Kushner Companies’ Real-estate Practices Under New Federal Scrutiny
Jared Kushner’s real-estate company (Kushner Companies) is the subject of a new investigation just launched by Maryland’s two U.S. senators and four of its U.S. representatives.
Kushner Companies had already been under fire in the press for its ruthless treatment of its tenants. Most notorious of those claims involved how the company aggressively went after tenants who owed back rent or left their leases early, sometimes even when the debts went back years before Kushner’s company even owned the properties and sometimes even when the individuals were in full compliance with their leases.
The son-in-law of President Donald Trump, Jared Kushner initially made a name for himself in high-profile glamorous real-estate investments in Manhattan and Brooklyn and then on the international stage. That was successful up to a point, even though information that came to light this year suggests that Kushner had been struggling more than had met the public eye before his notorious father-in-law became president.
As Trillions reported in an article earlier this year, entitled “What We Need to Know about Jared Kushner,” in 2011, Kushner’s enterprise began expanding into lower quality but still profitable investments in an effort to capitalize on depressed prices after the recent recession that had begun back in 2008. These started with a major purchase in 2011 of 4,681 units of what are called “distress-ridden, Class B” apartment complexes. The company bought another 1,700 multi-family units under similar distressed circumstances later that year.
Then, in August 2012, the company swallowed up 5,500 multi-family units in and around Baltimore, followed by the purchase of three more such rental complexes two years later.
Buying the properties and managing them effectively was not enough for the company, however. After acquiring them, Kushner Companies systematically went “back through the records, looking for any former tenants that they could possibly go after for more money – anyone who had broken a lease or owed back rent when they left, even if it was two or three years earlier.” The company ended up saddling those involved with the back rent, court fees, legal charges and back interest on the previous debts, all of which added up to a major burden for these mostly-low-income tenants.
In a public interview about these acquisitions, Kushner openly patted himself on the back for the wisdom of making these purchases. He spoke of this category of investment as being “the most resilient investment class” and said that although “it has a lot of construction and a lot of evictions,” in the end, the investment’s outcome has been “phenomenal.”
Kushner Companies did all this not just by intimidation or ordinary legal threats. A recent analysis of how the enterprise managed its shakedowns shows that Kushner’s team made use of a highly controversial approach to get people to pay up. They convinced judges to order the arrest of people who owed the company money.
According to a report from The Baltimore Sun, the company went after over 105 former tenants, who were often very poor and in very difficult conditions, with requests for their civil arrest for having not paid their past debts. The newspaper’s report showed that as many as 20 of these had been detained in the process of the company going after them.
The legal process involved was the court preparing an order known as a “writ of body attachment.” It is commonly used to bring in someone who was held in contempt of court or who has not paid past debts.
While effective in getting people to come forward, the process as it was used by Kushner Companies amounted to, for many, a discriminatory tactic with far more harmful consequences on the working poor than on others. For the poor, being arrested in this way will at the very least result in a disruption of critical income that they may need to help support themselves and their families. At worst, it could result in their being fired after their employers realize the individuals involved have been arrested.
All this even happened in three of Kushner Companies’ complexes where the company had received $6.1 million in federal rent subsidies since the beginning of 2015.
The current request for investigation of Kushner’s organization comes from Maryland senators Chris Van Hollen and Ben Cardin, plus four members of Maryland’s U.S. congressional delegation. Those include Elijah Cummings (the ranking member on the Committee on Oversight & Government Reform), Dutch Ruppersberger, John Sarbanes and Anthony Brown.
The letter they prepared demanding information from Kushner Companies notes that because the owner enterprise relies on subsidies from the Housing Choice program, Section 8, it has the obligation to follow Department of Housing and Urban Development (HUD) rules. In the case of Housing Choice, each “dwelling unit must pass the program’s housing quality standards and be maintained up to those standards as long as the owner receives housing assistance payments.” The rules go on to say that every “dwelling unit and its equipment must be in sanitary condition” and “must be free of vermin and rodent infestation.” As the letter continues, “If [the news reports] are accurate, they raise very serious and troubling concerns about whether Kushner Companies and its subsidiaries are complying with HUD’S housing quality standards to ensure the safety and health of their own tenants.” The letter also noted that some complexes were requiring tenants who wanted to pay by money order to get those orders from Walmart or ACE Cash Express, which involves an additional charge.
In the letter, the senators and congressmen demanded that the Kushner Companies turn over the following:
• Copies of all the housing assistance contracts it has with HUD
• Copies of the standard lease agreements for all of its complexes in Maryland
• All notifications received either from HUD, inspection companies, public housing authorities or local jurisdictions identifying defects in the complexes that arose during the past three years
• All complaints from residents about maintenance and repairs during the past three years
• Any notifications about elevated blood levels of lead affecting the tenants
• Any arrangements the complexes may have had with companies involved in providing the money orders tenants would be allowed to use to pay their rent
The letter also demanded specific information regarding how Jared Kushner himself has been involved with the management of the complexes. In addition, the letter demanded copies of all communications between the company and the White House, “including but not limited to communications regarding the management and resolution of Jared Kushner’s conflicts of interest.”
After all the bad press and now the investigations that are long overdue against Kushner and his enterprises in Maryland, it is not surprising that the company’s general counsel, Emily Wolf, has stepped up to defend its actions. As she said in a recent statement, “We are in compliance with the requirements of the Federal Housing Choice Program. We exercise our legal rights under the relevant provisions of Maryland law only as a last resort after all other reasonable attempts to collect rent payments are unsuccessful.”
The investigations are only just starting. Based on what has already been uncovered, one can expect this is yet another area where Donald Trump’s son-in-law is going to need to “lawyer up” to deal with the increasing outcry against his company’s abhorrent treatment of its tenants.