From Tablet Magazine, July 4:
How private equity is gobbling up the American city and turning residents into collateral
The Hotel del Coronado’s Victorian red turrets peak above the sand dunes off the coast of San Diego. Developed by two industrialists in 1888 at the height of the Gilded Age, the “Hotel Del” serves as an iconic California backdrop, including in the classic 1959 film Some Like It Hot. A recent $400 million renovation added over 15,000 square feet of event space to the already expansive oceanfront campus.
Just 10 miles north, in another oceanside neighborhood called Pacific Beach, sits Bay Pointe Apartments, a 1960s era garden style apartment complex with over 500 units spread across multiple sand-colored buildings.
What do the two complexes have in common? They’re both owned by the New York-based private equity firm Blackstone, as are hundreds of thousands of other properties across the country.
Blackstone Real Estate Income Trust (BREIT) acquired a majority stake in the Hotel Del in 2011 for $600 million. Ten years later, in one of the largest known real estate transactions in San Diego’s history, Blackstone purchased 66 residential complexes across the county for over $1 billion, including Bay Pointe Apartments. Many of the units in these buildings were previously classified as “naturally occurring affordable housing,” meaning that they had significantly below-market rents catering to working families in a city that, like many in America, is facing a stark affordability crisis. Nearly overnight, 5,800 households in America’s “finest city” became tenants of the private equity behemoth.
With this trend only increasing in San Diego—and in cities across the U.S.—it is worth asking: What happens when your home, doctor’s office, or favorite local restaurant gets bought up by private equity?
Already the largest commercial real estate holder in the world, according to the Private Equity Stakeholder Project (PESP), a nonprofit working to bring transparency and accountability to private equity’s various investments, Blackstone is also now the largest residential landlord in the U.S., with an estimated 300,000 rental units across the country. The goal of institutional investors like Blackstone is to optimize profits. On the ground, that translates to maximum allowable rent increases, evictions, the rise of hidden fees, a reduced investment in complex maintenance, and even efforts to influence state and local housing policy. Given the opacity with which Blackstone and other corporate landlords function, it’s hard to say exactly how dramatic the effects are on renters nationwide as compared to general national trends. But zoom in on specific markets or specific private equity firms, and you start to see the increasingly dire impacts.
For example, in Memphis, Tennessee, FirstKey Homes—the single-family home rental company owned by the private equity firm Cerberus Capital Management—was reportedly responsible for twice as many eviction filings than any other rental property manager in the city while also topping the list as the worst building code violator for residential homes by the Memphis Blight Elimination Steering Team in 2018. According to a 2016 report by the Federal Reserve Bank of Atlanta, Atlanta’s largest corporate landlords filed evictions on nearly 1 in 3 of their units, and those households showed a nearly 18% increase in their rate of housing insecurity compared to similar households not renting from corporate landlords. In California, meanwhile, in the past five years alone, Blackstone has spent at least $14 million lobbying against ballot measures that would have limited rent increases across the state. Corporate landlords are increasingly infiltrating the American housing market, from multifamily affordable properties to single-family homes to dormitories to mobile homes, while also contributing to how such spaces are constructed, managed, overseen, and monetized....
....MUCH MORE
