tv Fault Lines Al Jazeera January 21, 2015 2:30am-3:01am EST
lawmakers jumped off their seats and threw chairs and microphones, and three security marshalls were injured. an alliances called for a strike. more on that story and the other day's top stories on al jazeera. >> its been six years since the financial crash that sent the global economy into a tailspin. devastating the us housing market. predatory lending and a poorly regulated financial system were at the root of the crisis. but now, housing sales in some parts of the country have picked up. >> it really started in 2010 2011 in the wake of the housing bust and the foreclosure crisis that ensued. >> there were markets that were totally devastated. >> you had an unbelievable number of foreclosed homes. >> at foreclosure auctions like this one in georgia,
competition has gotten steep. >> sold! >> what's the name of your company? >> we're private. >> but the recovery isn't quite what it seems. >> housing recoveries are typically led by buyers. and those buyers historically were typically homeowners. people who intended to purchase and live in the home. they weren't investors and it wasn't second homes. >> i don't want to be on camera >> but in 2011 2012 you started seeing firms that were backed by some of the larger private equity firms beginning to get into the market. >> who came in and bought houses by the block basically. >> we've been trying to talk to some of the investors here like invitation homes right behind me but they refused to talk to us. >> this has not been the ideal recovery. this is the only housing recovery we have right now. >> it's a landlord's market and rents are rising across the country. the question is: are investors
jump-starting the economy or laying the foundation for a new crisis. >> right now the biggest landlords in the u.s. is wall street. >> tonight: fault lines investigates america's largest and most powerful landlords: wall street. >> atlanta is really rough right now, is very rough you know for a family to own your home. atlanta now is becoming lease and rental. >> atlanta georgia is a city that was gutted by the foreclosure crisis. six years after the crash, many residents here are still at risk of losing their homes. since 2008 almost 5 million u.s. homes have been lost to foreclosure.
now, there are nearly two million more homeowners who are on the brink. >> eighteen years. over 18 years you've worked and poured your heart into where you live to make the house a home that you're children have grown up in. your memories are here. what do we do? we fight. >> tammy doe was fighting to keep her home of nearly two decades when it was foreclosed on and sold to a new owner at auction. >> they don't wanna hear nothing you have to say. they just feel like you just in this position because you refused to pay your mortgage. no that's not the reason. >> she believes the foreclosure was illegal, but to prove it - and win back her home - is an uphill battle. when we met, she was on the verge of eviction. >> you know people say the america dream is to own your own
home and to have something to leave for your children. it's not that anymore. i don't see it >> if tammy doesn't win the legal fight, there's only one way she can stay in her home: to rent it back. >> do you know who owns your home right now? >> colony... colony america colony homes. >> colony american homes the home rental arm of private equity firm colony capital is now one of the largest landlords in america. >> "there's nothing more american than the dream of living in your own home. colony american homes is helping people right now to fulfill that dream." >> colony american when every home we went to it was fixed up, nice... >> the company owns over 16,000 homes in 10 states, purchased primarily from foreclosure auctions. >> "today there are fewer opportunities from strong investments, and even fewer opportunities to make a difference. at colony american homes
we will do both." >> now we have seen the recreation of the dream as well maybe you won't be a homeowner but we really need more people who are renters, because we over-stimulated home ownership. >> ... and for me to have to rent and never own my own home? no. can't do it. >> "we bought the house for a hundred and thirty two five." >> tammy isn't alone. her neighbors are also fighting for their homes in this predominantly african american suburb, 60% of all homeowners are underwater. predatory lenders disproportionately targeted african americans and latinos for riskier loans, including middle-income minorities who should have qualified for conventional mortgages. >> do you feel like you've been targeted? >> oh yeah most definitely. >> yes. >> definitely. >> yeah. bulls eyed out. >> and... and i... you know basically i just refuse to spend
20 years in the military working my buns off from dusk to dawn 7 days a week for 20 years, and come home and just give my retirement away. i'm not going to do that. >> colony bought your house for 40,000 dollars. >> uhum. >> an estimated 7 trillion dollars in housing wealth was lost in the crisis. much of it from communities like tammy's. >> you work and you work and you try to be the upholding citizen, and to guard your integrity. for them to come in and just rip it from you? that hurts. don't tell me about the american dream because i don't believe in it. >> 60% of our wealth was in our home. and then we had the predators suck that wealth out. they came in and took it out. that wealth had purpose.
