Housing

Private equity firms are major players in the rental housing market. Here’s how private equity ownership works, how it harms tenants, and the organizing strategies and policy responses that could help.

By Caroline Nagy, AFREF Associate Director of Housing Policy, and Aditi Sen, AFREF Managing Director of Research & Campaigns. This piece was originally published on Shelterforce on July 31, 2026.

Southern Towers is a 2,346-unit complex in Alexandria, Virginia. Most of its tenants are Black and foreign-born, primarily from sub-Saharan Africa. Los Angeles–based private equity firm CIM Group acquired Southern Towers in September 2020 for $506 million, one of the largest multifamily deals nationally of the year.

CIM’s purported strategy was to target urban neighborhoods that “will support outsized rent growth/capital appreciation,” meaning gentrifying neighborhoods where they expect to find tenants able to pay significantly higher rents. The deal was marketed with a target annual return of 13 percent over a six years.

At first, the ownership change was met with optimism among tenants, who hoped for better conditions and an improved landlord relationship. According to Sosseh Prom, national housing justice director of African Communities Together (ACT), this initial honeymoon period is common with private equity landlords: “They will give you a half-truth and paint this beautiful picture for you and then turn around and dismantle your community.”

Indeed, CIM followed a familiar playbook at Southern Towers, filing 250 evictions in its first six months of ownership, despite the ongoing pandemic eviction moratorium. Tenants also reported rent hikes and deteriorating living conditions due to deferred maintenance. These tactics are a feature, not a bug, of the private equity model, which is spreading across every part of the housing sector, including multifamily, senior, single-family rental, student, affordable, and manufactured homes.

In short, the growing private equity ownership of rental properties poses a clear and present danger to tenants, with both higher rents and reduced habitability. The good news, however, is that tenants at Southern Towers and elsewhere are not only learning to fight back but also achieving significant wins in the process.

Basics of the Private Equity Model

The private equity industry is an increasingly powerful part of the U.S. economy. Private equity firms are Wall Street investment companies that pool large amounts of private capital to acquire companies, including real estate firms and individual buildings. Because they do not trade on the stock market, however, they are much less regulated than public companies and are exempt from most U.S. Securities and Exchange Commission (SEC) filings.

The private funds market grew from $1 trillion in 2004 to over $16 trillion in 2025. Today, private equity–owned companies control the livelihoods of more than 13 million workers. As private equity’s presence in an industry grows, private equity firms can exercise greater control, exerting monopoly power over clients and workers and translating economic power into political power to extract more profit.

While some firms benefit from the capital infusion that private equity provides, the private equity business model is highly predatory and extractive. As Alex Blasdel writes in The Guardian, even when private equity investment helps an enterprise become more valuable, “the logic is still viral: private equity exists to replicate and enlarge itself, not to build anything in particular.”

The private equity firm usually invests a vanishingly small amount of its own capital—as little as 1–2 percent—to complete these company purchases; the balance comes from very wealthy individuals; institutional investors, such as pension funds; and debt.

Ironically, public sector workers, many of whom may be the very tenants who are suffering from high rents and low maintenance in private equity–owned homes, often fund private equity firms through their pension funds.

Private equity firms typically charge an annual management fee of 2 percent of the capital investors commit to the fund and take 20 percent of profits (above a 6–8 percent return threshold) from managing and reselling the companies they take over. This is known as the “2 and 20” model. These factors create incentives for exaggerated risk-taking, as private equity firms reap the benefits of high returns while losses are limited to their small equity contribution.

Private equity–owned portfolio companies typically face higher-interest payments to lenders. These interest costs help drive the private equity push for higher rents and create pressure to skimp on building maintenance. The debt burden, coupled with the relatively short time horizon for most private equity investments—on average three to seven years—creates a powerful incentive to make as much profit as quickly as possible.

The dangers to building finance can be further compounded when private equity firms take out additional loans to fund further acquisitions or pay themselves dividends. Private equity firms often require the target companies to take on more debt to pay investors (including the private equity firm) dividends or to repay a portion of the firm’s downpayment, a practice known as dividend recapitalization.

The amount, timing, and frequency of payments are entirely up to the private equity firm, while the portfolio company is saddled with debt payments for years. These dividend extractions benefit private equity general partners and investors, but additional debt can damage portfolio firms’ credit ratings and even contribute to bankruptcies, which can result in tenant dislocation.

How Tenants Are Fighting Back

For tenants, private equity ownership often means increased rent or other fees; increased evictions; and worse service and conditions, as basic maintenance is forgone. Private equity ownership can also often change who rents, forcing out longtime tenants in favor of those who can afford higher rents.

