Tricon American Homes bought hundreds of Charlotte houses and continues to raise rent
Over the last decade, out-of-state rental companies have bought thousands of houses across Charlotte, raising rents in a city already struggling with a shortage of affordable housing.
For Angela Campbell the news still came as a shock earlier this year: Her landlord, Tricon American Homes, would not renew her lease even though, she said, she paid the $900 rent on time, in full, every month.
When Campbell called to find out why, she said, a Charlotte-based manager for Tricon told her she had to leave the three-bedroom house in west Charlotte, where her family has lived for the past four years, because the company wants to raise the rent.
Now, Campbell needs to find a new home.
Campbell is a working single mother. She earns a living by running a Christian ministry program and working part-time as a ride-share driver.
But the cost to move — application fees, security deposit and first month’s rent upfront — can add up to about $2,000 or more, Campbell said. She doesn’t have it.
“This has messed everything up,” Campbell said.
After the Great Recession, the nation struggled with millions of soured mortgages, foreclosures and abandoned properties.
Wall Street private equity firms and hedge funds started buying tens of thousands of single-family houses and renting them out. In some cases, they got help from the federal government, which sold them distressed mortgages at steep discounts.
The companies now own houses across the country, sometimes more than 1,000 in the same city.
About a dozen companies are leading the national trend, but Tricon American Homes’ business practices have attracted the most attention from Charlotte housing officials and some non-profits. Officials from the Charlotte Housing Authority, a government agency, and non-profits such as Crisis Assistance Ministry and the West Side Community Land Trust say the company has made the city’s shortage of affordable housing worse by raising rents sharply, refusing to renew leases for some tenants who receive government rental assistance and buying from Charlotte’s rapidly shrinking supply of cheaper homes, sometimes called naturally-occurring affordable housing.
A report from the Charlotte-Mecklenburg Planning Commission says Charlotte lacks about 34,000 affordable housing units needed to meet demand. That’s about double the number from a decade ago.
The Charlotte Housing Authority, overseen by a seven-member board appointed by the mayor and the City Council, over the summer worked frantically to help find new homes for nearly two dozen renters in Tricon-owned properties who were given notices their leases would not be renewed, said Cheron Porter, a spokeswoman for the agency.
Porter said in June the Housing Authority received copies of letters Tricon sent to tenants, who all receive rental assistance under a federal program commonly known as Section 8. The families and others with low incomes put 30 percent of their income toward rent and the government pays the rest.
Data from public records and Tricon’s public statements show:
▪ The company has raised rents in Charlotte an average of 28 percent over the last five years, Tricon said. That’s a bigger increase than other renters saw in the Charlotte metro area, where rents for single-family houses rose 19 percent over roughly the same period, according to data from the property analytics firm CoreLogic.
▪ The company’s homes in Charlotte are concentrated in lower-income areas. The Observer used public records to map roughly 1,300 houses that Tricon owned in Mecklenburg County as of July. At least two-thirds were in neighborhoods where the median household income is less than the county average of $59,270.
▪ Tricon became a major landlord in Charlotte in 2012 by buying 550 houses from a local landlord, about half of them occupied by people receiving Section 8 subsidies for rent, according to the former owner, Thomas Moore.
The company has told investors it planned to reduce the number of tenants in Charlotte who received Section 8 assistance to “improve tenant quality,” according to a public report.
“There is a crisis,” Porter said. “The bus driver, the secretary at your church — (they) are being priced out of Charlotte.”
Investing in Charlotte
Rental companies own 300,000 single-family houses nationwide, according to the Urban Institute, a non-profit research agency that tracks housing trends. Many are concentrated in sunbelt cities like Atlanta, Phoenix and Charlotte.
A small group of out-of-state firms has bought more than 10,000 houses across the Charlotte region in recent years, increasing their holdings from almost none, according to an August 2017 Observer report.
These businesses operate far differently than traditional mom-and-pop landlords who own a few properties.
They use tenants’ rent payments to create investment tools called securities — a similar strategy that was blamed for the mortgage meltdown in 2008. Investors put up cash to buy the securities and get paid when the firm collects rent checks. They can reap more profits if rental rates go higher.
Tricon executives announced a $2 billion joint venture earlier this year with plans to buy up to 12,000 more houses in Charlotte and other cities.
City Council member Matt Newton said he wants the city to investigate whether Tricon’s business model is undermining the city’s attempts to preserve affordable housing. Newton said he would raise the issue with other members of the City Council’s Housing and Neighborhood Development Committee.
“They are contributing to a problem we are trying to solve,” Newton said.
