Invitation Homes, the largest residential property owner in the Bay Area and the nation’s largest owner of single-family rentals, has settled a lawsuit with the state over charges it priced-gouged its California tenants.
The Dallas-based landlord must pay $3.7 million to settle a lawsuit alleging it illegally hiked rent for hundreds of tenants across the state, the San Jose Mercury News reported, citing an announcement by state Attorney General Rob Bonta.
The Attorney General’s Office says the firm raised rents between October 2019 and December 2022 on 1,900 homes in California beyond limits allowed by the Tenant Protection Act. The state law, passed in 2019, caps annual rent increases to 5 percent, plus a percentage change in the cost of living of up to 10 percent.
In addition, the Attorney General’s Office alleged Invitation Homes also violated the state’s price-gouging law, which bars landlords from increasing rent by more than 10 percent during local and statewide emergencies, such as the coronavirus pandemic.
“Californians are facing a housing crisis of epic proportion. California has laws in place to protect tenants from sudden, large rent increases, and landlords need to be diligent in ensuring that they abide by those laws,” Bonta said in a statement.
As part of the settlement, Invitation Homes will pay $2 million in civil penalties, according to the Mercury News.
The company will also refund $1.7 million to tenants who paid in excess of state rent caps. That means an average payment of $895 to each of the 1,900 households impacted. By comparison, Invitation Homes’ rental revenues in California this year are expected to total $155.8 million.
Invitation Homes said in a statement that its internal audits had already identified some of the issues raised before it received an inquiry from the state.
“We are pleased to reach an expeditious and mutually favorable agreement on this matter with the California Department of Justice,” Kristi DesJarlais, a spokeswoman for the firm, said in a statement. “We remain committed to serving our residents with the highest levels of service and care.”
Invitation Homes owns 85,000 homes nationwide, including 12,000 homes statewide and 4,351 in Northern California — mostly concentrated in Richmond, Vallejo, Antioch, and Vacaville, according to an analysis of property records by the San Francisco Chronicle. The Bay Area cities have a majority of nonwhite residents.
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Founded after the housing bubble burst in 2008, Invitation Homes bought up thousands of foreclosed homes, starting in Phoenix, Arizona. As home prices soared over the last decade, the firm saw its customer base increase as more people were forced to remain renters.
The company is known for buying up homes on the edge of urban areas where rents are rapidly rising, then renting them to families eager to move out of apartments but without the savings for a down payment to buy homes.
The company’s average monthly rent in Northern California was $2,654 as of the third quarter of 2023, an increase of 4 percent from the same time last year. Since then, it has decreased its portfolio of homes in the region by about 100 homes, selling off more than it is buying.
— Dana Bartholomew