Report: Blackstone raised rents in San Diego by double the market rate

In a report published on August 1, the real estate group Blackstone is accused of contributing significantly to the rental crisis in San Diego.

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The report, compiled by the Private Equity Stakeholder Project, a private equity watchdog, and the Alliance of Californians for Community Empowerment, a citizen-led group, is titled “Helter Shelter: How Blackstone Contributes to and Profits from California’s Broken Housing System,” and aims to show how the investment firm was able to impose huge rent increases – nearly double the market average – on a number of rental properties over three years.

Here you will find the key findings from the report as well as information on what you as a tenant can do in the face of massive rent increases.

Rent increases

According to the San Diego Union-Tribune, Blackstone bought 66 rental properties with 5,800 units in the San Diego area in 2021 for over $1 billion. Since then, the company has increased rent on most of those properties by 38% – from an average of $1,696 per month to $2,339 per month – the report said, citing data from real estate research firm Yardi Matrix. On average, rents in one building rose 79%, while another saw a 71% increase.

Meanwhile, the report says the average rent increase for all apartments in the San Diego market during that period was 20% – from $2,259 per month to $2,706 per month.

Many of the units acquired by Blackstone were considered “naturally generated affordable housing,” according to the report, meaning they were affordable but not subsidized by government housing initiatives – and were vulnerable to large rent increases if ownership changed.

According to the report, the company lifted a self-imposed moratorium on evictions for nonpayment of rent at apartments nationwide at the end of 2022 – a policy the company said it implemented in light of the pandemic. While rent increases in California are capped at 10% per year for most apartment tenants, the law does not apply to a new tenant’s rent, meaning an eviction can result in a potential windfall for the owner.

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Blackstone issued a statement to CBS 8 San Diego on August 2.

“The reality is that average rents in these San Diego communities are 20% below the San Diego market average,” a spokesperson said. “We have invested approximately $100 million to improve living conditions for thousands of San Diegans who live in our communities. We have already completed over 44,000 repairs, including some that were not done before.”

In addition, the report says there is “ample evidence” that Blackstone uses the property management software company RealPage to set rents. One program produced by RealPage is called YieldStar. Several lawsuits have been filed naming RealPage as a defendant, alleging that YieldStar allows “landlords and property managers to collude to increase rents above competitive levels in a cartel-like manner,” the report said.

The report says that while a number of property managers under contract with Blackstone are named as co-defendants in the lawsuits, none of them name companies owned by Blackstone, and no lawsuit specifically accuses the property managers of price-fixing on Blackstone properties.

What can tenants do?

To profit, investors across the country have been buying up affordable housing. According to a Redfin report released in May, investors bought a record 26% of the affordable U.S. homes that sold in the first quarter of 2024.

The real estate market is popular for investors because it can offer a high return on investment. Redfin’s report shows that the typical home an investor sold in March brought in 55.2% more ($174,616) than they paid for it. That’s up from 46.3% ($146,586) a year earlier. (The report neglects to mention how long these properties were held on average.)

When large corporations and investors take over more and more properties, tenants can feel a little small.

In some communities, renters have banded together to fight rent increases. For example, 42 families living in an apartment building in Miami Beach, Florida, received eviction notices this summer, dated July 2, informing tenants they had to move out by the end of August. No reason for the eviction was given at the time, but at least one resident believes it may be a redevelopment project. The story, reported by local media, caught the attention of the city commissioner, who in turn contacted the landlord. CBS News Miami has reported that the renters were given an additional 30 days to leave their homes — that may not solve all of their problems, but at least it will solve some of their problems.

In Ohio, some residents protested trailer park owners and state officials outside the state legislature, demanding an end to repeated, unaffordable rent increases. Rent control was banned statewide in 2022.

And while it’s unlikely, you can also talk to the owner of your building and ask for a smaller rent increase. If you’re a long-term tenant with a good track record, they may be more willing to negotiate – especially if the owner is an individual or family rather than a business.

This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.