One of Washington’s closest allies in a fractured Europe struggles to adapt to the Trump administration’s unpredictable policy moves. EMILY SCHULTHEISURI FRIEDMAN BERLIN—Last month, foreign-policy-focused members of Germany’s Bundestag met for their regular committee meeting here. On the agenda were two major issues: the consequences of President Donald Trump’s decision to pull troops out of Syria, and rumors that a similar move was planned for American forces in Afghanistan. What, they wondered, did the conflicting signals out of Washington actually mean, and how was Germany, as a major ally of the U.S., supposed to react? “The worst thing wasn’t just the decision itself, but that it happened in a way that one couldn’t prepare for,” Stefan Liebich, a lawmaker on the committee and the foreign-policy spokesman for the Left Party, told The Atlantic. Calling those issues the latest example of the “American zigzag,” Liebich added, “German politics is still learning to adapt to this new situation.” It was hardly the first time that Berlin had been blindsided, disappointed, or just plain confused by the messages coming out of Washington since Trump took office two years ago. Across Europe, this administration has forced leaders and governments to rethink the way they deal with their old ally. From the president’s criticism of NATO and his tirades on trade to his decision to pull the U.S. out of international agreements like the Paris climate accord, leaders here have gotten the message loud and clear that the status quo no longer applies—and that at any point Twitter rhetoric could turn into tangible policy. As political and security leaders, including German Chancellor Angela Merkel and U.S. Vice President Mike Pence, gather this weekend for the annual Munich Security Conference, that shift is felt especially strongly here in Germany. Germans have long considered their relationship with the United States to be a special one: The U.S. helped rebuild Germany after World War II; it supported Germany’s reunification efforts after the fall of the Berlin Wall in 1989; and even today, it effectively serves as the guarantor of German security. But Trump and his “America first” mantra have slowly chipped away at that goodwill, leaving Germany feeling abandoned by, and losing trust in, an ally many view as akin to a parent or a big brother. Where they might have followed the U.S.’s lead in the past, German leaders now acknowledge that they, and Europe more broadly, must chart a course for themselves—and, in Germany’s case, step onto the world stage to an extent they’ve been reluctant to do. And the once-common view of the U.S.’s reliability as a partner, from issues of trade to rising threats from Russia or China, has been called into doubt in a way that creates nervousness in foreign-policy circles here. “Today we see much more clearly than we did two years ago: Trump represents a turning point in transatlantic, German-American relations,” Norbert Röttgen, chairman of the Bundestag’s foreign-affairs committee and a member of Merkel’s Christian Democrats, told The Atlantic. “In his thinking, the postwar conception of alliances and systems, and the claim of the U.S. to lead and spread these alliances internationally, does not really matter.” In many ways, the world order remains unchanged: The U.S. has not pulled out of NATO or formally called its commitments to the military alliance into question, and the transatlantic bond, while weakened, still consists of shared security, economic, and even cultural ties. Ask any major politician here, and they’ll argue that the relationship with Washington remains relevant and important. (Pence is also a more senior official than is typical at the Munich conference, which might also go some way toward addressing European concerns about Washington’s commitment to its friends.) But the dynamic under the surface has experienced a real change. At first, the hope remained that the president’s advisers could moderate his more impulsive tendencies. But one by one (from Secretary of State Rex Tillerson, to National Security Adviser H. R. McMaster, to Defense Secretary Jim Mattis) those advisers have left—leaving German diplomats with few strong contacts in the administration, and the administration with hard-line national sovereigntists such as McMaster’s replacement, John Bolton, and the divisiveU.S. ambassador to Germany, Ric Grenell. “It’s become very difficult for us, as German politicians or the German government, to discuss anything sustainable with the White House and especially with Trump,” says Nils Schmid, the foreign-policy spokesman for the center-left Social Democrats (SPD), who are part of Merkel’s governing coalition. “We are making contacts, but with limited success.” And though no one would say (publicly, at least) that they worry about Trump pulling the U.S. out of NATO, there’s a sense among German leaders and policy types that it’s difficult to trust the U.S. to uphold its end of the bargain security-wise—leading to a call for Europe to think about its own security and foreign-policy interests. “We need to be able to engage, of course, with the United States,” says Almut Möller, head of the Berlin office of the European Council on Foreign Relations, “but also realize that the predictability is no longer there.” That is perhaps why Schmid’s party is reportedly questioning Germany’s involvement in a decades-old agreement to support the deployment of American nuclear weapons in the event of a conflict on the continent. The move came after the Trump administration announced that the U.S. would withdraw from a treaty with Russia that eliminated a class of nuclear-capable missiles in Europe. Though Merkel’s Christian Democrats have reiterated the importance of the “nuclear sharing” agreement, the fact that one of Germany’s leading parties would so openly question it