Tricon is not the only investor-backed rental company that has been questioned about its business model. Companies such as Invitation Homes have also been criticized for rent and fees. A proposed class-action lawsuit filed earlier this year in California accused Invitation Homes — the largest single-family house landlord in the country — of unfair business practices.
In written responses to questions, Tricon said it has invested more than $200 million in Charlotte, helped neighborhoods by repairing dilapidated houses and provided more than 40 local jobs.
Tricon said its rents are based on the market and are adjusted when the market changes. The company’s average monthly rent in Charlotte is $1,192, the statement said.
“Our goal is to provide our residents with a quality home, a clean and healthy living environment and value for their monthly rent payment,” Tricon said. “We want residents to stay in our properties for long tenures, in order to reduce unnecessary turnover and vacancies, which is important for the families we serve and for our own work.”
Tricon acknowledged that it has phased out leases for some tenants who get Section 8 benefits over the past year, calling the program an “additional administrative burden.” In some cases, Tricon said, it had trouble collecting rents on time.
Unlike some states and cities, North Carolina allows landlords to refuse to rent to people who receive Section 8 assistance.
Some 4,200 Charlotte households depend on Section 8 benefits to help pay their rent, but some landlords are unwilling to lease to them, said Porter, the Housing Authority spokeswoman.
Tricon’s comments are similar to those from other landlords nationally who refuse to rent to recipients, according to a recent New York Times report. They say the program limits their ability to raise rents, imposes an onerous inspection process and includes tenants who destroy properties or violate lease terms.
Ben Carson, head of the federal Department of Housing and Urban Development, which oversees the program, has launched a task force to examine the issues and visited cities to discuss ideas for improvements, the Times reported.
Charlotte Housing Authority President and Chief Executive Officer Fulton Meacham said his agency has already taken steps in recent years to address landlords’ concerns, including streamlining the inspection process.
Tricon owns about 16,000 houses nationally. The company said its presence has benefited Charlotte and the 15 other markets where it owns houses.
“We view ourselves as long-term investors in the local economies where we operate,” the company said. “In fact, the reason for our strong and growing investment in Charlotte is that we believe the city has an exciting and bright future.... A significant portion of that investment has gone towards improvements and repairs that make those houses ready for families. In many instances, we have renovated what may have been the worst home on a street into what is now the best home on the street.”
‘They just want money’
Local non-profits said they are seeing more Tricon tenants like LaTonya Richardson.
She lives in west Charlotte, where she has been in a Tricon-owned house since 2012.
In July, she said, she was nearly evicted because she didn’t have enough money for her rent. Richardson borrowed money from a relative and got the rest from Crisis Assistance Ministry, a Charlotte non-profit that helps clients avoid eviction.
But Tricon recently raised her rent from $950 per month to $1,210. That’s nearly as much as Richardson typically receives in monthly income.
She once worked full-time but had to quit her job due to severe depression and complications from bipolar disease, Richardson said. Now, she said, she lives on $744 in monthly government disability benefits. She said she survived domestic violence and occasionally does paid speaking engagements for a religious ministry that can add as much as $1,000 to her monthly income.
She said she has survived in recent months because a relative helps her buy groceries when she cannot afford them.
Richardson said she is upset with Tricon for raising her rent so much at once.
“They don’t have any empathy for people,” Richardson said. “They just want money.”
But, she said, she had no choice recently but to renew her lease with the company.
Moving means coming up with a security deposit and first month’s rent as well as paying fees to apply to rent homes and she said she could not afford it.
‘Improving tenant quality’
Tricon’s Canada-based parent company, Tricon Capital Group, announced its plans to enter the single-family rental house business in 2011 with a goal of profiting from the U.S. mortgage crisis, according to its annual report that year.
“The U.S. banking system remains in turmoil, as it has taken years to deal with stockpiles of defaulted acquisition, development and construction loans as well as defaulted first mortgage residential loans,” Tricon Capital Group, which trades on the Toronto Stock Exchange, said in the annual report. “But, what is often bad for the banks can be very good for Tricon.”
Tricon pitches itself as a landlord to middle-class renters who make as much as $95,000 a year. These tenants, according to Tricon, can afford to pay up to $1,600 a month.
In one of its first major deals in Charlotte, Tricon bought 550 houses for about $26 million in 2012 from a local landlord who rented mostly in lower income and minority neighborhoods.
Nearly half of the houses were rented by households who depended on Section 8 assistance before Tricon bought them, said Moore, the former owner, who now does work for Tricon scouting new properties.
Moore said he typically rented houses for $650 to $750 a month depending on the number of bedrooms.
