U of M study finds large investors evict renters at higher rate

NINA MOINI: There have been more than 23,000 evictions in Minnesota this year. That's according to the Eviction Lab at Princeton University. That's 40% higher than the average before 2020, the pandemic. And a new study by Minnesota researchers finds eviction rates for single-family homes are higher for properties owned by large investors, especially private equity firms. And it finds rentals owned by private equity are concentrated in lower-income neighborhoods.

Anthony Damiano is a research associate at the University of Minnesota's Center for Urban and regional Affairs and one of the authors of that study. He joins us now to break this all down. Thanks for being here, Anthony.

ANTHONY DAMIANO: Thanks for having me.

NINA MOINI: I'm curious, within your work, why you were interested in single-family homes, specifically.

ANTHONY DAMIANO: Well, really, this started since the Great Recession, when we had the foreclosure crisis. And we saw a huge influx of homes that became vacant, that were owner occupied, that ended up in the hands, oftentimes, of investors, who would either flip them or kept them to use them as rentals. And so we've seen major growth in the single-family rental market. In Hennepin and Ramsey County, for example, since 2000, the number of single-family rentals has grown by 75%. So it is a growing share of the market here in Minnesota.

NINA MOINI: So 75% single-family homes compared to multi-unit buildings, apartments, duplexes. And you also looked at where in the Twin Cities single-family homes owned by large investors are concentrated. And what did you find there?

ANTHONY DAMIANO: Yeah. What we found is that different types of landlords had different spatial strategies. And in particular, what we found with private equity firms is that they were heavily concentrated in lower-income communities of color-- so places like North Minneapolis and the east side of St. Paul. In addition, we found that Real Estate Investment Trusts, or REITs-- which is also a different type of institutional investor. They were more concentrated in more middle-income, suburban neighborhoods.

NINA MOINI: So, what does that say about the business models of these companies?

ANTHONY DAMIANO: Right. And what we know about private equity firms is that they tend to be less regulated than publicly-traded REITs, for example. And so they tend to exhibit riskier behavior-- so buying into lower-income neighborhoods with less stable home prices but with the potential for higher returns. While REITs are publicly traded and are more heavily regulated, they tend to operate more in stable housing markets in middle-income suburbs.

NINA MOINI: What about the tenants? You're looking at renters. And what are you finding within the tenants who are impacted from these companies?

ANTHONY DAMIANO: Right. So this particular study, we don't have information on tenant characteristics. But we do have a parallel strand of research, including a survey of over 1,100 renters in single-family homes in Hennepin and Ramsey Counties. And what we found is the results from tenants tends to match what we found with evictions, that tenants living in homes owned by private equity, and REITs, and other larger landlords had worse outcomes across the board, whether it was higher rents, more repairs, higher rates of harassment, and less safe homes. So across the board, we're seeing more problems with those types of landlords.

NINA MOINI: And what are some of your questions that maybe were not answered by this study?

ANTHONY DAMIANO: I think one of the things that we've struggled with and what we had to spend a lot of time on was trying to actually untangle the web of ownership and trying to figure out, who owns these properties? We use publicly-available parcel data to try to figure out who the owner is. But oftentimes, landlords will use various LLCs and shell companies or will use different variations and spellings of their names or different mailing addresses, which makes it harder to understand who these actors are and how they're operating. So we did our best using a variety of techniques that I won't get into now. But I still think there's more work to be done to untangle these oftentimes very complex webs of ownership.

NINA MOINI: Yeah. And I'm curious about the time frame. Beginning after the Great Recession in 2008-ish, like you talked about, and then through now-- we obviously know that the COVID-19 pandemic impacted a lot of areas of life. Was your study or your research able to break down any differences that were related to just different happenings in the world that were significant?

ANTHONY DAMIANO: We weren't able to really track down and measure these changes over time. One of the things we actually found in a study we tracked calls to the Home Line helpline for tenants. And what we saw is we saw an increase of calls during the pandemic.

But we saw a lower amount of calls related to evictions, because there was an eviction moratorium during the pandemic. But then after the pandemic ended, we saw a distinct rise in calls. And I think, as you pointed out at the beginning of the show, that is correlated with a rise in evictions that we've seen since the moratorium has been lifted here.

NINA MOINI: Where do you go from here, I guess, with what you found? Where does your research go?

ANTHONY DAMIANO: Yeah, I think we would like to learn more. We talk to tenants via focus groups. And we're continuing conversations. A lot of this research was funded by the Family Housing Fund, which is a local nonprofit that studies housing issues. And so we'll be convening groups to talk about policy changes that can hopefully benefit these tenants that are struggling.

NINA MOINI: Yeah. And you mentioned policy changes. And I don't know if you're like, I'm just on the research side, but I'm curious how this happens or is permitted to happen? Where does the responsibility lies-- is it policy makers? Is it at a state level or a municipal city level? How does this happen?

ANTHONY DAMIANO: Yeah. I think there's some interesting things happening at both the city municipal level and at the state level. In the past few years, the state has passed laws, for example, landlords have to give longer notice period before they can issue an evictions, which allow tenants more time to maybe get money together to pay back rent. I think places like the city of Minneapolis, I know have looked at making sure that there is a person who is responsible on the rental license to make sure it isn't just a large corporation and a 800 number that you have to respond to when you have issues. I think there's also been bills at the state level in Minnesota and other states that have looked at limiting the portfolio size of these companies so that, while there are now multiple companies that have upwards of 500 to 800 homes just in the Hennepin and Ramsey County area alone, this would force them to divest and break up into smaller pieces.

NINA MOINI: Say, before I let you go, the Twin Cities-- we're looking at Ramsey County and Hennepin County-- I'm curious if you have an idea of where the Twin Cities falls, like on a national scale or compared to other places of the same size? How are we doing compared to other states, I guess?

ANTHONY DAMIANO: We're doing relatively well overall compared to-- the mega hotspots for this investor activity are places in the sunbelt, so like Atlanta. And in Georgia, for example, over the past few years, about 30% of all homes have been sold to investors. So we haven't seen that level. And so while in the Twin Cities, it's a relatively small percentage that are owned by these homes, we think that the negative experiences of tenants across the board is worth bringing to light and to potentially prevent the wholesale takeover of the market in the future like it has in other places.

NINA MOINI: Anthony, thank you so much for coming on and breaking down your work for us. We really appreciate it.

ANTHONY DAMIANO: Thanks for having me.

NINA MOINI: That was Anthony Damiano, a research associate at the University of Minnesota's Center for Urban and Regional Affairs.