demonstrates an erosion of trust in U.S. commitments in Europe. These views aren’t just confined to politicians and foreign-policy elites: New polling from Atlantik-Brücke, a transatlantic organization, finds German public opinion turning strongly against the United States. Asked whether they had a positive or negative view of the U.S., 85 percent said they had a negative view; just over 10 percent had a positive view. And when they were asked to choose if the U.S. or China is a more “reliable partner,” Germans picked China, by a margin of 42 to 23 percent (with a third of those surveyed undecided). Annual surveys from Pew Research Center show a sharp drop in confidence in the U.S. once Trump took office: In the final months of Barack Obama’s presidency, in 2016, 86 percent of Germans believed that he would do “the right thing” regarding world affairs; under Trump, that figure plummeted to 10 percent in 2018. The response here to Trump’s foreign policy, at least publicly, can be summed up by German Foreign Minister Heiko Maas’s frequent statement: The answer to “America first” should be “Europe united.” But the idea of a united Europe, while something most leaders have supported in theory, is not the easiest prospect at a time when the continent is facing rising populism, continuing challenges related to accepting and integrating refugees, and fears of impending economic slowdown (to say nothing of the fact that one of its biggest economies and its foremost military power, Britain, is leaving the European Union). Joe Kaeser, chief executive of the German conglomerate Siemens, reflected this doubt during a December visit to the United States. In a kind of geoeconomic manifestation of Newton’s Third Law—every action provokes an equal and opposite reaction—he spoke in terms that Trump has injected into transatlantic discussions. The businessman, who has often accompanied Merkel on foreign trips and been described as the “unofficial captain of Germany Inc.,” echoed Trump in describing Europe as not just an ally of America’s but also a competitor. And he urged the leaders of his country, Europe’s largest economy, to formulate a “Germany first” economic policy as a hedge against the potential failure of his preferred option: the European Union crafting a unified strategy for contending with economic giants such as the United States and China. The term, which Kaeser first used at a conference last fall, is controversial in Germany, where it has been invoked by the German far right to oppose immigration and shunned by many officials. “Germany needs to have a Plan B,” Kaeser told The Atlantic. “If we can’t go together, we need to go it alone and understand what exactly does that mean.” As an example, he noted that the heads of the three largest German carmakers had been meeting with Trump at the White House amid the president’s threats to impose steep tariffs on automobiles imported from the EU. “That’s applying a Plan B already, because a Plan A would be that the Europeans would [jointly] get something done. But in absence of that, there are now people cutting bilateral deals,” he observed. Kaeser has considerable interests in how these questions are resolved. Siemens has been fiercely jockeying with the American company General Electric for multibillion-dollar energy contracts in Iraq. His dissatisfaction with European competitiveness might stem in part from his own frustrations with Brussels. This month, EU regulators blocked a merger between Siemens and France’s Alstom, which the companies touted as a way of creating a railway behemoth to rival China’s, on the grounds that the deal could stifle competition and raise prices within Europe. He noted that the kind of contingency planning necessary to develop an alternative to a European economic strategy can motivate reluctant partners to get serious about Plan A or risk being “left behind.” But his comments nevertheless indicate just how fluid the debate is about Germany’s place in the world—a long-thorny issue within German political circles, given the country’s history and subsequent reluctance to take on more active global leadership. Citing the enormous challenges that Europeans face from the rise of China as a strategic competitor and the reemergence of Russia as a military power, Emily Haber, the German ambassador to the United States, rejected Kaeser’s premise. “The answer in Europe is not ‘Germany first,’” Haber told The Atlantic. “Don’t fool yourself … We know that we need the much larger shadow of the European Union and of European integration in order to leverage our power. So it’s not ‘Germany first.’ It’s not ‘Luxembourg first.’ It’s not ‘France first.’ Because that’s a diminishment of power.” She added that while German policy makers are not treating the United States under Trump as more of a competitor than an ally, there is one worrying exception: the administration’s criticisms not of particular EU policies or actions, but of European integration itself, which is “existential for us.” “Do we see eye to eye in regard to the strategic irrefutability of the European Union?” Haber wondered. Asked whether she had arrived at an answer, Haber responded, “Let’s wait and see.” In any case, the German (and European) response to the Trump era of American foreign policy is predicated on the assumption that, even if a different president enters the White House in 2021, some of these shifts are more lasting than Trump’s tenure. The current situation “may shift back, or it may change again at the level of style and tone … but what will remain is this withdrawal from the Near East, the decline of the willingness to engage in international affairs, the withdrawal of America from international agreements,” Schmid, of the SPD, says. “This separation will not be changed back so quickly.” Emily Schultheis reported from Berlin, and Uri Friedman from Washington, D.C.



