MINNESOTA [11/10/21]— U.S. Senator Tina Smith (D-Minn.), chair of a key Senate housing subcommittee, and Senate Banking Committee Chair Sherrod Brown (D-OH), are raising concerns about real estate powerhouse Zillow’s reported plans to sell a large portfolio of single-family homes to institutional investors who could turn those properties into rental homes. The move could leave local homebuyers without affordable options, and renters with poorly managed properties.
The two Senators were joined by Senator Jack Reed (D-RI), a senior Member of the Banking Committee, on a letter Monday to Zillow Chief Executive Officer Rich Barton. In the letter, the Senators questioned Zillow’s plans to sell some or all of its $2.8 billion portfolio of 7,000 properties in its home-buying division – known as “Zillow Offers” – to institutional buyers who are accumulating huge portfolios of single family rental homes. One leading candidate to buy the portfolio, Pretium Partners, is a private equity firm that has “a troubling record” managing rental properties, the three Senators said in the letter, citing recent press reports. Several other private-equity backed buyers are also reportedly considering buying the portfolio.
“These large-scale property sales have the potential to destabilize local real estate markets and leave local buyers with few affordable options for buying a home,” the Senators wrote. “Troublingly, these types of sales have the ability to concentrate property ownership in the hands of a few, corporate-driven, out-of-town landlords with little meaningful connection to communities.”
The Senators said renters of properties owned by Pretium and its affiliates have reported “serious flooding issues, vermin infestations, and other unsafe conditions,” with property managers often being unresponsive. Last month, witnesses told the Senate Banking Committee that such troubling management practices by private equity firms are widespread across the country and often impact communities of color, exacerbating longtime inequities and lessening home buying opportunities.
Pressing Zillow for Answers
The Senators pressed Barton to detail:
· The number of properties Zillow plans to sell from its portfolio, as well as the value and location of each.
· The number of properties Zillow has sold to institutional investors since the beginning of 2020, compared to the number sold to individual buyers or community-focused non-profits.
· If the company intends to allow local buyers a “first look” opportunity to purchase a home, similar to the programs offered by the Federal Housing Administration, Fannie Mae, and Freddie Mac.
You can read the Senators’ letter here.