May 12, 2014
Last year in Sun Valley, a working class part of Los Angeles, the Navshadyan family signed a one year lease on a house from Invitation Homes, the arm of private equity giant, the Blackstone Group. Invitation Homes claimed that the house had been newly remodeled. But when the family moved in they discovered water leaks and an infestation of cockroaches. The air conditioner failed. Tap water turned brown and a bathroom flooded.
The family moved out while repairs were arranged. It turned out the house also had an asbestos problem and extensive mold. When the family decided not to return, the company refused to let them get out their belongings and kept trying to collect their rent.
In other words, from the start, Invitation Homes has been trying to squeeze the Navshadyan family for every penny it can. This is the same kind of thing that is happening throughout the country to people renting from many other huge companies controlled by Wall Street.
And no wonder. Invitation Homes is trying to make a quick killing out of their home rental empire. Over the last three years, Invitation Homes had bought up more than 44,000 homes nationwide, mostly cheap, foreclosed houses in cities hardest hit by the economic meltdown. The company claimed that it was just out to “professionalize” the home rental market. In fact, its main aim was to repackage thousands of these houses together into financial securities that it calls rental bonds. The monthly rent checks on each of the houses are being used to service the debt on these bonds.
According to Business Week, rental bonds constitute a potentially huge, new financial market that can grow to almost one trillion dollars over the next decade! In other words, Wall Street banks are looking to pull a stunt similar to what they did with subprime mortgages – turn rental homes into a financial profit machine – until the bubble bursts.
Of course, caught in the squeeze are tenants like the Navshadyan family, who thought they were just renting a home – but in fact found themselves caught in a trap set by Wall Street.