CALIFORNIA, USA — This story was originally published by CalMatters.
Gladys Balcazar says she can barely afford food after paying rent to her new landlord, Blackstone Inc, one of the world’s largest private equity firms.
Balcazar, a 60-year-old janitor, lives with her 27-year-old son in a two-bedroom apartment in Imperial Beach. She supports her son, who has a disability, on a salary of $2,800 a month.
Blackstone bought her building and 65 others in San Diego County in 2021, becoming one of the region’s biggest landlords and alarming lawmakers, affordable housing advocates and Balcazar. In March Balcazar’s monthly rent rose $200 to $2,000.
“All of this has really depressed me because I don’t see a way out,” she said in Spanish. “I only earn enough to pay the rent, and after that there is nothing left.”
Adding to her stress were large swaths of dark mold outside her building, on walls and window ledges, climbing to a roofline. A building manager said she would be responsible for mold remediation in her unit if she moves out, Balcazar said.
“They said we’re responsible because we’re not ventilating the unit,” she said.
When asked by CalMatters, Blackstone said in a written statement that Balcazar would not be responsible for mold remediation.
“This is not something that would be required of our residents in any scenario,” the statement reads. “In the event where any issues like this are raised to management, the team addresses the situation as quickly as possible.”
A new landlord
Balcazar isn’t the only tenant getting the squeeze from Blackstone, advocates say.
Two years ago, Blackstone bought a portfolio of 66 relatively low-rent apartment buildings in San Diego County from a well-known charitable foundation for $1.48 billion. This year, tenants of those 5,800 dwellings say they’re worried about rent increases, maintenance issues and potential evictions. And advocates and tenant groups have mounted an organized campaign, warning that thousands of previously affordable homes are becoming less affordable as Blackstone’s influence grows.
Residents have protested a $4.5 billion investment in Blackstone by the University of California. They staged a public town hall with San Diego’s city council president, and they lobbied state lawmakers to increase renter protections.
Some lawmakers share their concerns. Senate President Pro Tem Toni Atkins, a Democrat from San Diego, said so many affordable units under one corporation’s control is cause for “major concern,” especially if the company is raising rents.
“Unlike many of our mom-and-pop property owners, who themselves may be trying to stay afloat in today’s economy, Blackstone is a huge company, and should not be building its portfolio on the backs of working Californians,” Atkins said.
Blackstone, the world’s largest owner of commercial real estate, said in statements that its apartment rents are lower than 80 percent of the competition in the San Diego market and most units are affordable to people making the median income.
Blackstone representatives declined to answer questions in an interview, but said in written statements to CalMatters that it is improving California’s housing stock by investing in and renovating its properties.
“We believe we have the most favorable resident policies among any large landlord in the U.S.,” Blackstone said, “including not making a single non-payment eviction for over two years during COVID. We operate in accordance with California’s rent stabilization laws and are investing $100 million to make these San Diego communities better places to live.”
The statement did not address whether rental rates in renovated units would increase.
Because California caps how much landlords can raise rents each year for current residents — by 5% plus inflation or, at most, 10% — housing advocates say large companies such as Blackstone will try to boost rents to that limit, hoping it’s high enough to compel current tenants to leave. Then companies can charge new tenants even higher rents.
Two advocacy groups, the Private Equity Stakeholder Project and the Alliance of Californians for Community Empowerment, in March compared rent ranges Blackstone charged tenants in 2021 at 10 San Diego-area properties, with rental rates they sought from new tenants. (CalMatters looked at current list rents for those same properties in May.)
The list rents for new tenants in each complex were, on average, 29% to 100% higher than the average rents tenants paid in 2021. (The range varied by apartment size.) The asking rent increases ranged from a 7% bump for a 1-bedroom in El Cajon’s Redwood Gardens to a 201% jump for the priciest 2-bedrooms at Bay Pointe in San Diego’s Pacific Beach area.
Given already high housing costs, tenants contend they will have no place to go if they can no longer afford rent at Blackstone’s properties.
Affordable housing is scarce in the nation’s most populous state, which had 30% of the country’s homeless population and half of its visibly unsheltered residents, many living in tent encampments on city streets, in 2022.
What is less visible are those at risk of losing their homes.
At a sun-drenched rally in late April, Darlene Simpson protested against Blackstone from her wheelchair in the shade of the state Capitol. Simpson said she leads a tenant union of 73 Blackstone residents because of some family members’ experiences with poverty, including a granddaughter who lived in a car.
Simpson lives in a Blackstone building in Escondido, a San Diego suburb.