In 2010, at the height of the foreclosure crisis, the federal government watched nervously as hundreds of thousands of families lost their homes. Empty houses blighted neighborhoods, their shades drawn, their yards overgrown. Without some kind of intervention, federal officials worried, the housing market would continue in its free fall, prices would keep dropping for existing homeowners, and the economic recovery, already tenuous, would be imperiled.

But who would fill these empty homes? Few Americans were in a buying mood, and for those who were, mortgages were harder to come by than they had been before the crash. So the government incentivized Wall Street to step in. In early 2012, it launched a pilot program that allowed private investors to easily purchase foreclosed homes by the hundreds from the government agency Fannie Mae. These new owners would then rent out the homes, creating more housing in areas heavily hit by foreclosures.

“There was this glut of foreclosed properties in parts of the country, and inadequate demand from the traditional home-buying population and even traditional investors,” Meg Burns, who was at the time the senior associate director of the Office of Housing and Regulatory Policy, told me. “We were trying to influence demand.”

It worked. Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country. In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012; today, institutional investors own at least one in five single-family rentals in some parts of the metro area, according to Dan Immergluck, a professor at the Urban Studies Institute at Georgia State University. Some of the nation’s hardest-hit housing markets were finally stabilized.

The investors argued that they could be good landlords—better, in fact, than cash-strapped small-timers. According to Diane Tomb, the executive director of the National Rental Home Council, a trade group established in 2014, single-family rental companies “professionalized” a sector traditionally run by mom-and-pop landlords, bringing with them 24/7 responses to maintenance requests and a deep pool of capital they can spend on homes.

They also projected they could make money, which no one had done on a large scale in the home-rental business. “We wanted to rescue these neighborhoods and create a long-term, permanent income stream for our shareholders,” says Frederick Tuomi, who was until recently the president of Invitation Homes, which is now the largest single-family rental company in the nation. (Tuomi is currently on a temporary leave of absence to care for a family member.)

Wall Street analysts and potential shareholders, however, were skeptical. Maintaining thousands of homes of different sizes, ages, and conditions across an entire metro area seemed like a logistical nightmare. “How can you operate and create scale in that situation?” Sam Zell, the billionaire real-estate investor, told CNBC in 2013. “I don’t know how anybody can monitor thousands of houses.” When the new rental companies started offering shares to investors on the public market in late 2012, the response was tepid.

But housing trends were on the side of the investors: America was becoming a renter nation. According to census data, between 2007 and 2017, the United States added less than 1 million households in owner-occupied homes, but 6.5 million in renter-occupied homes. Many families wanted to live in a spacious house in a good school district, but could no longer afford to do so as owners. The homeownership rate bottomed out at 62.9 percent in 2016, down from a high of 69 percent in 2005.

Of course, the trends that favored these new landlords were largely produced by a financial crisis that Wall Street had itself abetted. That some of the same investment firms that had played a part in the housing crisis were now poised to profit from it made for a dismal irony. But if the new companies could deliver on their promises of making home rentals easy, affordable, and worry-free, perhaps everyone could win: The companies could return a profit, the housing market could be shored up, and houses that had lain fallow after the crash could once again be happy homes.

That’s not what happened. I talked with tenants from 24 households who lived or still live in homes owned by single-family rental companies. I also reviewed 21 lawsuits against three such companies in Gwinnett County, a suburb of Atlanta devastated by the housing crash. The tenants claim that, far from bringing efficiency and ease to the rental market, their corporate landlords are focusing on short-term profits in order to please shareholders, at the expense of tenant happiness and even safety. Many of the families I spoke with feel stuck in homes they don’t own, while pleading with faraway companies to complete much-needed repairs—and wondering how they once again ended up on the losing end of a Wall Street real estate gamble.