it was the engine for small business in our community. it is what educated our children. >> if you are low income or lower middle income you probably don't have a stock portfolio it was your forced savings plan. >> with stagnant wages rising debt, and tight mortgage credit, buying a home is a dream more and more people just can't afford >> homeownership is stability. it's a stake in our nation. that's been lost. we've lost that. it's all been transferred to wall street and now they're our landlords. >> for more "faultlines" check out on demand or visit aljazeera.com/faultlines. >> you know how they say that everybody has a purpose in life?
well, at one time, i felt that selling cocaine was my purpose. >> we was starvin', just lookin' for a way to succeed. >> the first time i seen rock cocaine was 1980. >> the murder rate was sky-high. >> south of the 10 freeway, was kind of a "no-man's land". >> you know, we're selling it for the blacks. i said, you go into these neighborhoods, there's no cops you can sell it where you want and when they start killing each other, nobody cares. >> i was going through like a million dollars worth of drugs just about every day. >> that's like gold! >> we can make a fortune! >> he was maybe the biggest guy in l.a. >> freeway rick was getting his dope from a very big operator. i think we're into something that's bigger than us. something we really can't deal with. >> they had been trafficking on behalf of the united states government. >> she could prove what she was saying. >> [rapping] crack in the system. >> [rapping] this is los angeles.
moved in. in some parts of southern california one in every twelve homes was foreclosed on. >> como esta? >> bien, bien. >> so nice to see you, thank you so much, gracias. >> now what's this? >> oh, really? it's a big house. >> esperanza rosales was in tammy's situation not long ago. the home she lost is also now owned by colony american homes.
she had eight days to pack up and move 22 years worth of belongings. >> what has been the hardest thing for you since you lost your home and became a renter? >> esperanza and her family now live in a rental home owned by another corporate landlord. >> the new landlords have moved into communities already plagued by housing instability. housing advocates and federal officials agree: we are living
through the worst rental affordability crisis in u.s. history. now communities are concerned about wall street rents. we went with esperaza and her daughter to this community meeting in south la. los angeles already has the highest rent to income ratio of any city in the country. >> at the time not only had my mom just lost our house, that we lived in for 22 years, but she also lost her job. >> i didn't know what to look for what to see because we have never experienced or had to go rent anywhere else. as long as she would get a moderate payment that she could afford, she would've kept the house. >> ok. i myself am a renter. i'm a member of congress but i was a teacher for 24 years so i rent even in my own community. >> democratic congress members
mark takano and maxine waters have also come to learn about corporate landlords in their districts. >> in order to force you to take out a long lease, they jack up the price of month to month.. >> my lease payment is much higher than my mortgage payment was... it's hard to reach the people when you need them. but when you owe them money. oh man. they email you they call you they put notices on the front door. >> the only time she called me back was um, i needed an extension on the rent and she said if you don't pay by the 10th, you're gonna be... the eviction is going to start. so i had to go out take out a loan a payday loan of all things, so now i'm stuck in even bigger crisis trying to pay that back on time. it just seems like it's a sinkhole of [power play]. i'm getting into bigger and bigger debt. >> like esperanza, ursula and jeannette are tenants of invitation homes. in just a few years, the company has grown to be the largest single-family landlord
in the country buying up 45,000 homes across 14 markets at a cost of 9 billion dollars. the new venture is a subsidiary of the largest private equity firm in the world: the blackstone group. >> it's like a double jeopardy where... there were families that lost their homes and at the same time they're being taken advantage of in the rental markets. the connection there i was really surprised. i thought the crisis was over. now it's 2014, the crisis continues. >> we already know that the industry associations for builders for the real estate industry they pour huge amounts of money into campaigns at the state and local level to defeat anything that would protect renters. now you bring in blackstone and these equity firms to join the fight on that side and you can see what a goliath we're up against. >> yeah, a few years ago, the oecd ranked 32 industrialized countries on kind
of tenant security and tenant protection. the u.s. came in last. as a nation, it's a landlord friendly place >> what we need is immediate protections for renters today in the form of rent stabilization just cause eviction protections, a whole basket of policies that would have an immediate impact. >> but rising rents and affordability aren't the only concerns. >> there are also additional questions around the quality of the housing, the maintenance of the housing. >> this is a brand new industry. and so there is not an easy template for the tenant side and for making sure that tenants are well served, and that the homes are safe and secure. >> did you know you wanted to live here the moment you saw this house? >> yeah. >> yeah? how come? >> because i saw my kids playing here. i think that was it. that's what sold me to this house. because i knew my kids would have a wonderful place to play.
