The New York real estate market has become a private equity playground, and the result has been a disaster for tenants and the market alike.
Things are heating up inside Wall Street’s new rental empire.
Over the last few years, giant private equity firms have bet big on the housing market, buying up more than 200,000 cheap homes across the country. Their plan is to rent the houses back to families—sometimes the very same people who were displaced during the foreclosure crisis—while waiting for the home values to rise. But it wouldn’t be Wall Street not to have a short-term trick up its sleeve, so the private equity firms are partnering with big banks to bundle the mortgages on these rental homes into a new financial product known as “rental-backed securities.” (Remember that toxic “mortgage-backed securities” are widely blamed for crashing the global economy in 2007-2008.)
All this got me thinking: Have private equity firms gambled with rental housing somewhere else before? If so, what happened?
Perhaps you’re thinking of Real Estate Investment Trusts (REITs)? The PE pursuit of rental homes is relatively new, I believe. Of course, it would be too much to expect these firms to hire property management companies to care for these homes. Some lease contracts insert wording that the renters are responsible for maintenance.
Lovely. BTW, the author of this article is Laura Gottesdiener.
Monsanto – food, Blackstone – shelter. These people certainly know how to manipulate the demand part of the economic equation. Big time.