“They’re kicking everybody out, raising the rent so high that nobody can afford them,” she said. “Everybody lives severely rent burdened. I’m angry by that.”
Simpson and hundreds of other protesters wore yellow T-shirts emblazoned with the logo of the Alliance of Californians for Community Empowerment Action, which helped organize the tenants’ union.
It also is lobbying state lawmakers to increase renter protections this year. The measures were proposing lowering California’s statewide cap limiting rent increases from 10% to 5% and amending the state’s constitution to include housing as a right.
However, some of those provisions recently were stripped or weakened in the bill.
Iraídes González, a single mother of three, also protested in Sacramento. She said she was forced out of her Shady Lane apartment in El Cajon, another San Diego suburb, during the pandemic. González lost her cashier job and lived in a homeless shelter and subsidized housing for about a year.
She moved back into the Shady Lane apartments in 2021. In April her rent jumped $200 to $2,500, she said.
She shares a bedroom with her three children, and roommates occupy the other bedroom. The rent increase means she often has to choose between food and rent, she said.
“I’m really stressed out because I don’t want to return to a shelter with my kids, but it’s impossible for me to find that much money,” González said.
Moving under pressure
Lila Miller, a 31-year-old food server who was working two jobs, said she was kicked out of the Blackstone-owned Vista Lane apartments in Chula Vista in November 2022, after she fell behind on rent because she was sick with COVID.
“I was working 12 to 15 hours a day about six days a week just to pay my rent and utilities,” Miller said. She worked mornings at Starbucks and nights at a pizza restaurant.
“When I told them I was sick and I missed work, they had no interest in hearing it. They didn’t care,” she said of her apartment managers. She has since moved back to Gassville, Ark., her hometown.
A Blackstone spokesperson said Miller was not evicted.
“Lila Miller was never evicted and left her apartment by her own choice in December 2022. Importantly, not one eviction for non-payment was carried out in November or December 2022,” Blackstone said in its statement.
California law banned many evictions during the pandemic. The law protected tenants if they were unable to pay rent or other charges due to COVID-19-related financial distress and had received an eviction notice from March 2020 through March 2022. The protection expired in June 2022, though some California cities still are enforcing pandemic-era policies protecting renters from evictions.
Tenants sometimes leave under pressure before a full eviction is carried out, housing advocates said, because having an eviction on a tenant’s record would make it difficult for them to find future housing.
‘Better places to live’
When Blackstone bought the 66 San Diego buildings, comprising 5,775 apartments, company officials said investments in those buildings were creating 500 jobs.
“Since our ownership of these communities began, we have completed 23,000 work orders, invested $37 million to make them better places to live, and implemented financial literacy and after school programming on-site free of charge to residents,” the company’s statement said.
Advocates point out the irony that the seller was the Conrad Prebys Foundation, a massive charity that donates millions to various causes, including the San Diego Zoo, the San Diego Symphony, hospitals, clinics, and other nonprofits. Conrad Prebys, who died 2016, was a billionaire real estate developer and philanthropist who in the 1990s sold some residential properties to a nonprofit.
Blackstone’s purchases in San Diego were only part of the company’s national pandemic-era buying spree. During a two-year span, one of the company’s key funds, the Blackstone Real Estate Income Trust, snapped up more than 200,000 housing units nationwide, most of them apartment buildings, according to The Private Equity Stakeholder Project.
In California the Blackstone trust drew protestors’ attention when the University of California invested $4.5 billion in it in January, a month after many wealthy investors had begun pulling out their money.
Housing activists and some California unions said UC was contributing to the housing affordability crisis through its Blackstone investment. Simpson, head of the San Diego tenants union, traveled to San Francisco in March to call on the university to disinvest.
“I think they’re being greedy,” Simpson said. “People are severely rent burdened. They can’t afford to stay, and they can’t afford to leave.”
The following day, Jagdeep Singh Bachher, head of UC Investments, told the Board of Regents the decision to invest in a fund with an annual rate of return of 11% was a “capitalistic” one in the best interest of UC pensioners.
“The job of this team, day in and day out, is to pick assets that are going to be accretive to future generations and future retirees,” Bachher said. “And to do that … I have to make some capitalistic decisions.”
New profit approach
Blackstone’s San Diego purchase could signal an expansion of its typical approach, said Sara Myklebust, a Georgetown University researcher studying private equity’s growth into the rental market.
