And now let us pause to contemplate Richard Blum’s participation in the destruction of the American dream at the hands of a new phenomenon known as the “Wall Street landlord.”
Blum’s wife is U.S. Sen. Dianne Feinstein. The California legislator’s latest financial disclosure report, filed with the U.S. Secretary of State on May 15, includes a 2014 Blum Family Partners investment of at least $1 million in Colony American Homes Holdings.
Blum is the billionaire founder of the private-equity firm Blum Capital Partners. Colony homes are owned under the umbrella of Colony Capital, one of the largest investment firms in the world. The senator’s disclosure describes Colony American Homes as a “leading owner and provider of high-quality single-family residences for rental across the United States.”
What it doesn’t say is that the rental stock is made up of foreclosed homes purchased by a handful of investor groups and hedge funds in the aftermath of the 2007–08 financial crisis and real estate crash.
Blum is often identified as a quintessential Democratic Party insider, with ties that run the gamut from Jimmy Carter to the Dalai Lama. His private-equity firm manages about $500 million in assets, and the bulk of the fund’s portfolio is dominated by holdings in CBRE, the world’s largest commercial real estate services firm.
Though Blum has taken pains to deny it, reports say he’s worth at least $1 billion. According to a recent Roll Call survey, Feinstein’s net worth is $45.3 million, which puts her in the top tier of wealthy Washington lawmakers.
Colony American Homes was one of several investor-owned landlords highlighted in a June report from the anti-poverty advocates at the California Reinvestment Coalition (CRC). That study focused on the rise of the Wall Street landlord and its impact on California renters and would-be homeowners.
The verdict from the CRC is that Colony American Homes has not been an especially good landlord: rents are above average, utilities generally aren’t included, and maintenance is poor, at best. Moreover, would-be first-time homeowners in California often find themselves squeezed out by cash-rich corporate buyers like Colony American Homes. Rents are going up, and the landlord is nowhere to be seen.
“Neighborhoods are changing, income diversity is changing, the tenure of residents is changing,” says CRC associate director Kevin Stein, an author of the report. The investor grab of housing stock, he says, “is destabilizing neighborhoods and creating a lot of displacement.”
The CRC survey found that real estate investment trusts, private equity firms and hedge funds have spent $25 billion buying over 150,000 distressed homes around the country since 2012.
“This whole situation is only possible because of a financial crisis that was engineered by Wall Street,” says Stein. “This is investors profiting off of foreclosure.”
Stein says Gov. Jerry Brown could “use his bully pulpit to talk about the importance of neighborhood stability, and to acknowledge that there’s extreme gentrification and displacement going on.” Or Brown could pay back the $331 million he diverted from foreclosure relief for homeowners in 2012 to solve the state budget crisis. The AP reported last week that lawmakers and community groups have called on Brown to repay the money, after a Sacramento judge ruled that he had illegally funneled the foreclosure monies into the state’s general fund.
A May report from the California advocacy group Tenants Together also weighed in on so-called Wall Street landlords. The organization reported that Colony has, to date, purchased more than 2,000 formerly foreclosed properties in California and flipped them into rentals. Banks help investors do this by converting future rental income on properties into securities, which are then turned back to the investors as loans. “Wall Street has also issued over $8 billion in securities tied to almost 60,000 homes,” some owned by Colony, reports the CRC.
The loans are then used to purchase additional distressed properties, notes CRC. This has conspired to fuel a growing market in investor-purchased single-family homes.
The investor-led push to buy distressed single-family homes, says Stein, means individual buyers often get pushed out of the market. Nonprofits and developers who want to build affordable housing are often outbid, and local businesspeople, many of them from communities of color, “feel that they are being circumvented. These deals are going around local businesspeople,” says Stein. “There is an issue of the amount that [investors] are bidding and that their offers are in cash.”
Neighborhood Housing Services of Silicon Valley and the Law Foundation of Silicon Valley were two of 70 signatories to the CRC report.
Just days before Feinstein put the finishing touches on her May 15 financial disclosure report, Tenants Together released its study, “The New Single-Family Home Renters of California.”
The statewide tenants-rights organization found that renters of single-family homes from the three biggest corporate landlords in the state—Blackstone/Invitation Homes, Waypoint Homes and Colony American Homes—“pay higher rents than their neighbors and face challenges getting repairs.”
Those companies together own about 9,500 properties in California, according to Tenants Together.
Doug Henwood, an economics journalist and author of Wall Street: How It Works and for Whom, says investor-driven home purchases follow the general model of private-equity deals. “They are in it for the short-term, the medium-term,” says Henwood. “They are not in it for the long haul. The incentive is to screw the tenants over completely, minimize repairs and maximize rents.”
The senator’s disclosure report lists the Colony American Homes investment in the section of Feinstein’s “non-publicly traded assets and unearned income sources,” which also includes another Colony distressed-asset fund, Colony American Homes War I, LLC.
According to the report, Blum Family Partners has a $50,000–$100,000 investment in Colony American Homes War I and no reported 2014 income from that investment.