>> right out front? >> it felt like home you know? >> edit novshadyan her husband, and two-year-old son moved into this rental home in sun valley california in may of 2013. >> it's a nice little house. >> edith was 8 months pregnant at the time >> this is all your stuff that's still inside? >> yeah, that's, that's my stuff. that's my fridge my table my chairs, my home. it's still here. >> less than two months later, they moved out. >> our water was brown yellow i mean it was dirty. we couldn't shower. the molding inside my newborn's room the molding at the bottom, that had turned brown. i mean the pipes were leaking. they said leave for 2 to 2.5 weeks and you'll come back home. we're gonna change the plumbing. a few days later i got a call they found mold inside the house. >> they came to an agreement with their landlord that they would move. >> i don't understand. they said you could move but they wouldn't -
>> release my property. >> why not? >> they were going to check my stuff so i can move it out. and they kept saying we're running more tests running more tests and they've never released it. >> the landlord changed the locks and their possessions - everything from furniture to wedding albums - were left inside. the weeks turned into 6 months of calls and emails, but no real answers. >> like after being exposed to the mold my children got sick. >> we started noticing a difference. like he would have like a runny nose and he would have this cough. and we were thinking "is he getting sick?" is he... he's a child and... it wouldn't go away. it wouldn't go away. and then my daughter had it. my daughter... >> your newborn daughter? >> my newborn daughter had it...like the runny nose the cough and i'm like... is he giving it to her? i mean what are the chances? and then me and my husband have it. are we always sick? >> the family is suffering from chronic flu-like symptoms that they say are a result of mold exposure.
>> time and time i kept asking - tell me what type of mold it is, the pediatrician wants to know just tell me. i kept asking. every phone call every email. please tell me what type of mold it is. i'm sorry, please tell me what type of mold it is. and nothing. >> edith's landlord was not a local slumlord. invitation homes owns this property. >> there's some things you're supposed to provide right, as a landlord: clean water suitable condition how about that? like a healthy environment for a family to live in. i pay rent you know it's not like i was living there for free. when i wanted my stuff they said i can take my stuff but i have to sign a release releasing them from liability. >> in response to our request to comment on the novshadyan's case invitation homes wrote that the company: "...provided the family with a clean renovated home that encountered an unexpected home maintenance issue that was quickly resolved..." invitation homes also told us they repaired house
along epa guidelines after the novshadyan's initial complaints and the resulting mold and asbestos tests came back negative. but they refused to release the results despite repeated requests from the family >> some of these properties were left unmaintained or abandoned for months or in some extreme cases now years. depending on the investor depending on the quality of the investor depending on the integrity of the investor some of them will actually do a really good job of refurbishing the house, and others will sort of put up new sheet-rock, and make them look pretty from the outside to get a renter in only to find out later that the pipes are faulty maybe there are infestations that were never taken care of, and the property really still is a problem property that probably should've been raised. >> i don't think they cared. i think to them we were just a monetary value. we weren't people. that was it. we were people paying rent.
>> for more "faultlines" check out on demand or visit aljazeera.com/faultlines. >> hundreds of days in detention. >> al jazeera rejects all the charges and demands immediate release. >> thousands calling for their freedom. >> it's a clear violation of their human rights. >> we have strongly urged the government to release those journalists. >> journalism is not a crime.
