At Hearing, Warren Details Private Equity’s Predatory Management of Manufactured Housing Communities and Calls for Reform
Yesterday, Senator Warren reintroduced the Stop Wall Street Looting Act which would help protect residents in manufactured home communities - and consumers in many other industries - from Wall Street’s clutches
Washington, D.C. - Today, during a hearing of the Senate Banking, Housing, and Urban Affairs, United States Senator Elizabeth Warren (D-Mass.) highlighted the impact of the private equity industry on manufactured housing communities and made the push for her Stop Wall Street Looting Act, which would fundamentally reform the private equity industry and help protect residents in manufactured homes from Wall Street’s clutches.
Today’s witness, Sofia Lopez, Deputy Campaign Director On Housing, Action Center on Race and the Economy, confirmed to Senator Warren that when private equity or other Wall Street firms purchase a manufactured home community, the quality of life for the residents often gets worse. When repairs are needed to ensure that the residents have quality living-conditions, private equity and other corporate landlords shift these responsibilities onto residents to pad their profits.
Yesterday, Senator Warren reintroduced the Stop Wall Street Looting Act, legislation that would force private investment firms and their managers to take responsibility for the outcomes of companies they take over, empower workers, and protect investors. She also chaired the first hearing that the Senate has held that is focused solely on private equity in which she highlighted the consequences of private equity and called for reforms to put workers and communities first. In 2019, Senator Warren and Representative Dave Loebsack (D-Iowa) questioned private firms’ predatory management of manufactured housing communities.
Transcript: How Private Equity Landlords are
Changing the Housing Market
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Thursday, October 21, 2021
Senator Warren: Witnesses discussed the damage the private equity industry has done to communities across this country. It’s good that we’re continuing this discussion today specifically in the context of housing.
Manufactured, or quote-unquote “mobile” homes, are a critical avenue to affordable housing for millions of Americans. A few decades ago, these communities were generally owned by mom and pop businesses.
But the private equity industry saw an opportunity. Residents of manufactured home communities often own their own homes but not the land underneath. And since most of these homes aren’t actually mobile, Wall Street vultures realized that families were effectively stuck in place – sitting ducks.
One of these vultures is a private equity-backed company called Hometown America. In 2006, Hometown purchased a manufactured housing community home called Oakhill that is home to 175 resident families in Attleboro, Massachusetts.
Now, Ms. Lopez, from what you’ve seen, when private equity or other Wall Street firms purchase a manufactured home community, does the quality of life for residents of that community generally improve?
Ms. Lopez: Thank you so much for the question, senator. No. I mean what's typical from my experience when private equity purchase housing -- whether it's mobile home parks, single family rentals, multi-family properties -- they typically follow the same playbook. Rent increases that tenants are hit with. Impossible new fees and fines and maintenance almost always deteriorates. And in this case, because tenants have bought their own trailers, and to mention, it's really expensive, if not impossible to relocate, and absolutely, that's a quality that they're banking on.
Senator Warren: Yeah. So when companies like Hometown buy up these communities, they have responsibilities -- legal responsibilities -- as landlords, like responsibility to maintain the property. And this is particularly important for the residents at Oakhill because the home sites in this area are subject to flooding.
So Ms. Lopez, from your experience observing how corporate landlords behave, do you think that Hometown was proactive in making the repairs to make sure that residents have quality living-conditions?
Ms. Lopez: I don’t know the specifics of this situation, but based on all of the patterns that I've seen. I think it would be highly unlikely.
Senator Warren: Well, you guessed right on this one. Hometown implemented a policy that specifically put the burden of these repairs on the residents. And yet at the same time, Hometown increased the rents so that they could further pad their own profits.
Now remember, as you say, most of these homes are not on wheels. So the residents have to choose between either paying the higher rent or in some cases, just abandoning their housing.
Nobody should be surprised that the private equity industry is forcing residents to make this choice and doing it just so that they can pad their own profits. Private equity firms get rich by loading companies and real estate they buy with debt, then stripping out all the assets, extracting whatever value they can, and charging exorbitant fees. That is the business model.
And for communities like Oakhill, this means increasing the rents, refusing to make home repairs, and squeezing every penny out of the residents that they possibly can.
Ms. Lopez, what does Congress need to do to ensure that residents at Oakhill and other manufactured home communities across this country aren’t being gouged by private equity firms?
Ms. Lopez: I appreciate this question. To me the most effective way to stop private equity abuses -- as I mentioned in my testimony -- would be a comprehensive set of tenant protections that would safeguard against things like exorbitant rent increases, excessive fines and fees, providing just cause eviction protections, and also a tenant's right to counsel to protect against the worst parts of what you're describing.
On the other side, there are many ways to begin to regulate private equity. I think the Stop Wall Street Looting Act is an excellent piece of legislation that starts to take away from the ability to take on excessive risk in ways that harm tenants and workers. But I also think that taking a look at the financing that these companies engage in. The mergers and acquisitions that they engage in. And the ways in which they geographically target are all ways that we can begin to develop legislation that takes on exactly the role of private equity in housing.
Senator Warren: Yeah. Thank you. That’s a very comprehensive answer, and I think you're right. There are a lot of ways that we can approach this. I very much appreciate your mentioning my Stop Wall Street Looting Act because it would fundamentally reform the private equity industry and end its most predatory practices. That would leave the residents in Oakhill and other manufactured home communities safer from Wall Street’s clutches.
So I’m going to keep working on that and I’m looking forward to getting some help on it.
Thank you very much, Mr. Chairman.
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