The disclosure form exempts Feinstein from having to provide any further detail on Colony American Homes, since the investment is held independently by Blum. As such, Feinstein didn’t have to indicate anything beyond that the investment eclipsed $1 million.
No surprise there, says Henwood.
“This is entirely consistent with the Democrats,” he said. “Real estate, and especially urban real estate, is one of the lifebloods of Democratic party financing.”
The investment in Colony American Homes earned Feinstein and Blum between $50,000 and $100,000 in capital gains and interest in 2014, according to the disclosure report.
In response to questions about the investment, Feinstein communication director Tom Mentzer says that “Sen. Feinstein has no involvement in her husband’s business decisions. Her assets are in a blind trust, which has been the case since she arrived in the Senate, and I have no information on her husband’s assets.”
A phone call to Blum Capital Partners was not returned.
UPDATE: Richard Blum provided the following statement through a public relations firm:
“Recent articles and blogs have totally mischaracterized my investment in Colony American Homes and the role the single family rental industry has on housing today.
“To be clear, I am a small limited partner in one CAH fund and, as such, I am a passive investor with no control over any of CAH’s business decisions.
“That said, the comments made about Colony American Homes and other investors in single family homes for rent are totally false and inflammatory. The investments are removing distressed inventory from the market, which has been depressing home prices. Many of these homes being purchased were foreclosed years ago, and had become a blight on neighborhoods. Instead, the investors rebuild communities and provide jobs. And they allow families who cannot buy or prefer not to, to stay in the communities they want. The average renter stays for five years.
“Finally, the homes being purchased by CAH and other investors are typically all-cash investments so they are not crowding out other buyers; most homes purchased are not even on the open market.
“Readers would be better served if the authors had bothered to check the facts about my investment and the positive role institutional investors are having on the housing market.”
> “This is entirely consistent with the Democrats,” he said. “Real estate, and especially urban real estate, is one of the lifebloods of Democratic party financing.”
Whoa!
Is this much honesty allowed?
Really, you guys didn’t know DiFi and hubby were slum lords and crony capitalist? Just wait till you find out what the desert protection act was worth, and the school book deals.
Follow the money……….I dare you!
I would love to see a good post from you on this! I always noticed she had some front environmental story out front which got great coverage while she was back-dealing some wall street protection schemes (legislation) that was for her own “noble” profit. Lets face it, she is the modern day equivalent of titled nobility and everyone else are serfs….renting, paying high, while they used the laws and financial “deals” to buy low. And that’s just one investment. I have always felt she was a Wall Street “wh__re” in the Senate.. She championed liberal causes for her persona while quietly using her position to fill up the personal coffer(s). That may be where her heart disease comes from…. a cold heart.
Lea Chism, that’s a good wester name.
Going back 22 years to 1994 is really stretching my rubber bands that power my brain.
The stink of the desert protection act of 1994 involved of course saving all those wonderful plants and critters of the Mojave desert that we love and addore. It was aimed at off road racing and strip mining in particular that were running over and killing tortoises, ants, rattlesnakes and scorpions.
Now we all know mining for gold, copper, lead, and coal is just terrible and we can buy it from some place we don’t care about and save the beautiful Mojave that just about what happened here. In this case there were some rare earth strategic metals involved, apparently only available from the Mojave, and China. The short of it is someone’s husband owned exclusive rights to export those very same strategic metals from China.
So guess what? Someone made a lot of money because someone’s wife got an environmental bill passed.
That worked so well that the very same president the signed that bill a few years latter saved large part of desolate southern Utah that contained a large swath of very clean burning coal. The man’s wife has been busy shutting down coal mines in West Virginia lately. It seems like I remember some organization called the Hippo group that was caught making contributions to that same fellows re-election campaign and Library. That group seems to own some mining concerns in Indonesia that just happen to have a lot of clean burning coal.
My mind is a little fuzzy so I can’t remember all those names so you’ll just have to do some of your own investigative reporting. I’m looking forward to your report.
Ah yes, Democrats, defenders of the common man. What, no Frank Mockery ranting and raving about this?
Satan would never speak ill of the Devil !
Had I received the fairytale education now being peddled on college campuses I too would be outraged to learn that the heartwarming, egalitarian notion of qualification-free homeownership would end up benefitting only the rich and connected. But having been educated to understand that “there’s no free lunch,” I knew to expect the subprime mortgage boondoggle to make huge profits for a favored few at the expense of the vulnerable many — which it did from its optimistic start to its calamitous finish. They don’t call this system capitalism for nothing.
When it comes to the grand stage of larceny, where government corruption and incompetence attract the finest actors, it takes big bucks to steal the show. Mr. Blum, himself from a storied family of gifted actors, delivered a marvelous turn as a monied alchemist who extracts so much gold from the rubble of broken dreams that he erects a monument to himself as champion of the broken at a university that postures as a champion of dreams. Black comedy at its finest, and just maybe Blum’s finest performance since his stellar portrayal as a war profiteer in the box office smash, “War, What Ain’t It Good For?”
