Institutional real estate investors under pressure from US Senate and Minneapolis inspectors
U.S. Senators are pressuring Zillow, the real estate website, to be transparent about its plans to sell tens of thousands of homes to Wall Street investors, including a company that is the subject of inspections by the city of Minneapolis.
Zillow is closing its home flipping division, with the goal of offloading its entire portfolio of single-family homes by next spring. An immediate buyer would be Pretium Partners, a private equity firm that owns more than 200 homes in Minneapolis, most of which are concentrated on the North Side.
Pretium’s business model relies on converting homes into rental housing put in place to maximize returns for shareholders – at the expense of tenants, according to researchers and housing advocates.
Senator Tina Smith, D-Minn., Chair of the Senate housing subcommittee, sent a letter to Zillow on Monday expressing concerns about the potential of the sales to “destabilize local real estate markets.”
“What’s troubling, these types of sales have the ability to concentrate real estate ownership in the hands of a few out of town, business-led owners with little meaningful connection to communities,” he said. -she writes. “In at least some parts of the country, this damage has been concentrated in communities of color, exacerbating long-standing inequalities and limiting home buying opportunities.”
One of those locations is north Minneapolis, where private equity firm Pretium Partners owns hundreds of single-family rentals. Their management company is HavenBrook Homes, which housing activists accuse of raising rents and charging tenants hidden fees while making minimal efforts to maintain properties.
“[HavenBrook Homes] aren’t in the best shape, ”community organizer Chloe Jackson said at a rent control rally in Minneapolis. “These tenants have major repair issues ranging from infestations, with possums and squirrels, to full bedroom access, electricity going out and causing electrical fires.”
Minneapolis voters agreed to legalize rent controls earlier this month.
City housing inspectors are currently carrying out portfolio-wide inspections of HavenBrook Homes. They have inspected 80 out of 223 properties to date, finding housing code violations in 58% of the properties. They include missing smoke and carbon monoxide detectors and dangerous electrical wiring. Pretium did not respond to a request for comment on the violations on Wednesday.
“We have focused on providing residents with superior service and an improved tenant experience” since purchasing its properties in Minneapolis, Pretium said in a statement to the Star Tribune earlier this year.
In a November letter to shareholders, Zillow announced that it would end its home buying program, Zillow Offers, and sell tens of thousands of homes in the coming financial quarters. The program was too risky while offering too little return on equity, according to the letter, which blamed “a global pandemic, a temporary housing market freeze, and then a supply-demand imbalance that led to a rise in prices. house prices at unprecedented scale ”for the company’s inability to accurately forecast house prices.
The closure of Zillow Offers will force the company to reduce its workforce by a quarter.
“Yes [Zillow is] lose money, then it makes sense to just sell it as a set to whoever is willing to buy them rather than one at a time, ”said Michael Goldman, professor of sociology and world studies at the University from Minnesota, who is researching private equity owners in the Twin Cities: “It’s the business of these monopolies like Pretium, it’s buying huge amounts like foreclosure, banks … so it’s perfect for them. “
The Wall Street Journal reported on Wednesday that Zillow has agreed to sell thousands of homes to Pretium Partners. Neither company has officially confirmed the information.
“As we shut down our iBuying operations, we continue to sell homes as we always have, which includes marketing them on the open market for sale to all types of buyers such as individuals and families, institutional or individual investors and nonprofit organizations, “Zillow said in a statement.
Smith’s letter, which was also signed by Senators Sherrod Brown, D-Ohio, Chairman of the Banking Committee, and Jack Reed, DR.I., asked Zillow to respond to the total number of homes she has the intention to sell and where they are; what efforts Zillow has made to transfer properties to individual buyers or community non-profit organizations; and how many properties Zillow has sold to institutional investors since early January 2020.
Zillow owns approximately 140 homes in the Twin Cities area.
Susan From • 612-673-4028