Invitation Homes, the largest U.S. landlord of single-family rental houses, reached a $48 million settlement with the Federal Trade Commission over allegations the company deceived renters about undisclosed fees, its eviction policies and unfairly withheld security deposits.
Invitation Homes agreed to the payment that will be used to refund renters harmed by the company. The FTC will also require Invitation Homes to clearly disclose full lease pricing, establish policies to handle security deposit refunds fairly and properly notify renters of programs for tenants facing eviction.
The company “preyed on tenants through a variety of unfair and deceptive tactics,” Lina M. Khan, chair of the FTC, said in a statement. “No American should pay more for rent or be kicked out of their home because of illegal tactics by corporate landlords. The FTC will continue to use all our tools to protect renters from unlawful business practices.”
Invitation Homes defended its policies as “industry leading” and stressed in a statement the agreement admits no wrongdoing: “Today’s agreement brings the FTC’s three-year investigation to a close and puts this matter behind the company, which will, as always, move forward with its continuous efforts to better serve its customers and enhance its practices. Invitation Homes remains committed to providing a high-quality living experience for individuals and families who want flexibility and choice in housing and to transparency with all stakeholders.”
The settlement is the first action taken by the FTC following the formation of its Renters Working Group designed to “examine unfair, deceptive and anticompetitive practices affecting renters,” the agency said. It comes as the issue of investor-owned housing, which economists say has driven up house costs, has drawn lawmakers’ attention. Bills are pending in the U.S. House of Representatives and Senate to discourage institutional buyers by taxing their future purchases or sales of single-family rental homes.
With more than 16 million single-family rental homes in the United States, institutional investors remain a small portion of owners and account for 2% of overall inventory, according to the National Rental Home Council. But their numbers have been rising as tightened inventories, increased prices and high mortgage rates have put more homes out of reach for first-time buyers.
At the height of the COVID-19 pandemic, investors accounted for roughly a quarter of all homes sold, up from roughly 15% annually since 2012, according to an analysis by the news website Stateline.
Range of fees
According to the FTC complaint, Invitation Homes overcharged tenants tens of millions in unadvertised junk fees that were added to their monthly rental bills between 2021 and 2023. These fees could total more than $1,700 a year for a single unit and included application fees up to $55, reservation fees that could reach $500 and other fees for so-called services that included smart home technology, “utility management” and air filter delivery.
The FTC quoted the company’s chief executive, Dallas Tanner, as aggressively pushing the fee program, telling a senior vice president overseeing fees in 2019 to “juice this hog.” Since that time, Invitation Homes collected more than $18 million in undisclosed application fees. Renters learned of these monthly fees only after they received a copy of their lease and in some cases after the lease was signed, the agency alleged.
The complaint also alleges Invitation Homes systematically withheld security deposits, charging renters for normal wear-and-tear, previously existing damages and even renovations. Standard practice included sending a company employee to survey a property prior to tenant move-out, noting all repairs and renovations needed before the unit turned over. A separate employee who had never seen the property would then decide which costs should fall on the renter, regardless of fault. In some regions, the FTC said all charges were passed on to renters and only reviewed upon a tenant’s complaint.
According to the agency, these practices resulted in Invitation Homes returning just 39.2% of total security deposit dollars collected between 2020 and 2022. Over that time, the industry averaged a deposit return rate of nearly 64% nationwide.
Despite this, residents in nearly 34,000 properties submitted at least one work order within the first week of occupancy for issues related to plumbing, electrical, or heating and air conditioning services between 2018 and 2023.
Some residents also reported uncleaned houses where mold was present, broken appliances, rodent feces and exposed wiring. Others complained of dangerous conditions that persisted for weeks including no heat in winter, no air conditioning in summer, and sewage backup in the house, according to the allegations.
Eviction allegations
Invitation Homes is also being accused of unfair eviction practices that took place even while state and federal restrictions on evictions were in place during the COVID-19 pandemic. Allegations include intentionally steering renters away from filing a Center for Disease Control declaration that was required to prevent eviction. Instead, the company allegedly encouraged renters to complete an internal “hardship affidavit” that provided no eviction protections.
Some residents reported that the company initiated eviction proceedings even after they had vacated a home, resulting in false eviction filings appearing on tenant screening reports that makes it more difficult for those renters to secure housing in the future.
Over the first six months of 2023, Invitation Homes reported over $1.19 billion in total revenue, according to company filings. Over the past year, rents across its portfolio have increased 4.2%, and “other income” grew 9.6%. National rents grew 1.2% over that time, CoStar data shows.
Since its founding in 2012, Invitation Homes has grown into the largest owner of single-family rental homes in the United States, with its total portfolio of owned or managed houses recently topping 110,000. That number includes roughly $216 million in investments to acquire 580 single-family homes this quarter.
The company has said it plans on investing $1 billion in new home purchases this year after spending roughly the same amount on 3,200 houses in 2023. Underwriting on its house purchases targets a 6% return, according to company executives.
“Doing right by our residents means doing right by all of our stakeholders,” Tanner said on the company’s most recent earnings call. “I'd like to thank our residents for their trust and their loyalty and thank all of our associates who work hard every day to earn that trust. We proudly stand behind the work that our company and our associates are doing to ensure our residents have a great experience with us. And we're honored to be a part of the solution to today's housing challenges.”