In 2011, rene and Erica Valentin were living with their two young children in a small two-bedroom apartment in suburban New Jersey. They had been saving for years to buy a house. But then Rene, now 42, was laid off as a district manager at Best Buy, and the couple decided that the only way they would ever be able to afford to buy was in a cheaper market.

Erica, now 34, applied to be an engineer at AT&T in an Atlanta suburb. When she got the job, the family picked up and drove south, moving into a two-bedroom apartment near the city center. They pinched pennies as Rene’s job search stretched into its second year. By the time he finally found a position in 2014—again at Best Buy—the family still couldn’t afford to buy. But their daughter, Sophia, was about to enter first grade, and the Valentins wanted her in a good school district and not to have to share a room with her brother. So they decided to rent.

A real-estate agent showed them around Lawrenceville, a sprawling suburb 30 miles northeast of downtown Atlanta, where the homes are large and the schools are good. Every house they saw was owned by the same company, Waypoint Homes, which they told me the agent explained was a professional rental company, with 24/7 maintenance, quarterly check-ins, and deep pockets to spend on repairs.

They settled on a 2200-square-foot house on a quiet street. From the outside, it didn’t look like much—vinyl siding, black shutters, brick detailing. But it had three bedrooms, two bathrooms, walk-in closets, and a large, fenced-in backyard, all for just $1,373 a month. Soon enough, they were installing a tire swing in the backyard, hanging art on the walls, and putting up curtains in the kids’ bedrooms—dark blue for Antonio, light blue for Sophia. They paid their rent using Waypoint’s online platform, impressed by how far technology had progressed from the days of dropping a check in the mail. The property wasn’t theirs, exactly, but they finally felt like they could settle down.

As the valentins were nesting, America’s new corporate landlords were looking for efficiencies. The companies set about standardizing flooring and appliances, which would, in theory, lower costs and make life easier on maintenance workers. They established centralized call centers to handle tenant communication, and installed smart locks so that potential renters and maintenance staff could let themselves in to look around or do repairs.

At the same time, the industry was consolidating. Investment groups created companies to manage the homes: Blackstone established Invitation Homes; Cerberus created FirstKey Homes; Colony Capital created Colony American Homes. And then those companies started merging.

In 2015 alone, Colony American Homes merged with Starwood Waypoint Residential Trust, Cerberus Capital Management acquired more than 4,000 homes from BLT Homes, and American Homes 4 Rent said it was acquiring American Residential Properties in a $1.5 billion deal. By 2017, two major players, Invitation Homes and American Homes 4 Rent, controlled nearly 60 percent of the market.

On calls with investors, those two companies touted their cost-cutting measures, which often involved pushing responsibilities onto tenants. In 2016, Jack Corrigan, the chief operating officer of American Homes 4 Rent, told investors that the company hoped to reduce spending on repairs, maintenance, and “turn costs”—preparing a home for a new tenant—from $2,500 per home to $1,600. That same year, Colony Starwood cut property-management costs 25 percent from the previous year; one of its money-saving innovations was to use videos and chat software to show tenants how to fix minor problems, so they wouldn’t have to request repair staff for a clogged garbage disposal or a leaking toilet.

The obligation to repair their own rental wasn’t the only responsibility passed on to tenants. I reviewed one Colony Starwood lease from 2016; it was 34 pages long and specified that tenants were responsible for landscaping, “routine insect control,” replacing air filters in their central air systems once a month, repairing broken glass (regardless of how it was broken), and repairing and maintaining sewer and sink backups. American Homes 4 Rent started levying “trip charges” if maintenance staff were sent out to homes to assist with repairs that the tenants should have performed themselves, David Singelyn, the company CEO, explained at a 2015 investor forum. Some companies began requiring that tenants buy renter’s insurance to cover the property itself, rather than just their belongings, a clause lawyers in some states say is unenforceable.

As the industry started to grow, the major players all described their desire to standardize and improve the business of being a landlord. But even to the companies’ employees, the effort to become more efficient started to look more like craven attempts to squeeze tenants. “It shouldn’t be just about making money, but that’s what it turned into,” Shanell Hanson, who was a property administrator for Colony American Homes in an Atlanta suburb from 2014 to 2016, told me. Hanson said the company had six maintenance workers for 2,100 homes in the area she managed. Residents would frequently call with substantial problems: Sewage was overflowing, or the house was full of mold. But with such a small staff, Hanson could rarely deal with the problems quickly. And the law was on the corporations’ side: If tenants want to seek financial remedy for a landlord not keeping the property in adequate condition, under Georgia law, they have to take the landlord to court, a costly and lengthy process. “It’s almost impossible to do without an attorney,” Lindsey Siegel, an attorney at Atlanta Legal Aid who works on housing issues, told me.

