The Feds Sued a Major Corporate Landlord. Here’s What It Means for Renters

The country’s largest corporate landlord for single-family homes has agreed to pay $48 million to settle claims that it illegally charged tenants junk fees, failed to inspect homes before residents moved in and withheld security deposits after they moved out.

The deal with Invitation Homes was announced Tuesday by the Federal Trade Commission, which a spokesperson said is becoming increasingly concerned about corporate landlords and the risk of consolidation, forming companies that are “too big to care” if they engage in abusive tactics that feed their bottom line.

“Corporate landlords should not engage in abusive and deceptive practices that essentially steal money from hardworking Americans who are just trying to make rent,” said Douglas Farrar, director of the FTC’s Office of Public Affairs.

The money paid by Invitation Homes will go to affected tenants, according to the deal.

The company, which did not admit to any wrongdoing as part of the settlement agreement, said in a statement that it “remains committed to providing a high-quality living experience for individuals and families who want flexibility and choice in housing.”

Invitation Homes owns roughly 80,000 homes across the country, including nearly 12,000 in California, of which about a third are located in Northern California. The company, founded in 2012, rose to prominence in the wake of the 2008 foreclosure crisis, as private investors bought foreclosed homes for cheap and then rented them out.

As a landlord, Invitation Homes took advantage of its tenants in numerous ways, the FTC alleged. The company, for example, would advertise monthly rental rates without including mandatory fees, which the FTC described as “junk” fees — including fees for rental applications, fees to reserve the units and pet fees — that could total almost $2,000 annually.

Residents would learn about these fees only after they received a copy of their lease and sometimes after they signed it, the FTC alleged. The agency’s investigation also found that since 2019, Invitation Homes has made more than $18 million in application fees alone.

The suit alleges many renters also had to pay for “smart home technology,” which allows the company to manage utilities and access to the rental.

Desiree Fields, an associate professor at UC Berkeley who focuses on the behaviors of corporate landlords, said companies often advertise “smart home technology” as beneficial for the tenant, but in reality, it’s good for the property owner.

“It helps them manage their costs when properties are vacant,” she said. “Then they can also charge a monthly fee for that ‘smart home technology.’”

Invitation Homes didn’t adequately prepare homes for residents to move in and didn’t respond quickly to complaints from tenants, according to the complaint. The investigation found renters often moved into homes that were dirty or had broken appliances.

In a particularly harrowing report, Farrar said the heat was not fixed for several days at a home that a pregnant woman moved into during winter.

“The company promises 24-hour, seven-day-a-week emergency services,” Farrar said. “But clearly, they were not delivering on those promises.”

Farrar said while this lawsuit is rare, it reflects a change in the marketplace as more large investors purchase single-family homes and rent them out.

Invitation Homes also allegedly withheld security deposits from 65% of its tenants and only returned them if tenants complained to the company.

During the pandemic, Invitation Homes’ customer service agents were instructed to steer residents away from filing for protection under the federal eviction moratorium and instead pushed them to fill out the company’s “hardship affidavits,” which had no legal effect and allowed the company to evict people during the moratorium period, according to the complaint.

As part of the settlement agreement, which a federal judge must approve, the company agreed to advertise accurate rental prices, accurately represent the condition of properties and overhaul its security deposit practices.

Leah Simon-Weisberg, executive director of the California Center for Movement Legal Services, said the FTC’s actions against Invitation Homes represent an important step in the right direction.

“It’s really important that we not think that the private market is going to solve the housing affordability crisis,” she said. “The government needs to really center tenants in their approaches to fixing the housing crisis.”

California legislators have tried to stifle corporate landlords’ ability to purchase single-family homes in bulk and rent them out like Invitation Homes has done across the country.

All of those bills introduced this year failed to make it to Gov. Gavin Newsom’s desk, but even if they had, it’s “hard to put the genie back in the bottle at this point” after corporate landlords have spent years buying up homes, said Fields, the UC Berkeley professor.

Instead, she said, policies like rent control “that are about really targeting the effects of these business practices on renters and tenants are more apt.”