U.S. Senators are pushing real estate website Zillow to be transparent about its plans to sell tens of thousands of homes to Wall Street investors, including a company that is being inspected by the city of Minneapolis.
Zillow is closing its home flipping division, with the goal of selling its entire portfolio of single-family homes by the 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 the conversion of 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, wrote to Zillow on Monday expressing concern about the potential of the sales to “destabilize local real estate markets.”
“What is troubling is that 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 the communities.” , wrote Smith. “In at least some parts of the country, these harms have been concentrated in communities of color, exacerbating long-standing inequalities and limiting home buying opportunities.”
One of those locations is north Minneapolis, where Pretium Partners has hundreds of single-family rentals. Its 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. access to full rooms, electricity going out and causing electrical fires. “
Minneapolis voters agreed to legalize rent controls this month.
City housing inspectors perform portfolio-wide inspections of HavenBrook Homes. So far they have inspected 80 out of 223 properties and found the housing code offenses in 58% of them. Violations include missing smoke and carbon monoxide detectors and dangerous electrical wiring.
“Pretium is committed to providing the highest quality rental housing experience possible by providing consistent, reliable and caring service,” Pretium said in a statement Wednesday. “As we continue to invest significantly in improving these homes and integrating service infrastructure, it takes time. As the new owner of Havenbrook, Pretium stepped in to address pre-existing violations and make substantial improvements to an under-invested set of Havenbrook properties by spending more than $ 46 million on renovations and maintenance.
In a November letter to shareholders, Zillow said it would end its home buying program, Zillow Offers, and sell tens of thousands of homes in the next 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 studies Private Equity Owners in Twin Cities. “It is the business of these monopolies like Pretium, it is to buy enormous quantities like foreclosures, banks. … So that’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 Sen. Sherrod Brown, D-Ohio, chairman of the banking committee, and Jack Reed, DR.I., asked Zillow to disclose the total number and location of the homes that ‘he plans to sell; what efforts have been made to transfer properties to individual buyers or community non-profit organizations; and how many properties it has sold to institutional investors since early January 2020.
Zillow owns approximately 140 homes in the Twin Cities area.
Susan From • 612-673-4028