Canada’s Shareholder Association for Research & Education (SHARE) has urged institutional investors to look at how their real estate portfolios might be harming minority communities following allegations that a pension fund’s investment partner targeted majority-Black neighbourhoods for mass evictions.
Earlier this year, Canadian federal pension plan the Public Sector Pension Investment Board (PSP) entered into a $700m joint venture with US real estate investor Pretium Partners – despite concerns over Pretium’s eviction and rental pricing policies.
Now, Pretium is one of the targets of a US congressional investigation for allegedly filing evictions “at dramatically higher rates in majority-Black counties than in majority-white counties”.
Pretium was also singled out for allegedly attempting to evict tenants at least 1,750 times – among the highest reported by a corporate landlord – in contravention of a federal eviction moratorium and rental assistance programmes put in place by the US government.
In a statement to RI, SHARE Chief Strategy Officer Shannon Rohan said: “Pension plans need to take a step back and evaluate the real estate revenue model. How are we contributing to a growing housing crisis and its disproportionate impacts on minority communities, women and younger generations? These externalities may not show up on the corporate balance sheet or in ESG ratings, but they are systemic risks for pension funds and other long-term investors and universal owners.
“Unfortunately, raising rent and other occupancy-related fees are too often the central strategy to leverage capital and produce profits. Research on real estate investment trusts (REITs) show that displacing tenants, ‘repositioning buildings’ by making renovations and then raising rents for incoming tenants, is at the heart of many REIT business models. If we’re serious about equity and inclusion, pension funds should be engaging with their real estate portfolio companies on tenure rates and eviction rates, not only on a global level but broken down by jurisdictions.”
According to Rohan, institutional investors must begin incorporating housing affordability and racial justice into asset manager selection and due diligence across real estate portfolios. Investors must also establish a floor for labour standards to ensure that bidding processes and other pressures do not enable a race to the bottom in terms of wages, benefits and working conditions, she added.
SHARE plans to issue new investment research on affordable housing in the coming months.
A representative from PSP said to RI: “Pretium is committed to providing equal rental opportunities and support to all of their residents and they do not track the race, gender or ethnicity of any of their residents. Following our due diligence review, we are confident in Pretium’s management and the processes they have in place to manage our portfolio effectively and efficiently.”
Pretium Partners said: “As disclosed in a response letter to the Select Subcommittee, PESP [one of the bodies which provided evidence to the congressional investigation] is pursuing a decidedly biased agenda with testimony containing numerous false claims. We are committed to providing equal rental opportunities and support to all of our residents and categorically do not track the race, gender or ethnicity of any of our residents. We also unequivocally confirm that no resident covered by a CDC declaration [referring to the government eviction moratorium] has ever been evicted from Pretium’s homes for non-payment of rent.”
Pretium Partners was established in 2012 by Goldman Sachs alum Don Mullen Jr – who famously oversaw the bank’s bet against the 2008 mortgage crisis depicted in ‘The Big Short’ – and is now one of the largest corporate landlords in the US.