It's been said the rent is too damned high and, in this case at least, four U.S. Senators are pinning the blame on private equity firm KKR, which just bought 5,200 apartment units for $2.1 billion.
U.S. Senators Elizabeth Warren (D-Mass.), Reverend Raphael Warnock (D-Ga.), Ron Wyden (D-Ore.), and Peter Welch (D-Vt.) wrote to KKR about the deal.
The lawmakers highlighted what they say are the dangers of private equity’s involvement in the housing market and pressed KKR on its plans to set rent prices, protect tenants’ safety, and ensure long-term tenants can remain in their homes following the acquisition.
“We have long raised alarm bells regarding private equity’s encroachment into the housing market,” wrote the lawmakers. “We are deeply concerned that KKR’s multi-billion dollar real estate purchase could result in even higher rents, exacerbating America’s housing crisis.”
Raking in profits
The Senators charged that KKR’s purchase is the latest in a long history of private equity firms using the housing crisis to rake in profits by driving up rent costs and squeezing families.
In an April 2024 Market Report, they noted, a KKR executive appeared to explicitly describe its strategy to buy up distressed properties and increase rents for Americans, noting that KKR is “optimistic about rent growth given the structural shortage of housing and unfavorable cost dynamics for new construction in the United States.”
The deal came to light in June, when KKR announced that it had acquired a portfolio of 18 multifamily assets concentrated in the Coastal and Sunbelt markets.
The private equity behemoth did not identify the properties but said they were midrise and high-rise, Class A buildings in Washington, California, Colorado, Texas, Florida, Georgia and North Carolina in addition to New Jersey. The transaction totaled more than 5,200 units.
n a press release, KKR said the acquired properties were relatively new and have “convenient access to urban, metropolitan areas, high-quality construction, modern amenities and excellent energy, water and waste efficiency.”
The deal follows billion-dollar real estate purchases by Blackstone and Brookfield, seemingly signaling a “growing confidence among large investors that rents and values for apartments will soon begin rising again” and exposing a pattern of private equity’s encroachment into the housing market.
“Private equity firms have disproportionately pushed people of color out of affordable single-family homes and their communities through gentrification and negligent landlord practices…Whether the property is a mobile home park, single-family rental, or multi-family building, the private equity purchase playbook remains the same,” wrote the lawmakers.
But KKR says the primary element making the transaction attractive was the disruption to the apartment industry caused by interest rate increases beginning in March 2022.
“We believe this is a great moment to invest in real estate, as transaction activity starts to pick up on the heels of two years’ of dislocation in commercial real estate markets,” said Justin Pattner, partner at KKR and head of its Real Estate Equity in the Americas division, in a statement.
Senator Warren recently reintroduced the Stop Wall Street Looting Act, comprehensive legislation to fundamentally reform the private equity industry by closing loopholes that allow private equity to capture all the rewards of their investments while insulating themselves from risk and liability.