Invitation Homes Will Pay Millions To Settle Price-Gouging Suit

Invitation Homes has agreed to pay more than $2M to settle a lawsuit accusing the single-family rental giant of price gouging. 

The Dallas-based company unlawfully increased rents on about 1,900 homes in California, according to a suit brought by the state’s department of justice. In addition to civil penalties, the company also paid $1.68M in tenant refunds and credits, per the California DOJ.

“We continue to stand proud of our overall business, and in this case, our transparency, timely cooperation and active engagement with the department,” an Invitation Homes spokesperson said in an email to Bisnow. “Notably, this matter highlights the company’s proactive audits and self-directed remediation, much of which occurred prior to receiving any inquiry from the California Department of Justice.”

The California Tenant Protection Act, signed into law by Gov. Gavin Newsom in 2019, prevents price gouging by limiting rent increases to no more than 10% over a 12-month period. It also prohibits 10% increases during or after a local or state emergency. 

The practice is especially egregious in an era when Californians are facing a “housing crisis of epic proportions,” the state’s Attorney General Rob Bonta said in a statement.

“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,” he said. “The settlement announced today should serve as a reminder to landlords in California to familiarize themselves with the law and protections put in place to keep homes accessible to Californians.” 

Invitation Homes identified some of the violations during its own reviews and immediately sought to remedy the issue, per the AG’s statement.

SFR giants like Invitation Homes have amassed massive portfolios across the U.S. by snapping up individual homes and turning them into rentals. In California alone, the company owns or manages about 12,000 properties. Its nationwide portfolio includes 80,000 homes.

The industry has been lambasted by critics who claim the conversion of for-purchase homes into rentals contributes to the nation’s housing crisis. Some lawmakers in Congress have gone so far as to introduce bills that would force firms to sell off their SFR portfolios over the next decade.

But even without political pressure, the allure of single-family rentals has begun to fade, especially in the build-to-rent space. After making up almost 9% of single-family starts in 2022, spiked interest rates have dulled investor appetite for the sector, according to Fast Co.

“We’re seeing build-for-rent developers that are trying to sell a lot of communities to builders for the for-sale market because of the challenges with higher cost debt,”  research firm Zelman & Associates CEO Ivy Zelman said in a November chat cited by the outlet. “We see that market right now under a lot of pressure.”