Blackstone bought the San Diego buildings in an estate sale from an owner who was unlikely to extract maximum profit from them. That portfolio could help Blackstone develop new ways of increasing rents at scale, she said, much as Blackstone did when it became a major national landlord of single-family homes through its Invitation Homes company.
Blackstone founded Invitation Homes in 2012 in the wake of the foreclosure crisis. Seven years later, Blackstone sold its last shares in it for a $7 billion payout, more than twice what it invested, according to The Wall Street Journal.
Now, Blackstone is likely looking for a similar profit in the apartments market, Myklebust said, and owning a large portfolio in one region could give them enough leverage.
“They’ve perfected an approach to being able to make as much money as possible,” Myklebust said. “When they see opportunities to be able to continue to use that approach, they’re going to do it, and they’ve been seeing and getting those opportunities.”
Affordable housing experts in California warn that such profit opportunities are emerging through mass sales of unsubsidized apartment buildings, traditionally where lower-income people live.
In March the California Housing Partnership, a nonprofit trying to preserve affordable housing, estimated California had nearly 864,000 affordable units in some 44,250 properties — but 324,000 of those units were at risk of losing affordability.
“These properties are becoming an increasing focus for policymakers as private equity has accelerated for-profit acquisitions,” the report said.
Blackstone’s entry into Escondido is a top concern for Consuelo Martínez, a city council member.
Blackstone bought five Escondido apartment buildings totaling 636 units, county records show. Martínez said she has been fielding phone calls from affected renters since last year.
Martínez wrote in a letter to the Alliance group that representatives of a political strategy firm had contacted her on behalf of Blackstone, stating their client planned to begin evicting tenants with outstanding rent balances.
The warning involved two apartment buildings in her district, the Mission Terrace Apartments and the Palmilla Apartments, with more than 100 tenants total in arrears.
During a recent visit to Blackstone’s Park Terrace apartments in Escondido, Martínez bent over to photograph a Blackstone sign advertising “Big Changes” in the predominantly Latino neighborhood.
“Oh man, I wonder how much their rent is going up,” she said.
Many of Martínez’s constituents are Latino renters. While touring the working-class neighborhoods she represents, Martínez drew parallels between the impending evictions and fallout from a short-lived 2006 ordinance that banned Escondido landlords from renting to undocumented immigrants.
The courts later overturned that ordinance, but not before many residents left their homes and jobs. That had a ripple effect on the local economy, she said, adding that Escondido’s housing squeeze is related to historic, systemic discrimination against lower-income immigrants.
Martínez said she often is a lone voice on the city council trying to help the renters.
“I don’t feel like I have the support on my council to even talk about renter protections,” Martínez said.
She is not the only San Diego-area politician to raise an alarm.
Sean Elo-Rivera, president of San Diego’s City Council, recently introduced renter protections after a town hall with the Blackstone tenant union. The city council last month passed the ordinance extending eviction protections to renters who continue paying rent and complying with their lease.
“San Diegans who are paying their rent and abiding by their lease should not live in fear of eviction,” Elo-Rivera said.
“The consolidation of property ownership is concerning,” he said in an interview. “We have a finite supply — finite and insufficient supply — that is being owned at a greater and greater percentage by a select number of entities.”
‘Like a diamond’
Blackstone in its statement said it can’t be blamed for the San Diego region’s rising rents.
“We are not driving rents,” Blackstone said. “A shortage of housing is driving increased rents. We own less than 1% of rental housing in the U.S. and, given our ownership levels, we have virtually no ability to impact market rent trends.”
Others acknowledge that demand is boosting rents. Until San Diego has a large enough supply of housing, skyrocketing rents will persist, said Ricardo Flores, executive director of the Local Initiatives Support Corporation, a nonprofit promoting affordable housing.
“At the end of the day, what this bet that Wall Street’s making locally … is, ‘You guys will never fix your supply problem, and therefore what we own will go up in value, just like a diamond,’” he said.
The Legislature has tried to counter that, Atkins said. It passed laws to create and preserve affordable housing and assist renters. But more needs to be done, she said.
That rings true for Balcazar. Rent consumes more than two-thirds of her income, leaving $280 a month for food, clothes and necessities. Utility bills and doctors visits trigger anxiety, she said.
She and her son often survive on two-for-$7 burritos and expired food, she said. Then she showed a photo of expired food she bought at a discount during a recent shopping trip.
What’s next? She doesn’t want to move, or leave her son with someone else. She might store their belongings and seek a studio to rent, she said.
“It’s not fair,” Balcazar said. “I think housing should be a human right.”
CalMatters higher education reporter Mikhail Zinshteyn contributed to this report.