Hanson said she was instructed by a supervisor not to answer the phone when certain tenants called. “Her response would be, ‘We’re not fixing that, just don’t call the tenant back,’” Hanson said of the supervisor. Hanson said she was fired when she reported the company to OSHA because she worried that the homes were in such poor shape that the conditions for the maintenance staff she supervised were dangerous.

In 2017, Invitation merged with Starwood Waypoint, the company that itself had merged with Colony American in 2015. Invitation said it could not comment on individual employees (or the alleged OSHA complaint), but that company policy protects whistle-blowers from retaliation, and that the company does not tolerate unsafe working conditions for maintenance workers. A spokeswoman added that the events Hanson alleges occurred when the company was under different ownership. (Fred Tuomi, the longtime Invitation CEO, was a senior executive at Colony American beginning in 2013, and headed the company as it merged with both Starwood Waypoint and Invitation.) Invitation also said that any employee not returning tenants’ calls was not following its company policy.

Many other single-family landlord companies were cutting corners on maintenance and repairs. “As the corporation got bigger, it just got worse, in terms of what we had to work with and how we had to deal with problems,” a former Los Angeles leasing agent who worked for Waypoint between 2015 and 2017 told me. (She spoke on the condition of anonymity because she still works in real estate.) Regional teams received bonuses for keeping costs low, she said, which incentivized them to skimp on spending. Instead of responding to tenants personally, supervisors would send calls for maintenance to out-of-town call centers—which would in turn assign maintenance workers dozens of repairs in a day, not realizing that Los Angeles traffic could mean that relatively short distances could take hours to traverse.

Another former Waypoint leasing agent, in Florida, who also spoke on the condition of anonymity because she is still in the real-estate field, told me that the company stopped replacing shower-curtain rods and changing locks when tenants moved out. When Waypoint learned that it was spending $5 million annually on paint, local managers were told to just touch up the walls rather than repaint them, giving the interiors a splotchy, unfinished appearance, she said. At one point, a mandate came down from a field manager that the company was going to do everything it could do not to return security deposits to tenants. “It wasn’t a company policy, and you will never find it in writing, but it was a verbal thing passed down to field project managers,” she said.

Charles Young, who was named the chief operating officer of Starwood Waypoint in 2015 and now serves in that position for Invitation Homes, told me that the company never told staff to avoid returning security deposits. Tuomi, of Invitation, said that while the companies may have been “horribly inefficient” at first, they’ve gotten better at responding to problems as they’ve gotten bigger, with the help of technology and more experience. Invitation launched an advance-scheduling and route-optimization program last year to improve the efficiency of its maintenance staff, according to Kristi DesJarlais, an Invitation Homes spokesperson. The company told me repeatedly that complaints about the early days of the single-family rental industry are no longer valid.

Rene and erica valentin’s problems with their rental home began almost immediately. Their pipes would periodically break, sending a stream of water onto their living-room carpet. Sometimes the water would be boiling hot—their kids once stepped in it and burned their feet, they told me. Getting someone to come fix the pipes was always a production. Erica said she would call, or file a complaint online, and it would take days, sometimes weeks, before she received a response. Repair workers would come and replace small sections of broken pipe, but Waypoint never investigated why the problem persisted. They didn’t replace the soggy carpet, either; a faint mildew smell started to permeate the house. The contractors Waypoint sent seemed, to the Valentins, unqualified—one didn’t have a car and had to call his mother to drive him to Home Depot to pick up a part. “You would expect this type of behavior from a one-person landlord who’s a jerk, but a big multimillion-dollar company—how do you treat your tenants like that?” Erica said. “They have the money to fix things.”

The Valentins thought about leaving, but moving is expensive, and they were still saving up to buy a house. They also worried that breaking a lease would ruin their credit. So they stayed, and the problems mounted. Their air-conditioning stopped working; the family waited eight sweltering Georgia summer days for a repairman, who told them that the wrong-size unit had been installed at the house and that it would never keep them cool. When they asked if Waypoint could install the proper unit, they told me the company did not respond. Waypoint merged with Invitation Homes in late 2017.

