Today’s monopoly round-up is chock full of market power news. I divided it up into good and bad news, as usual, and I did a special section on the end of the Google antitrust trial. But I want to start with an observation about Wall Street seizing control of housing, because this week, the Federal Trade Commission brought a pretty ugly complaint against the largest operator of single family rental homes in the country, Invitation Homes, which owns 80,000 single family homes. The FTC recouped $48 million for renters and stopped a host of bad practices.

Let’s start with something fairly surprising outside of the corporate landlord space, but adjacent to it. Back in August, I wrote up the small circle of firms that comprise the homebuilder cartel, which consolidated after the financial crisis. Despite a housing shortage, or likely because of it, there are now 12 new billionaires or billionaire families in the homebuilder industry created since 2019. That’s just stunning, because these people are getting rich not by building, but by not building. There was a slight increase in housing starts in 2020, but what’s happening is almost entirely a spike in price without an increase in new supply.

How is that related to these large corporate landlords of single family homes? Well, homebuilders actually build single family homes, and there is a significant segment of the market called build-to-rent, which is about 8% of all housing starts and growing rapidly. And these build-to-rent homes are managed by… large corporate landlords. Both groups, the landlords and the builders, like the new consolidated approach. And neither is a particular fan of anti-monopoly policy.

Back in July, billionaire real estate magnate Barry Sternlicht went on CNBC and attacked the new antitrust regime. “I think Lina Khan has gone off the deep end,” he said. “We think the FTC has lost its center.” At the time, I just thought he was some billionaire under investigation doing some griping. And that’s not wrong.

But it turns out, Sternlicht wasn’t just speaking for himself, he used the term “we.” And he mentioned that he and one other company are being investigated even though they own a small share of the broad real estate market. It turns out, his firm, Starwood Capital Group has 14,000 single family homes, mostly in the sun belt. And according to the Capitol Forum news outlet, Starwood has contracted with Invitation Homes to do the property management and price-setting for its rental portfolio, which likely has substantial geographic overlap. In other words, it looks as if Sternlicht has a price-fixing problem here.

But it goes beyond that. And to understand why, let’s look at the FTC complaint against Invitation Homes. It’s basically a systemized slumlord spread across tens of thousands of homes. It starts even before you rent. People pay a non-refundable application before even renting, and then are told the rent is higher than what was advertised. If they walk away, as many do, they lose the application fee. Since 2019, Invitation has made $18 million just from the deceptively marketed application fees alone. Then there’s the rental scams. Invitation adds undisclosed fees to rent - a ‘utility management fee,’ a ‘Lease Easy bundle' fee, an ‘air filter delivery fee,’ a ‘smart home technology’ fee, and so forth. These fees add hundreds of dollars a year to the actual cost of renting.

The FTC complaint is full of instances where executives discuss how to more effectively cheat people. For instance:

In 2019, Invitation Homes’ CEO called on the company’s Senior Vice President responsible for overseeing the company’s fee program to “juice this hog” by making the smart home fee mandatory to renters. In 2021, that same Senior Vice President described a proposed price increase of the mandatory smart home fee as “a tactical issue that has garnered the interest of one of the corner offices on the 20th floor” and pledged to the CEO that “between you and I, I have not let this go. I will get it taken care of.”

Pretty much everything you can imagine a bad landlord does, these guys do. They keep the security deposit, they make it so tenants can’t contact anyone to complain, they send fake charges to collections to ruin the credit of their customers, they pursue unfair evictions, and so forth. Residents complain of new homes with mold, spiders, rat feces, broken fridges, and so forth, and internally, Invitation Homes executives, and even McKinsey consultants hired to study the problem, concurred on the endemic deception and bad quality. Except this landlord isn’t just a random slumlord, it’s one of the biggest Wall Street players in housing.

And Invitation Homes is also deeply connected. Barry Sternlicht, for instance, isn’t just a partner with Invitation Homes, he helped form it, selling a subsidiary of Starwood to Invitation in 2017 and serving on its board until 2020. So his disdain for Lina Khan comes from a genuine recognition of the threat she poses to his ability to reap unfair fees.

Taking a step back, Sternlicht and Invitation Homes are orchestrating a fundamental shift in the American home. Until the 2008 financial crisis, there were no large landlords of single family homes, it just wasn’t practical to buy this asset class in bulk. But because of Obama foreclosure policies and how Fannie and Freddie allowed purchases of single family homes, private equity swooped in and started buying. And they haven’t stopped. And now they are a small but increasing share of the market, and probably much more significant if you look at the market as a series of regions.

What’s happening is the consolidated homebuilders are starting to work with consolidated corporate landlords to transition Americans away from homeownership. In 2021, Invitation Homes and one of the builders Pulte cut a deal where Pulte is building 7,500 homes specifically for Invitation to buy and rent. To put it another way, where did the starter home go? Well, it’s still there. It’s just no longer a home you can buy, it’s one you have to rent. And pay an air filter delivery fee.

Fortunately, Federal Trade Commission Chair Lina Khan is standing in the way of this fundamental transition. As usual, Khan is just the tip of the spear, everyone from the governor of Texas to members of Congress are furious about Wall Street’s meddling in housing. Kamala Harris put in her plan to stop financiers from buying up homes en masse. But it’s Khan who is acting, and that’s why Sternlicht and his crew are so angry.

And now let’s move on to a different group of angry billionaires, those at Google, where I’ll relay the final bit of the third antitrust trial that ended this week. And after that, the rest of the news of the week...