'They Answer to Their Stockholders': Local Family Suing Wall Street-Backed Landlord

Sunday, May 27, 2018
Jared Keever
St. Augustine Record

When Lisa Ginter and her husband, Paul, moved their family into a rental home in the MuraBella neighborhood in the spring of 2013, they thought they had found a dwelling where they could be comfortable.

The landlord, after all, was a large corporation called Invitation Homes that had been buying up homes in the wake of the recession and turning the properties into rentals.

With foreclosures swirling and times tough, Ginter thought having the backing of a company with deep pockets would provide some stability rather than renting from a single owner who might be on the verge of losing the property himself or simply not having the cash to make needed repairs for the home.

Invitation Homes, a subsidiary of the private equity firm The Blackstone Group, owns nearly 2,000 homes in the region and more than 25,000 in all of Florida. It is the largest single-family rental home company in the country.

“The assumption is, at least for us was, ‘This is their investment,’” Ginter told The Record recently. Elaborating, Ginter said she expected Invitation Homes would be willing to take care of their homes so that, when the market recovered, the properties could be sold for a profit.

Now, five years later, the Ginters are engaged in a lawsuit with their former landlord.

New home, new health worries

According to a 15-page complaint filed by Ginter’s attorney in circuit court in St. Johns County, Invitation Homes failed to repair a water leak in the home’s attic that led to extensive mold formation and humidity problems throughout the house that made her and her family sick.

Ginter told The Record last week that family members started to notice allergy-like symptoms almost immediately upon moving in at 2512 West Caparina Drive.

“But you don’t know what drives that. It’s a new property so you chalk it up to, it’s a new house with new paint, new environment,” she said. “But my daughters kept saying, ‘We don’t feel good in this house.’”

Ginter initially associated the complaints to the family having moved to a new home and the kids starting at a new school away from their friends. But breathing problems and other issues, like headaches and bloody noses, continued to get worse and trips to the hospital and doctors became more and more common.

“I was exhausted, utterly exhausted,” she said. “My husband would come home and he would say, ‘I feel like I am coming down with something,’ and my husband is never sick.”

Health problems persisted for months, with little answers. Doctors ordered tests and CAT scans for various family members.

“So we went through this whole process of uncertainty, and high stress and panic and fear and all the emotions that come with it,” Ginter said as she began to tear up describing a feeling of “helplessness.”

By Christmas Day of 2013, after returning home from a family trip and just months after moving in, Ginter said she became convinced it was the house making them sick. They moved out and hired professionals to come in and take a look.

“They inspected the house, they did air quality testing and they found what appeared to be an ongoing water leak up in the attic,” Ginter said. “They also found very high humidity levels in the home.”

The air quality test, she said, turned up “high levels of pathogenic mold.”

According to the complaint, Invitation Homes hired a company called Microtech to perform remediation on the property in January.

The Ginters paid rent for that month, she said, but after some back and forth with the company and an attorney they had retained at the time, they notified Invitation Homes that they would be terminating their lease.

By Feb. 11, though they had not returned to the home, Invitation Homes served them notice to pay February’s rent or vacate the property. On Feb. 28, the company began eviction proceedings in circuit court.

Those were dismissed three days later.

The family never returned to the home, and, worried that their belongings had been contaminated by the mold, left everything behind.

The family’s lawsuit alleges that Invitation Homes knew, or should have known, about the leak in the attic and the associated mold and moisture problems. The company breached its contract with the family by failing to “provide habitable living conditions,” the complaint says. It also alleges that the company violated state law by failing to maintain the property by complying with “applicable building, housing and health codes.”

The lawsuit says the family is entitled to compensation for lost property, rent abatement and medical bills that they incurred and are also entitled to damages for the emotional distress and inconvenience they suffered.

As a part of the same lawsuit, the Ginters are also seeking damages from Microtech, who, it is alleged, both further contaminated the family’s personal property and damaged it during the remediation process.

Attorneys for both companies declined to comment citing pending litigation.

Invitation Homes also declined to comment on the Ginters’ case specifically but did send a written statement that said that ​the company “is proud to provide high quality homes and outstanding service to our residents around the country.