But despite the new ownership, the flooding continued. One Sunday afternoon in March 2018, they returned home and saw water rushing out of their house. They found their home submerged in four inches of water and their bulldog, Bam Bam, whimpering in a corner. They called Invitation and waited, moving their soggy couch to the garage, piling ruined children’s books and teddy bears on tables, wondering why the issue had never been fixed after dozens of calls.

The problem, it turned out, was more significant than a bad section of pipe. The  house’s pipes had been the subject of a class-action lawsuit because they broke so frequently, and the pressure regulator in the hot-water heater was faulty, sending too much water into an already fragile system. They learned this from a contracting company that Invitation dispatched to diagnose—but not to fix—the problem. When Rene got back to the house from a trip to pick up a pizza, the contractors were packing up their equipment. Invitation was looking for someone to do it for a cheaper price, they told him.

A few hours later, another contractor showed up in a Honda Civic. With Invitation’s permission, he started pulling up the drenched wall-to-wall carpet and knocking down walls, leaving exposed nails and dust throughout the house, the Valentins told me. It was slow-going—the contractor didn’t know much about drywall, Rene said, and he was working alone. He set up industrial fans to dry out the wet concrete floor and advised the Valentins to wear masks if the dust bothered them for the next few weeks.

An Invitation spokeswoman told me that according to company records, the Valentins had experienced some plumbing issues, but that those issues were “promptly addressed.” The company gave the family the option of staying in a hotel during the flood and at the company’s expense, the spokeswoman said. (The Valentins said that they were told to pay upfront for a hotel, and that the company would “consider a partial reimbursement” later. They said they were still required to pay rent during this time.)

Living in a decaying house was taking a toll on the family. The mold was aggravating their son’s allergies; the dust made him feel even worse. The day after the flood, his face began to swell. Erica started to cry as she realized that her efforts to find a good home had landed them in a place that was making her family sick. But she felt powerless to do anything about it.

The valentins’ story is not unique. The tenants I spoke with said that their landlords ignored their requests for repairs and kept homes in hazardous condition. Many said they’d received eviction notices even if they’d paid their rent on time.

These negative experiences occurred across the industry. In 2016, LaSonia Kimball moved out of the Covington, Georgia, home she rented from Colony Starwood and awaited the return of her $750 security deposit. Instead, she was charged $4,297.40 for repairs such as hedge trimming and interior painting. She took the company to court to get it to drop the fees and give her back her security deposit, which it ultimately did, though it did not admit wrongdoing. (Invitation told me that Kimball’s deposit was retained “due to damages beyond normal wear and tear” but that it was eventually returned.)

Timothy and Michelle Poorman’s Invitation Homes rental in McDonough, Georgia, burned down in December 2017; according to a complaint filed in state court in August, a fire investigator found that the chimney, which was installed by Invitation Homes, had lacked necessary parts and had not been correctly ventilated. The Poormans are currently suing for compensation for their lost property. (Invitation said that it could not comment on pending litigation but that it disputes the allegations in the Poormans’ lawsuit.)

Waypoint Homes never did a move-in inspection after Carla Brown and her family moved into their home in Marietta, Georgia; her porch collapsed when she was standing on it and she broke her ankle. (She settled with the company.)

David Ochwangi rented a house from American Homes 4 Rent in Smyrna, Georgia, and repeatedly filed maintenance requests because the pipes were leaking; the company refused to make repairs and a burst pipe ruined thousands of dollars of electronics, appliances, and furniture, according to a complaint filed in Georgia state court.

The air-conditioning in Jennifer Callahan’s Florida home was wired incorrectly; when she complained that it was unsafe for her four-month-old baby to be in the house, where temperatures could reach 100 degrees, the American Homes 4 Rent office told her she was a “drama queen” and did not send someone to repair it for a week and a half, she told me. American Homes 4 Rent did not return multiple requests for comment.

Tenants also say that rather than taking advantage of economies of scale, the rental companies are taking advantage of their clients, pumping them for fines and fees at every turn. This impression is backed up by the financial reports of the companies themselves. American Homes 4 Rent increased the amount of money it collected from “tenant charge-backs” (essentially billing tenants for repairs after they move out) by more than 1000 percent between 2014 and 2018, according to company earnings reports, though it only grew the number of homes it owned by 70 percent over that period. In some states, Invitation Homes keeps the utilities in its name, and charges tenants a monthly $10.99 “utility service fee,” which is in addition to the cost of water, gas, and electricity. The company increased its “other property income”—the amount it collected from resident reimbursement for utilities, service charges, and other fees—by 114 percent between the first nine months of 2017 and the first nine months of 2018, despite only growing the number of homes it owned by 71 percent. On an earnings call in 2017, Invitation Homes’ then-CEO John Bartling said that “automated charges to residents” drove profits in the quarter, leading to a 22 percent increase in “other income.”