Fighting back is not easy. For one, private equity firms and their investments are intricate corporate structures. The Financial Times reports that “private equity is, almost by definition, an opaque asset class.” Nonetheless, tenant organizers are learning how to pierce the corporate veil and move up the value chain to the actual private equity owner, who may operate or hide behind an on-the-ground brand or management company.

Profiling the size and scope of the private equity firm’s operations and building footprint, its record of similar practices elsewhere, and information on the largesse of often very wealthy private equity executives can all help paint a clear picture of who is doing the extracting and where tenants’ hard-earned money is going. Armed with this information, tenants are challenging private equity’s financial extraction.

One effective tool, much like other tenant-organizing tools, is to use existing enforcement regimes related to habitability and code violations, especially if the parent private equity firms can be held to account.

For example, in Minnesota, tenant organizing by Inquilinxs Unidxs por Justicia helped prompt Minnesota Attorney General Keith Ellison to file a lawsuit against the private equity firm Pretium Partners and its single-family rental company, HavenBrook homes. One outcome of this lawsuit was the transfer of ownership of 345 homes to two area nonprofits.

In Providence, Rhode Island, tenant organizing created a law to prevent landlord algorithmic pricing and provided the public pressure necessary to make that law effective.

Once true ownership is established as an organizing target, the unique role of investors and lenders in the private equity model (it’s their money) can also create secondary campaign opportunities. ACT began organizing Southern Towers tenants into a tenant union, but CIM refused to meet with tenant leaders. This changed, Prom says, when she began reaching out to CIM’s pension fund investors, including the San Francisco Employees’ Retirement System and Pennsylvania’s Public School Employees’ Retirement System, and filed a complaint with Freddie Mac, which had guaranteed a $346.7 million loan for the building’s purchase.

Organized tenants working with the Tenant Union Federation drew significant federal scrutiny to CIM under President Joe Biden’s administration, culminating in a June 2023 meeting between Federal Finance Housing Agency (FHFA) Director Sandra Thompson and tenants at the complex, as well as support from both of Virginia’s U.S. senators.

By the summer of 2024, the FHFA imposed its first-ever set of tenant protections as a standard requirement for multifamily finance, though the protections themselves were relatively modest.

Changing the Playing Field: The Role of Policy

Unfortunately, in April 2025, the FHFA under President Donald Trump promptly gutted the limited tenant protections achieved and is not currently understood to be amenable to tenant concerns.

However, Prom is finding ways to continue the fight against CIM and other private equity landlords by focusing on state and local policy, including rent regulation, tenant protections, ownership transparency, and alternative models of housing and housing finance.

Another effective way to deter private equity investors is to make their incursions into housing less financially lucrative. By imposing rent regulation, private equity landlords cannot as easily raise rents or displace lower-income tenants. Rent stabilization, in short, disrupts their business model.

Such measures can protect communities from further private equity incursions. For example, Blackstone pulled out of Sweden after the country enacted good cause eviction protections. Similarly, New York passed the 2019 Housing Stability and Tenant Protection law, which closed loopholes in multifamily rent regulation and imposed limits on lot rent increases in manufactured home communities.

Another mechanism that can help is passing policy that makes property ownership publicly available, including requirements that public records include the identities of the true or beneficial owners of properties. New York is so far the only state that has passed an LLC (limited liability corporation) transparency bill, though the law applies only to foreign LLCs doing business in New York. Gov. Kathy Hochul vetoed legislation in 2025 that would have expanded its scope.

ACT was only able to bring CIM to the bargaining table by reaching out to its financiers; tenants must have access to basic information about who profits from their rent. Strong state beneficial owner disclosure requirements reduce costly research time. Access to technical assistance can also help tenant groups make good use of this public data.

Broader Housing Justice Policy

The policies discussed help—but to truly level the playing field, it is important to reform tax policy so that it no longer favors private equity and to build a social housing sector that is shielded from the market.

First, taxation: The U.S. federal tax code favors private equity investors who buy housing to extract profit, at the expense of housing affordability and stability. The U.S. tax code should incentivize affordable, stable housing for all. One urgent reform is eliminating the carried-interest loophole, which unfairly allows private equity firm managers to disguise their compensation as capital gains, enabling them to pay lower taxes than regular working people.

It’s not enough to decry private equity landlords, however. Developing social housing, especially for lower-income people who struggle to afford market-rate rents and are most vulnerable to housing displacement, is vital.

The tools that can make this vision a reality are well known. These include community land trusts, tenant and community opportunity to purchase acts (TOPA/COPA), and addressing long-standing repair needs in public housing.

Revisiting investment models for pools of patient capital that cut out extractive asset managers and can finance both the preservation of existing housing and the creation of new multifamily units will also be needed to break the dominance of speculative finance in the sector.