>> we wanted to hear directly from the industry: the financiers and business leaders who are now america's largest and most powerful landlords. >> the other thing i'd say about investing is it's often a lonely business. when you go back to 08, 09 we, like most of the people in this room, we were suffering, right? because asset values had declined pretty significantly. >> many of them were gathered at this investors' conference in new york city. >> what i would tell you about the business overall you know what's gone wrong... people in this room would be shocked to hear: renovating homes costs more and took longer [laughter in the audience]. that... that definitely happened. but what went right was home
price appreciation went better than expected. >> the industry leader - invitation homes denied our request for an interview. a new trade association - the national rental home council and several other companies, also said no. the one insider who would talk to us on camera was toni moss - a housing finance specialist who helped to launch the industry. >> there was a major shadow inventory of foreclosed homes and we thought it would be interesting to see if we could get private capital back into the market and acquire these homes and revitalize these neighborhoods. >> who is regulating this industry right now? >> well.. this... yeah that's the issue. it's not being regulated on a federal level. and therefore it's this massive granular situation where you have neighborhood regulations and then you have municipal regulations and then you have state regulations.
i mean can you imagine? when you have all those properties and you're trying to pay attention to what the neighborhood association is requiring? so it's not that the industry is not regulated, there is a lot of regulation. it's that the regulation itself is not consistent. >> investor landlords aren't just building a new business model. they have also created a new financial product: rental backed securities. >> we are already, a handful of years after the crisis seeing the emergence of a new piece of the securitization market with weak standards just as the primary mortgage securitization market had been in the lead up to the crisis. >> so what is securitization? >> securitization is a financial tool. the bonds are backed by assets that have a cash flow. so anything where there are monthly payments coming in
you can securitize. so when a tenant sends their rent check each month to their property management company, fees are taken out to pay for property management and other... other related fees and then what's left over is sent to the bond holders. >> mortgage securitization other kinds of securitization got really..., took a huge hit during the crisis yet you have this pent up demand... now you have this pent up demand to invest in those kinds of vehicles so lets create a new one. >> do you think securitization poses... rather creation of rental-backed securities pose the same risk as mortgage-backed securities? >> no. absolutely not. i think that mortgage-backed securities were much more complex. this is very transparent very straightforward and it's bringing a lot of players into the market. >> the first rental-backed security was introduced by invitation homes in october of 2013.
since then 9 more bonds have hit the market valued at nearly 5 billion dollars. we reviewed the list of addresses on that first invitation homes security, and found that the sun valley home rented by edit novshadyan and her family was one of the 3200 homes on the list. >> edith do you know that this house is part of blackstone's security? >> i don't know. i didn't even know that it was owned by blackstone. i just knew that we were renting from invitation homes. >> do i see the real risk that we are heading down the same path? that the lessons learned - the wrong lessons learned - that you can cherry pick the best loans or the best rental properties to keep for yourself and securitize the worst is happening or can happen? i think that is a very real risk. >> if something goes wrong and bondholders aren't getting what they are supposed to get each month and the bond defaults, bondholders through their
special servicer can seize the homes, so they can take the underlying collateral. >> that's not very secure for the tenants. >> we think there need to be more protections in that area. we think that's one of the risks and vulnerabilities here.. is that tenants could be displaced if things don't go as planned. >> back in washington, congressman mark takano, who sits on the house financial services committee is a lone voice raising questions about new corporate landlords. >> i represent an area that suffered through the subprime mortgage crisis of the mortgage-backed securities. i am concerned about how fast these new types of rental-backed securities are going to proliferate. is there anything wrong with trying to make a profit? certainly not. but i want to make sure that residents are being treated
fairly. that the impact on my community is not negative. >> how powerful are these new institutional investors, companies like blackstone? >> one of the big problems we have with the functionality of our government is that the ordinary person doesn't believe they have as much say as these big financial interests. and they're right. >> we have voted numerous times to weaken financial regulations, the dodd-frank bill, the federal consumer protection bureau has been the subject of many pieces of legislation this past year. i'm not able to get one single hearing on this issue. >> if you've got lobbying powers who lobby 24 hours a day 7 days a week 365 days a year on behalf
of banks on behalf of issuers and no one protecting investors or the consumer, you got a problem. >> the lack of change will allow them to do it all over again when people's memories fade and the dust settles. >> for more "faultlines" check out on demand or visit aljazeera.com/faultlines. >> beyond the verdict and on the streets >> there's been another teenager shot and killed by the police >> a fault lines special investigation >> there's a general distrust of this prosecutor >> courageous and in depth... >> it's a target you can't get rid of... >> the untold story... >> who do you protect? >> ...of what's really going on in ferguson >> they were so angry because it could have been them >> fault lines ferguson: race and justice
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