As early as 2015, single-family rental companies started filing eviction notices against tenants even if they were just a day or two late on the rent, according to Elora Raymond, a professor at Georgia Tech who was one of the co-authors of a study that looked at the eviction practices of single-family corporate landlords. By filing eviction notices, the companies can charge tenants a 10 percent late fee as well as hundreds of dollars in legal fees, even if the company doesn’t actually move to evict the tenant. The study, published by the Federal Reserve Bank of Atlanta, found that institutional investors in Atlanta were 18 percent more likely to file evictions than small landlords. One company cited in the study was in eviction proceedings against one-third of its tenants.

La Shay Harvey, a tenant of Invitation Homes in Covington, Georgia, told me she was charged a $95 late fee for missing rent one month even though she had paid her rent through Invitation Homes’ online portal, which had malfunctioned. She dropped off a money order the next day, but the company refused to accept the payment, eventually filing an eviction notice and sending her a bill for a $200 legal fee, a $75 insufficient funds fee, a $144 filing fee, and $199 in late fees, plus back rent, although she says she had tried to pay the rent. She took the company to court and won, but she will never forget coming home one day to see her daughter crying because of the eviction notice affixed to the front door. (Invitation disputes Harvey’s account, saying she has been late paying rent eight times since 2017.)

Houses require a lot of work under the best of conditions. Small-time landlords can do a poor job of managing properties. The tenant isn’t always right. But the volume of complaints, and the common themes among them—maintenance requests ignored, corners cut, costs passed on to the renter—suggest that the rental companies have failed to meet the pledge they made back when the incentives first kicked in: to make rental housing a business that benefits both tenants and investors. Tenants have filed more than 600 complaints about Invitation Homes and nearly 800 complaints about American Homes 4 Rent through the Better Business Bureau. (Together, the two companies own about 126,000 homes.) In a Facebook group of unhappy tenants, daily posts suggest that the companies continue to fail to respond to some long-reported problems.

Invitation Homes receives a 4.3 out of 5 from its tenants in internal surveys, the company said, adding that its business model depends on keeping people happy so that they’ll stay in their home, reducing turnover. Tuomi told me that as Invitation acquires more homes, it adds employees, stimulating local economies.

In May, Young, Invitation’s chief operating officer, took me on a tour of a few of its empty rental properties in the Sacramento suburb of Roseville. They were on quiet suburban streets, and they had wall-to-wall carpeting, evenly painted white walls, and spacious backyards. Young showed me how local staff go through an extensive inspection list before new families move into a home—turning on taps, checking power outlets, running the garbage disposal.

On the long drive back to Invitation’s office, I asked Young whether he thinks the company’s model of maintaining homes across far-flung metro areas is practical. In the beginning, when the industry was just getting started, it had some kinks to iron out, he allowed. But now, as Invitation reaps the benefits of scale, residents are happy, he said. Invitation gave me the names of three tenants who the company said would talk with me about their positive experience with the company, but none of the tenants responded to repeated calls.

Yet many of the renters I spoke with believe that to achieve the professionalism that Young described, the companies have had to adopt an adversarial relationship with tenants. In 2016, with the real-estate market heating up in metropolitan areas across the country, single-family rental companies also started pushing the limits of how much they could raise rent every year. American Homes 4 Rent raised rents by 11 percent between 2016 and 2018; the average rents in the top 30 markets in the country increased by just 6 percent over the same time, according to Zillow. American Homes 4 Rent owned 70 percent more properties in the first nine months of 2018 than in the same period in 2014, but it collected 150 percent more rent. “It’s up to us to educate tenants in a new way that there will be annual rental rate increases,” David Singelyn, the CEO of American Homes 4 Rent, said at an investor’s forum in 2017. “This has been a very passively managed industry for 30, 40 years, up until the institutional players came in.”

If investors were once wary of the single-family rental business, they aren’t any longer. The share price of American Homes 4 Rent was up 40 percent between August of 2013 and August of 2018. Investors such as Morgan Stanley and BlackRock increased their holdings in Invitation Homes in the third quarter of 2018. By December, the eight ratings firms covering the company had each given Invitation a “buy” rating, indicating that they believe it’s undervalued.

