Fri November 15, 2013
Wall Street-Backed Landlords Evicting Quickly In Charlotte
There are new players in Charlotte’s housing rental market. Big corporations have been on a spree over the last year, buying up over 2,200 homes. The Charlotte Observer marked that trend several months ago, and now it is reporting on a new trend. These corporations are quick to evict. Reporter Andrew Dunn joined us to talk about this.
Kevin: Good morning, Andrew.
Dunn: Good morning.
Kevin: So rent is due when rent is due, so what makes this situation unique?
Dunn: What is really unique is the mindset that these Wall Street-backed corporations have. It’s much different than the category of investor that had dominated the home rental market here in Charlotte before. Before it was your mom and pop investor. A family with a little money that decided to buy a property as an investment for cash flow for their own family. People in that category at times had a tendency to be a little more lenient with their tenants. They would work out a payment plans. They would give a little bit of extra time if there was a tough month for a tenant. For them, the biggest expense is kicking a tenant out and trying to find a new one. But these Wall Street corporations have a much more streamlined process. Very by the book, very quick, very efficient. It has caught some renters by surprise.
Kevin: OK so what is their motivation? Why be quick and efficient with this?
Dunn: Well, the motivation is when you are a company of that size you have to have certain policies. And at the same time, they have investors who are looking for a specific rate of return. These companies have promised their investors that they are going to deliver a (5 or 7 or 8 percent) rate of return each year and they have to meet those targets.
Kevin: So how many evictions are we actually talking about here?
Dunn: Well that is actually the most unusual thing here. What caught my eye were the percentages of their portfolio so far. One of these companies, only six months in, was one in four homes in their portfolio. And for one of the other major ones that I looked at, it was one in ten. And that compares really unfavorably to some of the larger apartment complex owners here in Charlotte.
Kevin: What is an average for one of the apartment complex owners in Charlotte?
Dunn: Those tend to be more in the 2.5 to 3.5 percent range.
Kevin: Is this something that is unique to Charlotte? Or is this happening all over the country?
Dunn: No. This is really widespread across the country. This really started about a year ago in some of the hardest hit markets after the mortgage crisis. You know, Nevada, California, Illinois, and Florida. It turned out that investors were really drawn to this, so these companies decided to branch out even farther, and that is how they ended up here in North Carolina.
Kevin: So these firms own houses all over the city. It’s a little bit different than, say, a landlord running an apartment complex where all of the apartments are right next door to each other. These houses are all over the city. Are they able to manage and upkeep these houses the same way a normal landlord would?
Dunn: Well that is really the challenge right now. The story really hasn’t been full told yet. We just really don’t know. In an apartment complex you can really have a small team of property managers to repair the roofs. You know, there is maybe one roof for one hundred homes. Here you’ve got one hundred different roofs for one hundred different homes all over the place and it is still to be seen how that is all going to work out.
Kevin: So let’s talk about those who are renting those houses and are facing the possibility of an eviction. What is their defense? What is their argument?
Dunn: No one has argued that these evictions are illegal. So there is not really a strong legal argument for these tenants to make. What they are trying to say is “Look, I’m having a tough month. Can you work with me? Can you give me an extra week? I’m going to be able to make it once I get my next paycheck.” One woman I spoke to by the name of Doretha Johnson had been living in her house in the University City area for about three and a half years. She was paying rent every month. Her landlord ended up selling to one of these companies, Invitation Homes. They came in and immediately raised the rent by a third. Johnson told me that was just a little bit too high for what she could afford. She asked for a little time to look for a new place to live. But she says that the company wasn’t willing to do that and began eviction proceedings right away.
Kevin: So even after the eviction process starts, if they are able to come up with the money, are these landlords willing to work with them under any circumstances?
Dunn: Well actually, North Carolina law does in fact give tenants the opportunity to pay up in full. It’s not the case where if you are two days late you are out of the house for good. There is a couple of weeks in the legal process where the tenants have a chance to pay up. But then it comes with court costs and late fees and there are all sorts of added expenses that come along with that.