″​Our residents are police, firefighters, teachers, veterans and other working individuals and families who are seeking an affordable way to live in great houses near good schools and jobs,” the statement said. “While our homes represent less than 1 percent of the single-family rental market, we believe the professional service and resources we can deploy are helping set a new higher, standard for quality across the board. Residents give us high ratings for customer service and satisfaction, and renew their leases and stay 50 percent longer compared to the apartment industry.”

Nationwide company, nationwide complaints

As of March 31, according to its first quarter earnings release, Invitation Homes owned 82,509 homes in the United States.

When the company completed a November merger with Starwood Waypoint Homes, it became the nation’s largest owner and operator of single family rental homes, according to HousingWire.com.

The Record first reported on Invitation Homes back in May 2013 when, after the housing market crash, it had gobbled up about 100 homes in St. Johns County, purchasing them through companies called THR Florida and IH2 Property Florida.

Today that number has grown to at least 421 homes, all of which are owned by various companies with similar names that share the same Dallas address.

And that accounts for roughly a quarter of the company’s homes in Duval, Clay and St. Johns counties.

A review of property records in those three counties turned up a total of 1,637 homes owned by companies associated with Invitation Homes. In Duval County, they own 1,122 properties and they have another 94 in Clay County.

That’s a fraction of its homes in Florida overall. The earnings release shows they own 25,766 statewide, with more than 9,000 in South Florida and another 8,655 in the Tampa area. The rest, some 5,800, are in the Orlando area.

That makes Florida the only single-state region in the earnings report and the second largest region overall.

California, with holdings of nearly 13,000 split between the northern and southern regions, ranks second and is part of the largest “Western United States” region, which has 28,581 homes spread across Seattle, Phoenix, Las Vegas and Denver.

With that many homes, the company has its fair share of critics.

It is the subject of at least three Facebook groups, with more than 400 users between them, many of whom complain of slow repairs, lost deposits or what are perceived as unfair rent increases.

The company has also been the subject of various news stories from coast to coast.

In November, right around the time of the Waypoint merger, The Los Angeles Times and L.A. Weekly ran stories about tenants in southern California, where Invitation Homes owns 8,361 properties. Both stories featured a woman named Renita Barbee, an L.A. city dispatcher who makes $78,000 a year and whose rent had increased since 2013 from $1,895 to $2,120. Last year, the stories said, she received a rent increase notice for $800. If she didn’t sign her new lease by December, the L.A. Weekly story said, she would also have to pay a month-to-month premium of $500 on top of the increase.

Nearly a month after receiving the notice, the L.A. Weekly story said, a manager at Invitation Homes contacted Barbee to tell her that the $800 increase was a computer-generated error and she was, instead, facing an increase of $200 a month.

After an L.A. Times columnist showed interest in Barbee’s situation, the story said, the company eventually offered to let Barbee, who had just lost her mother and whose husband was having health problems, stay in the home for an additional six months at her current rate.

She eventually moved out, concerned that she was not going to be able to keep with the regular increases.

And that is one of the common threads throughout the various stories; that the company, driven by the need to provide profits for shareholders, is squeezing working class families struggling to stay ahead and perhaps save enough to enter, or re-enter, homeownership.

Others stories, like a January piece from The Intercept that also featured Barbee, raised concerns that Blackstone had not only initiated securitizations backed by its rental properties — which, the story suggested, could exacerbate the drive for profits and further squeeze tenants — but that, in January 2017, it also announced that government-backed Fannie Mae was backing what was then the most recent securitization to the tune of $1 billion.

The story cited a report released by the Americans for Financial Reform, ACCE Institute, and Public Advocates, that, the story said, painted a picture of life renting from what is essentially a Wall Street firm as one of “aggressive rent hikes, fee gouging, and high rates of eviction.”

“These practices, according to the report, are propping up a new asset class known as ‘single-family rental securities,’ akin to mortgage securities but backed instead by the rent checks of tenants like Barbee,” the story said.

In a written statement to The Intercept, Invitation Homes said the rent for their homes is “dramatically lower on a per square foot basis than apartments in our markets.”

“Invitation Homes has invested more than $2 billion, an average of approximately $22,000 per house, in renovations to its properties—many of which were previously sitting vacant and dragging down property values for surrounding families,” the company told The Intercept. “Those investments not only benefit residents by providing high-quality homes near good schools and good jobs, but also played a critical role in stabilizing local housing markets, and spurring local economic growth and job creation.”

