The Impact Of Corporate Dominance On The Rental Market

The growing trend of corporate dominance in the rental housing market is causing concern among tenant advocates, local officials, and community members alike. When a single corporate entity controls a significant portion of the rental properties in a town or city, it can have far-reaching effects on housing affordability, community stability, and tenant well-being. The recent situation in San Diego, involving investment giant Blackstone Inc., serves as a stark example of these dynamics at play.

Blackstone’s Entry into the San Diego Market

In 2021, Blackstone Inc., one of the world’s largest private equity firms, made a major move into the San Diego rental market by acquiring nearly 6,000 units across the county. The firm purchased 66 buildings from the Conrad Prebys Foundation for approximately $1 billion, as part of a broader strategy to expand its rental portfolio during the pandemic. This acquisition gave Blackstone significant control over the local rental market, setting the stage for the challenges that would soon follow.

The Consequences of Corporate Control

With Blackstone’s dominance in the San Diego market, rent prices have soared. A report by tenant advocacy groups, the Private Equity Stakeholder Project and the Alliance of Californians for Community Empowerment, revealed that Blackstone raised rents on its San Diego properties by an average of 38%, or $600 per month, since acquiring them. This increase is nearly double the 20% median rent hike seen across the county during the same period.

In historically low-income areas like San Ysidro and National City, the situation is even more dire, with rent increases nearing 80% over a three-year period. Properties that once offered affordable rents of around $1,500 per month are now charging over $2,500, placing immense financial pressure on tenants.

Jordan Ash, housing director at the Private Equity Stakeholder Project and the lead author of the study, expressed grave concern over these developments. “Given the existing affordable housing crisis, it’s almost criminal that these units are no longer affordable,” Jordan Ash said.

The Disappearance of Naturally Affordable Housing

The units owned by Blackstone were previously considered “naturally occurring affordable housing.” These properties, often of lower quality, provided essential housing options for low- and middle-income renters. Unlike government-subsidized affordable housing, these units did not require tenants to go through special application processes. However, as Blackstone and similar corporations acquire and renovate such properties, they often transform them into higher-end units aimed at wealthier tenants. This not only reduces the availability of affordable housing but also drives up prices for the remaining units in the area.

Tenant Displacement and Community Impact

The rapid rent increases under Blackstone’s ownership have led to widespread tenant displacement. Many working families and low-income tenants have been forced to take on additional jobs or work longer hours to afford the new rents, while others have been pushed out entirely, either willingly or through eviction. Although Blackstone imposed an eviction moratorium during the pandemic, evictions resumed in August 2022, allegedly to create vacancies for remodeling.

This practice of upgrading properties to attract higher-income tenants has long been a strategy used by corporate landlords, but it comes at a significant cost to the community. As properties are remodeled and rents increased, existing tenants are often priced out, leading to a loss of community diversity and social cohesion. The character of neighborhoods changes as long-term residents are replaced by those who can afford the higher rents, eroding the sense of community that once defined these areas.

Monopolistic Practices and Market Instability

When a single corporation like Blackstone dominates the rental market, it can engage in monopolistic practices that harm tenants and destabilize the housing market. With limited competition, such companies can set rent prices with little concern for affordability, knowing that tenants have few alternatives. Additionally, the aggressive investment strategies employed by private equity firms can create long-term instability in the housing market. If a corporation decides to sell off properties or shift its investment focus, it can lead to sudden and significant changes in rental prices and housing availability.

What Can Be Done?

San Diego County officials are exploring ways to curb the impact of corporate dominance in the rental market. Potential solutions include easing restrictions on new housing construction, which could relieve supply pressures, and improving transportation infrastructure to better connect affordable housing with employment opportunities. There is also a renewed push for stronger statewide rent control protections to prevent large landlords from creating vacancies solely to raise rents beyond what current tenants can afford.

For tenant advocates, the case of Blackstone in San Diego is a clear example of the dangers of unchecked corporate power in the housing market. “Blackstone is a perfect example of what happens when there isn’t rent control,” Jordan Ash said. “Even existing restrictions have prevented them from raising rents even further and making housing even less affordable.”

Conclusion

The situation in San Diego underscores the need for greater scrutiny and regulation of corporate landlords in the rental housing market. As more private equity firms like Blackstone acquire large portfolios of rental properties, the risk of rent hikes, tenant displacement, and community disruption grows. To protect tenants and preserve affordable housing, it is crucial for local and state governments to implement measures that limit the adverse effects of corporate dominance and ensure that housing remains accessible to all.

A Glimpse Of What's To Come

How does this relate to Massachusetts and more specifically Millbury? What is happening in California could be a preview of what's to come in Massachusetts, with similar legislation modeled after California and future trends on the horizon. The MBTA Communities Act (M.G.L. c. 40A §3A) is pushing for a significant increase in housing density across 177 communities, aiming to eliminate requirements for parking, minimum bedroom sizes, number of bedrooms, and occupancy limits. If the Millbury Board of Appeals approves the proposed Chapter 40B Rice Pond Village project, developers Steven Venincasa and James Venincasa, either individually or through their various limited liability corporations, would control 56% of Millbury's rental market for properties with eight or more units, effectively creating an indisputable monopoly. They are also actively seeking to purchase additional properties in Millbury’s downtown Business 1 zoning district, which is targeted for rezoning under the MBTA Communities Act. People familiar with these developers believe their plans could negatively impact Millbury’s future, particularly for the town’s most vulnerable Environmental Justice Population. The same could be happening in other communities across the Commonwealth of Massachusetts, where different developers and investors are exploiting laws for profit without genuinely considering the implications on the communities involved.

As Gordon Gekko, played by Michael Douglas, famously said in Wall Street, “The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.” But those on the receiving end likely don’t share that same sentiment. While everyone is entitled to a fair and reasonable profit, price gouging, market manipulation, and price fixing are entirely different issues.

An online vocal critic argues that adding more apartments, despite the negative impacts on public safety, tax burdens, and existing neighborhoods, will lower rental costs. However, this perspective is widely regarded as misguided and has been debunked. The facts do not back up this overly simplistic argument.

This is an issue that all registered voters of Millbury and the impacts communities in Massachusetts should thoroughly investigate on their own, rather than simply accepting the propaganda presented by Governor Maura Healey, Lieutenant Governor Kim Driscoll, other state and local officials, and those with financial interests in real estate transactions or construction. One thing is certain: Massachusetts is facing an affordability crisis, and the MBTA Communities Act fails to address it. Registered voters have the power to decide whether to approve the necessary zoning changes that would allow the MBTA Communities Act to be implemented or not.

The next public hearing on zoning amendments related to the MBTA Communities Act will take place before the Millbury Planning Board on Monday, August 12, 2024, at 7:00 PM at the Millbury Town Hall, 127 Elm Street, Millbury, Massachusetts. While attending in person is ideal and has the greatest impact, you can also join via Zoom using the Meeting ID: 866 2927 0136 if you’re unable to be there.

Millbury and the Commonwealth of Massachusetts are at a critical crossroads. The decisions we make now will shape our future, determining whether our communities thrive or if we become the next wave of residents displaced in search of affordable housing. While more affordable options are essential, the MBTA Communities Act is not the answer. The true solution lies in a comprehensive approach that demands collaboration and commitment from all stakeholders. In doing so, we must also keep in mind our neighbors within the Environmental Justice Population, who are vital to the fabric of our community and future generations who will leave the nest starting their lives on their own.