Criticism
Wall Street companies in the rent industry, especially Invitation Homes, have garnered strong backlash from real estate experts and affordable-housing activists for taking advantage of tenants to fulfill investors' pockets; the primary argument is that the corporations are incentivized to keep repair costs low and fees and rent prices high in order to increase bond sales that determine their scale.[11] California Reinvestment Coalition's Kevin Stein derogatorily labeled the business model "securitization of rental income."[11]
An analysis of Census and property data by Massachusetts Institute of Technology researcher Maya Abood of four Los Angeles County neighborhoods where Invitation Homes single-family rents are located show that the percentages of rents it owns in a neighborhood ranged from 10% to up to 25%.[11]
A December 2016 Federal Reserve Bank of Atlanta study stated Wall Street rent corporations evicted tenants significantly more than regular mom-and-pop landlords; it reported Invitation Homes evicting 15% of its renters, and the entity it would later merge with, Starwood Waypoint, 30%, and stated being African-American also increased chances of being evicted if under a company like Invitation Homes.[11]
Complaints and horror stories from Invitation Homes' customers have been covered on publications and news stations such as WGCL-TV,[17] CBS Sacramento,[18] The Arizona Republic,[6] and WTVF.[19] Mold, sewage, and water leakage;[11] nails poking out;[18] infestation of vermin such as spiders, cockroaches, and ants;[11] broken appliances such as garage doors, heating systems, stoves, and microwaves;
Invitation Homes has faced several lawsuits from courts throughout the country.[6] In May 2018, tenants filed a class action against the corporation in the United States District Court for the Northern District of California, with a rationale of excessive rent price increases and fees; they reported being charged $95 if even a minute late on a rent payment, regardless if the company's online payment system is broken, and filing eviction notices that added more "unfair" legal costs, fees, and penalties for them to bear.[11] On July 20, Invitation Homes responded with a motion that stated the class action group and its plaintiff had too little evidence.[11]
Staff of Invitation Homes has responded to the criticisms, including chief operating officer Charles Young who in July 2018 stated the company had an average rating of 4.32 stars out of five from tenant surveys it ran.[11]
Despite Congress passing legislation banning broker's price opinions after the mortgage crisis, it's legal for Invitation Homes to use them due to a loophole where the law doesn't apply to bonds of multiple homes.[11] For the entity, the other firm's BPOs are a less-costly alternative to mortgage appraisal by licensed contractors typical of the housing market; according to an investigation by the Securities and Exchange Commission that started in September 2017, they involve inspections by independent contractors unlicensed to do appraisals, who are only assigned to inspect the exteriors with the assumption that the interiors were already renovated.[11]
One of the single-family securities looked at by Reuters contained 7,024 houses, each of which was making the entity an average rent of $1,538 a month and $985 a year for other fees.[11] Reuters also interviewed five Invitation Homes ex-employees that stated the company spent too little on repairs; the bond data showed it spent a per-house annual average of $1,142 on maintenance, less than the typical $3,100 average most Americans spend for the same services, although the entity responded that the $750 spent on system back-up costs wasn't shown.[11]
In September 2024, Invitation Homes reached a settlement with the Federal Trade Commission (FTC), in which the company agreed to refund $48 million to customers harmed by its actions, which according the FTC allegedly included "a variety of unfair and deceptive tactics, from saddling people with hidden fees and unjustly withholding security deposits to misleading people about eviction policies during the pandemic."[20]