Victor Raymos, association executive and CEO of the St. Augustine and St. Johns County Board of Realtors, agreed with at least part of that assessment in a recent phone interview with The Record when he pointed out that when Invitation Homes was buying up unoccupied and distressed properties after the housing market crash, they were helping prevent blight in the neighborhoods where they sat.

Raymos recalled the time when those who had lost their homes in foreclosure were taking appliances and fixtures out of their homes and even putting holes in the walls before they left. Though he wasn’t familiar with Invitation Homes specifically, he said companies that do what they do bought those properties and often times put money into them so people could live in them again.

“They really did a service to the community in my opinion,” he said.

In its email to The Record, Invitation Homes pointed out much of what it said to The Intercept, including the average $22,000 investment in what it called “upfront renovations.”

The company also pointed out that the number of rental homes it owns is small relative to the total number on the market.

“Invitation Homes’ portfolio represents only 0.1 percent of the more than 90 million single-family homes in the United States and less than 0.5 percent of the nearly 16 million single-family homes for rent in the United States,” the email said.

Some have raised concerns, though, that large single-family landlords have so established themselves in certain markets that they could severely disrupt them should they choose to pull out during a downturn.

The real estate blog, Curbed, in a piece about large landlords published this month, pointed out that Rep. Mark Takano, a Democrat from California, said that very thing in a 2014 report.

“Selling a large amount of properties quickly would not only deprive renters of their home, but destabilize the market for homebuyers and send housing prices into a freefall,” that report said.

Raymos said the chances of that happening, with only 400 homes owned in St. Johns County, seems pretty remote right now.

For one, he said, a company that has invested in that many homes would be unlikely to dump them all into the market place all at once, knowing that it could potentially dilute the price somewhat.

They are going to do things to maximize their investment,” he said.

Even if they did decide to divest themselves of all their properties here at one time, 400 homes, in this market, would have little impact.

“We are still in a situation where inventory is still low,” he said.

Going public, ongoing problems

Ginter was one of the tenants that Curbed spoke with for its recent story.

Though the few months she and her family spent in the Invitation Home rental property are years behind them, she says the health problems persist.

What they have endured, and continue to endure, is what eventually drove her to speak with the media, she told The Record. She wants other potential renters to know, not only what her experience was like dealing with her former landlord, but also to be aware of the dangers of mold exposure, its symptoms, its consequences and what can be done to avoid it.

Mold exposure like the type she and her family were subjected to, she said, makes the body “hypersensitive” to its surrounding environment, even if the mold presence isn’t as severe as the initial exposure.

“You might try to run from the mold but you can’t hide from the mold,” she said. “And it’s not just mold, it became chemical sensitivities.”

Ginter described an episode where she was walking through a home improvement store and the smell of chemicals caused breathing distress severe enough that she took herself to a hospital to be checked out.

That sensitivity also makes simple things like an overnight trip with a hotel stay, or a trip to see family, an anxiety inducing event.

“Now it’s a big project,” she said, listing off various items that need to be toted along like a portable air filter.

Forgetting something can almost induce panic.

“It’s not healthy,” she said. “It’s like reliving it over and over again.”

“It has really changed how we live, how we think, how we operate,” she added. “We feel very held hostage to those circumstances and to our current circumstances. We haven’t stopped going to the doctors.”

Though Ginter was originally comforted by the idea that her landlord was a large business that could tackle any issues that came up with the property, she said that turned out to not be quite the blessing that she thought.

“But I’ve come to understand it is truly run like a business,” she said. “They answer to their stockholders.”

Calling maintenance, asking for repairs and seeking responsiveness to problems end up in what she called a “shell game” with repairs being put off to the point that she wondered if it was simply a tactic to get her family to take care of the problems themselves.

“That’s sad to think that we are this actuarial number in the midst of their business plan,” she said. “So I am very angry about that.”

As for mold exposure, Ginter said potential renters, no matter who they are renting from, should be aware of the dangers of mold and high humidity. Given the nosebleeds, body rashes, headaches, respiratory problems, heightened sensitivities and other things she and her family have dealt with, and the thousands they have paid in medical bills, Ginter said putting a little work in up front to have a home inspection and air quality test done would be wise.

“So I would say anybody that’s looking to rent they need to do a little investment of their own,” she said.

“It’s a very small price to pay.”

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