Single-family rental companies are now “darlings” of the real-estate sector, according to Haendel St. Juste, an analyst at Mizuho Securities who covers the industry. “You have this proof of concept now,” he told me. “They’ve exceeded expectations.” When I reached out to Sam Zell, the Chicago real-estate investor who had been skeptical of single-family rentals in the past, he, too, had changed his tune. “Technology has disrupted the real estate industry,” he said in a statement, “and the single-family rental sector may be a case in which resulting efficiencies have a big impact.”

Single-family rental companies are continuing to expand, suggesting that, rather than a temporary response to a generational crisis in the housing market, institutional ownership of single-family rentals may be a new fixture of the real-estate industry. Invitation Homes spent more than $200 million on new homes in the first nine months of 2018. As the supply of cheap homes for sale evaporates, American Homes 4 Rent has started building new homes to add to its stock.

Despite the fact that the housing market has largely rebounded, the federal government continued financially supporting single-family rental companies until recently. In 2017, Fannie Mae provided a $1 billion loan guarantee for Invitation Homes, which allowed the company to benefit from lower interest rates than it would have received without the government’s backing, as well as more favorable loan terms. It wasn’t until August 2018 that the Federal Housing Finance Agency, which was created in 2008 to oversee federal housing agencies, announced that it was ending its participation in the single-family rental market because the companies could be successful without the government’s help.

That success may be coming at the expense of would-be homeowners—the Americans Fannie Mae was created to assist. As the rental companies continue to acquire more real estate, they are competing with people who have repaired their credit in the decade since the recession, socked money away, and are now finally ready to buy again. “Our fear is that any home that goes into [an] investor’s portfolio isn’t just about homeownership today—it is locking that home out of potential homeownership for decades to come,” says John O’Callaghan, the president and CEO of the Atlanta Neighborhood Development Partnership, a nonprofit that promotes affordable housing.

In some areas, renters say that it is difficult to find properties that aren’t owned by the big institutional investors. Heather Bryant’s Invitation Homes property in suburban Georgia had unreliable air-conditioning, a sewage system that frequently backed up, and a rodent problem that the company refused to address, she told me. But she and her husband kept re-signing the lease. “So many of the rental houses in Georgia are owned by them that it is nearly impossible to find someone who owns privately,” she told me. Iyesha Stringer moved out of one Colony American house in the Atlanta area, disgusted with the company because it had withheld 60 percent of her deposit and didn’t fix mold or flooding issues in the house. “I said I’d never rent from a big company again,” she told me. She moved into another property, only to find out a few months later that Colony American had bought the house and was going to start managing it. It’s now managed by Invitation Homes.

After four years of dealing with Invitation Homes, Erica and Rene Valentin decided they couldn’t take it anymore. When I visited them three days after the flood, they were still wearing face masks because their house was full of dust. Exposed nails lined the floor, and many of their belongings were stacked in the garage, one of the few places that had stayed dry. Desperate to get out, the family started to look at properties to buy. But home prices were on the rise, partly because of the presence of rental companies and institutional investors, which snapped up more than 5,000 homes in the Atlanta area in 2017 alone, according to Amherst Capital.

They eventually found a home they thought they could afford at $204,000. When they applied for a loan, however, they were denied. They had significant credit-card debt, and all their years of renting had deprived them of the wealth accumulation that has typically attended homeownership. They finally bought in Dacula, another suburb in growing Gwinnett County, for a little more than $300,000, but only after Rene took out a loan against his car to come up with the down payment. Now, they’re squeaking by on their monthly payments, but they know that one lost job could lead them to financial ruin. They like to say they found their dream home, but had to go through hell to get it.

In a sense, they were lucky. The Federal Reserve began raising interest rates in 2015, and it is getting costlier to borrow money. In Atlanta, home prices are rising three times as quickly as yearly increases in wages in the region.

That means many families will be forced to stay in institutional rentals. Instead of building wealth, they’ll continue to fork over rent money every month to companies looking for more ways to increase rents and fees.

Drive through the neighborhoods ravaged by the recession, and they may look back to normal. Once-empty homes are full of families, their lawns mowed, their lights on. But inside, these homes are different. They’re inhabited by renters, not owners. These families may live in a nice house and send their kids to a good school, but they don’t have independence, or the financial security that comes with owning your own home. A decade after being all but destroyed, they’ve yet to escape the crisis’s long shadow.


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