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Analysis

Over Two Thirds of All Los Angeles Rentals Are Now Owned by Speculative Investment Vehicles

A new study by Strategic Actions for a Just Economy links corporate ownership to faster neighborhood rent increases.

The Blackstone Group, one of the most infamous corporate landlords, has a market capitalization just shy of $85 billion. (PHOTO: But Why Would You Want To Be? by Kohtzy)

People are increasingly aware that in the years following the 2008 financial crisis, Wall Street landlords began gobbling up foreclosed single family homes in cities across the country. Tenant groups in Los Angeles have fought against some of these companies like Blackstone and Wedgewood for years. But what is less well known is that corporate entities had been expanding their reach into the multifamily housing sector for decades before then, enabled by the creation of favorable tax and regulatory policies, especially the proliferation of the Limited Liability Company (LLC), across the United States.

The LLC was born in Wyoming in the 1970s, but it gained popularity among investors after a 1988 regulatory reform that exempted the vehicles from corporate taxation, allowing them to “pass through” gains and losses to be taxed as regular income for their beneficial owners. Both large corporations and individual investors favor the structure for that reason, because it allows them to shield their other assets from creditors in the event of bankruptcy, and because of their ability to maintain secrecy in ownership.

Driven by the post-crisis movement of Wall Street capital into the rental market, and the increasing adoption of corporate structures by landlords of all kinds, today for the first time in history, more rental units nationwide are owned by corporate landlords than individuals.

Los Angeles has not escaped this nationwide corporate takeover. Our new report “Beyond Wall Street Landlords: How Private Equity in the Rental Market Harms Tenants,” uncovers what is happening here and nationwide, and what it means for tenants.

A heat map showing concentration of corporate-owned rental units. (Image: SAJE)

We found that corporate vehicles own over 43% of all rental units in the City of Los Angeles today. Corporate landlords own, on average, over twelve times as many units as individual owners do, buildings that are over five times larger, and ten years newer on average than individual landlord’s buildings are. Trusts — which are larger than “Mom and Pops,” meaning ownership of more than four units — own 23% of all units, and have investment patterns much more akin to corporate landlords than to individuals, owning larger, newer buildings, and having larger portfolios in general.

On the topic of the mythical “Mom and Pop Landlord,” we also found that the vast majority of properties are not owned by “Mom and Pops” (defined by the City as any property owner with fewer than five rental units) despite rhetoric to that effect being popular among vocal defenders of landlord interests. In fact, all landlords of this size own only about one third of rental properties, and individual owners (as opposed to small companies) own less than a quarter. With 75% of tenants living in buildings owned by investment vehicles or large landlords, their needs should be the priority over a small class of owners.

“Mom & Pop” landlords account for a small minority of Los Angeles rental stock. (Image: SAJE)

Corporate landlords nationwide have been implicated in the production of uninhabitable housing conditions for tenants, increased eviction, displacement, and destabilization of housing, extractive rents and gentrification, harassment and unethical management practices, and speculation, tax evasion, and vacancy. We demonstrate that the same trends hold in Los Angeles’ housing system as well.

Analyzing public data in Los Angeles, we implicate corporate ownership in faster neighborhood rent increases, more frequent use of the Ellis Act to mass evict tenants, higher rates of Department of Public Health code enforcement complaints, speculation, and vacancy. We use case studies to reinforce the degree to which these injuries are enabled by the corporate form itself, profiling some notorious and more under the radar cases of landlord misbehavior enabled by corporate protections. We argue that these tendencies are not exceptional behaviors on the part of their perpetrators, but rather structured into the relationship between increasingly corporatized landlords and increasingly precarious tenants.

What place do secretive shell structures have in the housing market? (IMAGE: SAJE)

The corporatization of landlords is bad for tenants. Only policies that attack the protections of the corporate form can help relieve the additional harms caused by corporate ownership of rentals. Corporate landlords benefit from structures that support secrecy and limit the ability to hold them accountable for malpractice, especially in the extensive proliferation of limited liability entities as property holding vehicles. As we describe in this report, the same policy decisions that allowed for the consolidation of the rental market into corporate hands are also those that enable these same companies to escape from proper oversight. A reality in which the rental market is dominated by speculation and corporate actors, and where tenants are forced into predatory arrangements, subjected to frequent eviction, unethical fees, and poor conditions, is the product of choices made, not an inevitable outcome of history.

We make several recommendations as to how policymakers can act to help reverse the harms that these decisions enable.

  • Requirements for the disclosure of beneficial ownership for all investment vehicles investing in properties, and creation of a property registry for all landlords with holdings in Los Angeles
  • Deepen local institutional capacity to investigate and pursue affirmative cases against landlords with predatory patterns of behavior like frequent/malicious evictions, unlawful evictions, poor habitability records, tenant harassment issues, and violations of RSO, and disclose such records to the public
  • Guarantee legal representation for tenants facing their landlords in court
  • Implement regulatory policies that limit the size and concentration of holdings of investment vehicle landlords
  • Implement a strengthened and progressive gross receipts tax that discourages the accumulation of large portfolios inside of a jurisdiction
  • Implement an out of state transactions fee that targets foreign business entities buying property in California

But no reform can replace tenant power. As long as there are predatory corporate landlords, there will be tenants organizing against them.

Find the report here.


Alexander Ferrer is a researcher at Strategic Actions for a Just Economy focused on how increasingly financialized housing impacts tenants.

SAJE is a 501c3 non-profit organization in South Los Angeles that builds community power and leadership for economic justice. Founded in 1996, SAJE focuses on tenant rights, healthy housing, and equitable development. SAJE runs a regular tenant clinic, helps connect local residents to jobs, organizes for tenant rights, and fights for community benefits from future development through private agreements and public policies. We believe that everyone, regardless of income or connections, should have a voice in creating the policies that shape our city, and that the fate of city neighborhoods should be decided by those who dwell there in a manner that is fair, replicable, and sustainable.


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