, she said.
        
    
                    
Greystar refused to return her $1,000 deposit. Titus tried to argue. “I was really upset that they kept all my money,” she said. When she resisted paying the additional $400, the building turned her account over to bill collectors, who started calling her three times a week. She finally told them she was looking for a lawyer, and they stopped. Greystar did not respond to questions about Titus’ case.
        
    
                    
For Mousbé, the pandemic brought on an immediate employment crisis. She had been working as a driver for a company that provided rides for children heading to or from school or activities. No riders during lockdown meant no paycheck.
        
    
                    
For four-and-a-half months, she had no income. She burned through her savings fast. “We were not getting any rides from anybody,” she said. “I kind of fell behind.”
        
    
                    
Mousbé’s employer started up again in mid-2020, requiring drivers to install dividers in their cars, and to stock extra masks and hand sanitizer. Mousbé began driving again and took a second job, taking care of kids.
        
    
                    
She said she tried paying off the back rent in installments, three times a month, to catch up. But with late fees compounding what she owed, it was too much. She asked if she could apply for rental assistance for the missed months under the CARES Act. A manager told her the building didn’t have forms.
        
    
                    
Finally in December 2020, the manager said she owed $18,000 (a figure she questions). The building might evict her, he said, and she should leave before Greystar took action. Greystar did not respond to questions about this exchange.
        
    
                    
Mousbé gave up. She had started paying on time again and still hoped to secure rental assistance for the back rent (she eventually filled out the forms). She knew the Centers for Disease Control and Prevention had instituted a temporary moratorium on evictions because of the pandemic, but she worried about what Greystar would do. “I felt like I was forced out the door,” she said.
        
    
                    
She looked around in the neighborhood and found a one-bedroom for less than she had been paying Greystar. San Francisco was one of a few cities where rents eased during the pandemic.

“Greystar doesn’t really care about the tenants,” she said. “It’s all about the money. When we need something, it’s like pulling teeth to get things done.”
        
    
                                  
        
    
                    
The manager had told her she would get her deposit back, and that she could use it for moving expenses, she said. But Greystar kept the $3,100, plus interest. She is still trying to get it back.
        
    
                    
Now she has a one-bedroom in a building called L Seven, a half-mile from the Olume. Her new landlord, Brookfield Properties, was second only to Blackstone in Private Equity Real Estate’s ranking of the top 100 firms.
        
    
                    


        
    
                    
    Methodology


        
    
                    
ProPublica’s analysis used data from the National Multifamily Housing Council’s annual listing of corporations that own the most apartments. To determine which firms were backed by private equity, ProPublica also drew on descriptions of companies’ sources of funding compiled from PitchBook, Crunchbase, Private Equity Real Estate, industry publications and the firms’ own websites.
        
    
                    
    
    
    

        

            Have You Had Trouble Renting an Apartment and Don’t Understand Why? It Might Be Your Tenant Screening Score.
                Did a tenant screening company, such as LeasingDesk, On-Site, Credco or RentGrow, send you a score or report? We want to understand their effect on tenants.
    


        

        
        Expand

    

    
            
    
                    
                    
                
            CorrectionFeb. 7, 2022: This story incorrectly described Yardi Matrix. The company provides data and research on multifamily, student housing, office, industrial and self-storage properties across the United States. It is not a property manager.

        

                

                                    
        Erin Smith contributed reporting and Alex Mierjeski contributed research.

    


                                    
        Update, Feb. 7, 2022: After this story was published, a spokesperson for Freddie Mac said it bases its underwriting on the rent at the time the loan is made to make sure that properties can meet maintenance and other obligations without needing to increase rent.

    
            
        
    