In its written statement, Tricon said it rents homes to nearly 400 families who receive Section 8 benefits. Some 122 of them live in Charlotte, the company said.
In a 2014 report to investors, Tricon described a strategy to increase rental rates in Charlotte and reduce the number of tenants who receive government assistance.
The company said the plan was part of “continuing efforts to improve tenant quality in the Charlotte and southeast Florida markets where the Company is focused on raising rents by increasing its mix of market rate leases as compared to government assisted rental program (Section eight) leases,” the report says.
Are new laws needed?
To try to account for the impacts of corporate landlords, some researchers suggest cities and states pass new ordinances and laws.
But the Charlotte City Council has not discussed the issue in the last year, said Newton, the city councilman.
He said he did not know about concerns from the Charlotte Housing Authority and some non-profits about Tricon until informed by an Observer reporter.
Tricon promises changes
In response to questions from the Observer, Tricon said it would change some of its policies.
In Charlotte, the average Tricon renter is paying about $260 more per month now than five years ago, according to the company’s public documents.
Tricon told the Observer it is going to limit rent increases during lease renewals.
The company also promised to help Section 8 tenants in “good standing,” but whose leases will not be renewed, by working with local charities to help find new housing.
Tricon also said it will give other Section 8 tenants more time to prepare for a move — 120 days instead of 30 to 60.
End of the American dream?
But some industry researchers said such changes likely would not offset the worst impacts from investor-backed rental companies. The business model demands the firms raise rents to satisfy investors, they said.
The consequences can be particularly harsh when companies buy houses in low-income areas and minority neighborhoods, said Maya Abood, a former researcher with the Massachusetts Institute of Technology’s Urban Planning Program who co-authored a report titled “Wall Street Landlords Turn American Dream into American Nightmare.”
Abood said she researched Tricon’s impact on the Los Angeles area housing market in 2017. She said she found Tricon bought houses in low-income areas and inherited some Section 8 tenants.
Such a strategy, Abood says, offers good financial returns for investors because companies can buy houses cheap and drive up rents. Low-income tenants have little choice — pay more rent or be homeless — because they don’t have the money to move, Abood said.
“This is the closing down of the American dream for some and not others,” Abood said. “Owning a home has been a way to enter the middle class, particularly for African-Americans in the South. You can’t save up to buy a house, if they keep raising the rent.”
Tricon owns 25 homes on one west Charlotte street alone. Magnasco Lane, between Interstate 85 and Freedom Drive, is in an area where the median household income is about half of the county average.
That’s where Angela Campbell, the single mother, and her family live.
She is one of the Tricon tenants whose leases were not renewed last summer, according to the Charlotte Housing Authority.
Campbell said Tricon initially gave her 30 days’ notice that she had to move. After she contacted a non-profit legal agency in September, Tricon gave her until the end of the year to move out.
“I don’t even want to live here anymore” considering the reason the lease was not renewed, Campbell said. “They have let me know what they think of people like me.”
But Campbell said she likely would have to put her belongings in storage and move to a motel if she doesn’t find another place she can afford.
“A lot of people are being devastated because someone said ‘I want more money,’” Campbell said.
Data reporter Gavin Off contributed to this report.
Statement from Tricon
As part of our ongoing work to enhance our service to residents, we recently updated some of our operating policies to better meet the needs of the communities we serve. We have outlined new nation-wide policies below.
With respect to renewals, moving forward we are committing to keeping any increases within standard local rental growth rates, at all times.
This is designed to give residents greater peace of mind when their agreement is up for renewal. In situations where households with section 8 vouchers are not having their lease renewed: in every instance feasible, we will now be giving these residents 120 days advance-notice prior to the end of their rental period. Our goal with this measure is to ease pressure, giving the families in question more time and greater flexibility to plan for their next steps.
For residents with section 8 vouchers who are in good standing but whose leases are not renewed, we are taking more steps to help ease the transition by growing and building relationships with charitable organizations. This will allow us to play an enhanced, even more active role in assisting residents find new homes. In Charlotte, for example, our recent work with the Crisis Assistance Ministry went a step further and led to a resident in need staying in her home.
To ensure our high standards are met and properties receive the best possible care, we have created an additional resident-centric maintenance team dedicated solely to addressing more complex service requests that require immediate attention. With advanced customer service training, this team is well-equipped to deal efficiently with more complicated resident needs. This will help increase service and response times, while giving residents added assurance that they are getting the help they need.
We are proud of the work we do with our residents and of our commitment to the community of Charlotte, and we continue to be excited about the city’s bright future.