Dear Mr. Blum,
Thank you so much for your candid and open letter in defense of your investment portfolio. How awful of the proletariat classes to put into question the nature of your valuable, well-intentioned investments and cast the shadow of doubt on your private equity dealings. Why should it concern us? We should mind our own business, yeah?
“That said, the comments made about Colony American Homes and other investors in single family homes for rent are totally false and inflammatory. The investments are removing distressed inventory from the market, which has been depressing home prices. Many of these homes being purchased were foreclosed years ago, and had become a blight on neighborhoods.”
Forgive us Mr. Blum for daring to cast a pall over the excellent opportunities which your “passive” investing makes possible for us ordinary working class people and for not being thankful enough for the hard work you and your fellow tycoons do to remove the sacrilegious blight from our neighborhoods! Thank goodness your investments in Colony American Homes (and other quite legal business opportunities like it) focus on helping the hard working families who would otherwise have to contend with a housing market in which prices are “depressed.” Instead we have the immense good fortune, thanks to you and your oligarch friends, of not being able to afford rents or take out mortgages due to the artificially pumped-up prices of property which are a direct result of investor speculation taking place in the Bay Area real estate market!
“Instead, the investors rebuild communities and provide jobs. And they allow families who cannot buy or prefer not to, to stay in the communities they want.”
God bless the virtuous Captains of Enterprise and High Priests of Wall St. who, through their benevolence and care for the commoners, invest in good causes — like securities and derivatives and real-estate — which profit not only the tycoons and multi-millionaires but the whole community as well (though obviously not in the same proportions; roughly 99% to 1%, shall we say?)
At the board meetings of “Oligarchs Magnanimous” there’s a good feeling flowing through hearts of our dear investors, as they experience the serenity and joy of making megabucks. But what truly makes their untiring efforts worthwhile and gives them that warm, fuzzy feeling inside, is the securities-backed knowledge that their money is rebuilding communities, creating jobs and allowing families who cannot afford to buy homes to be able “to stay in the communities they want” (by not allowing them to buy homes?!). Perhaps we ordinary people of sub-ordinary means “prefer not” to “invest” in real-estate because we do not want, nor can we, pony up a million bills for a home more realistically worth $400,000.
Nevertheless, I truly appreciate the kindness and thoughtfulness of people like Mr. Blum, who show a deep empathy and understanding of individual’s and families’ needs.
“Finally, the homes being purchased by CAH and other investors are typically all-cash investments so they are not crowding-out other buyers; most homes purchased are not even on the open market.”
Finally, Mr. Blum’s statement — à la Robert Durst — that investors put up “all-cash investments”, ergo “other buyers” (presumably meaning those of us who have to qualify for a bank mortgage) are not crowded-out, is simply a splendid display of the highest reasoning. Moreover, Mr. Blum informs us that most of the homes CAH — and other corporately owned real-estate investment and management firms like Blackstone/Invitation Homes and Waypoint Homes acquire — never even make it to the “open market.” Is there then some black market that exists where these deals are happening independently of the free market? Oh, yes, that would be the Insiders Trading Market, conveniently located next to the NYSE over there on Wall Street. But, shhhhh, it doesn’t really exist.
So thank you Mr. Blum for your outspoken and guileless explanation of the situation. And, quite frankly, thanks for giving us “non-investors” an insider’s glimpse of how the oligarch thinks. For it is said in the billionaire’s investment bible somewhere that ‘Might makes Right,” while Laws 1 and 4 in the Ten Commandments of Wealth Building respectively state: “Thou shalt put thyself before all others” and “Thou shalt not question.”
People, please remember to be respectful of your superiors’ wealth and power.
Blum’s firm CBRE is busying itself selling off chunks of public properties Blum and Difi Cronies:
http://www.eastbayexpress.com/oakland/going-postal/Content?oid=3713528
More Shady CBRE real estate dealings:
https://www.baycitizen.org/news/government/miffed-investors-sue-state-building-sale/
Two terms in office and off to jail you must go!
People there is no more reason than this for term limits.
A good crook can still move up the powerful ladder and still make zillions, just look at Hillary go!
For all the progressives out there who are offended by “crony capitalism” and “corporate welfare”, time to take a break from bashing wimpy, helpless, harmless Republicans and start phoning, texting, tweeting, facebooking President Obama, Senator DiFi, Babs Boxer, Mike Honda, and the rest of the ruling oligarchy and let them know that you want them to shut down/cancel/defund/kill/put a stake through the heart of the Export Import Bank:
http://mercatus.org/publication/biggest-beneficiaries-ex-im-bank
I’m sure Boeing, General Electric, Bechtel, Caterpillar, etc. enjoy get billions of tax bucks and that the money “trickles down” to help the little people, but I thought you didn’t believe in “trickle down”.
Don’t you know?
There’s is an old word for that, it’s called fascism and it’s the new way to do things in Washington DC. and it has nothing to do with the little people!
now how do we get more people to think and read before they vote?