Housing Profits & Crisis Capitalism. The Cambridge Example

Blackstone, the world’s largest residential property owner in 2021 purchased $325 million in apartment complexes in East Cambridge. The journal, BISNOW, that published the news on June 29, 2021, exerted that this was "one of Greater Boston's largest investment sales of the year” – more HERE. Indeed, this this huge investment in rental properties aimed at profiting from ongoing Cambridge housing needs is telling. 

​Cambridge, COVID, and  the Creation of a New Housing “Crisis”

The exact timing of the Blackston acquisition is important. Cambridge and the country at this time were in the middle of the COVID pandemic. The U.S. Department of Defense COVID timeline provides key details: HERE. On June 15, two weeks earlier, Johns Hopkins University, announced that U.S. COVID-19 related deaths had just surpassed 600K.  

• On June 10, 2021 President Biden stated “…that the United States will purchase and donate half a billion Pfizer vaccines to 92 low- and lower middle-income countries and the African Union. The donation serves as the foundation for a coordinated effort by the world’s democracies to vaccinate people around the world.”
•  On June 3, 2021, the White House announced “…its framework for sharing the first 25M doses of at least 80M U.S. COVID-19 vaccine doses globally by the end of June.”
• These announcements had followed shortly after a May 20, 2021, statement that the “Deputy Secretary of Defense and Vice Chairman of the Joint Chiefs of Staff issue a memorandum on methods to enable and encourage vaccination against COVID-19.”

The late June 2021 Cambridge housing purchase by Blackstone with its $345 million investment purchase of apartment buildings in Cambridge is those closely linked COVID. Specifically, the late May and early to middle June announcements coincide the ramping up of Cambridge-based vaccine companies to create the anticipatedly vast number of new vaccines to meet the new global market. COVID provided the natural “cause” for crisis transformations in the housing market for greater corporate profit at the expense of local residents in Cambridge and elsewhere.
Today housing costs in East Cambridge top the housing cost list in the city, surpassing those even of West Cambridge and most other areas. Blackstone, in its New York City ventures, recently faced serious legal problems for its housing overcharges.  Indeed, less than a month ago, on November 27, 2024 we read that Blackstone paid $15 million after alleged rent overcharges, “one of largest settlements of its kind in NYC”: HERE. Another report this one dated.  January 19, 2024 addresses Blackstone’s $3.5 Billion Housing Deal “that expands Blackstone’s reach into Us, Canadian rental markets.” The Bloomberg article on this identifies Blackstone as a leading private equity firm as finalizing the acquisition of another residential company (Tricon), privatizing the latter company in the process. HERE  

Billionaire Blowback: The Institute of Policy Studies

An October 21, 2024 analysis published by The Institute on Policy Studies (IPS), a progressive organization dedicated to a more equitable, ecologically sustainable, and peaceful society  highlights the problems in a document entitled  Billionaire Blowback on Housing. The Reports’ subtitle reads: “How concentrated wealth disrupts housing markets and worsens the housing affordability crisis.” The same is happening in Cambridge. This report notes that “Across the United States, communities are facing an acute housing affordability crisis. Rents and homelessness are rising while home ownership feels increasingly out of reach for millions. What’s driving that crisis? In a word, inequality. Increased corporate control over our housing market — by billionaire investors and their for-profit entities — are driving these trends and placing significant barriers to the preservation and creation of permanently affordable housing.” They go on to note that “You’re experiencing it if you’re among the 22.4 million households — half of all renters — who spend more than 30 percent or more of your income on rental housing.”  They add that “…all of us are caught up in a larger housing system that is out of kilter and distorted by the participation of a class of ultrawealthy investors.”
While some have proposed as a solution “…simply building more housing….[the] focus on expanding housing supply through for-profit development misses this key driver of the housing crisis: as wealth concentrates in the hands of billionaire investors, their predatory investment and wealth-parking in luxury housing defines our housing markets today. (emphasis mine). This report, in short “…highlights the role of the billionaire class in driving our housing emergency — and outlines the policy solutions we need to protect the public interest. A summary of the  full PDF points out that: “Predatory billionaire investors have bought up an unprecedented share of single-family homes, apartment buildings, and mobile home parks to extract more rents from already economically squeezed residents." 
In a nutshell, as this IPS report goes on to state:

             "Wealthy investors are buying up properties but holding them vacant to profit from real estate appreciation. They       make money not from rents, but from treating real estate as a luxury asset to park their wealth in. Billionaire investors are entering the short-term rental industry, removing a substantial portion of rental housing from the market…Billionaire investors are helping skew new development towards being increasingly high-end. Although housing production has actually exceeded our nation’s growth in households, new construction is increasingly unaffordable to low-income households. Nationally, we have sufficient and even an excess of housing for the wealthy, alongside not enough housing priced at rates affordable to low-income households in need. Wealthy buyers are bidding up land and housing prices, inflaming gentrification and resulting in huge increases in the cost of housing. First-time homebuyers and people of color who have historically been excluded from the market are competing against billionaire private equity funds and wealthy buyers who make swift cash offers."

Why "Build Baby Build" is NOT the Solution

If “Build Baby Build” is not the Solution and Instead will make this worse, what can cities like Cambridge do?
To respond to the situation the authors argue among other things for:

• Taxing luxury real estate transactions (“mansion taxes”) with the fund going to increase supplies of non-profit and social housing.
• • Prohibiting keeping units vacant for long periods of time.
• Promoting public land banking, public banking, and using public pension funds to resource and finance social housing.

Instead, the current Cambridge City Council seems more interested in flooding the city with still more billionaire investment money to buy of existing properties, remove tenants, demolish the still functional buildings, to build larger far more expensive housing that likely will remain largely vacant. One key benefactor of this option, , may in fact be Blackstone which the report’s authors  argue “…is the largest corporate landlord in the world, with over 300,000 residential units across the United States.” Blackstone is clearly not the only investment firm operating in our city, and as we have seen elsewhere, the result will be the equivalent of a land rush, tenant evictions or lease terminations, the demolishment of existing structures,  and the erection of new structures, many of faulty or insensitive design for wealthy out of town or out of state investors who care only about the profits they can make here.         
More recently, on December 5, 2024, New York City passed its controversial “City For All Housing Bill” See our recent blog post: HERE One of the concerns voiced by opponents to this plan is that there is no evidence that adding more luxury housing serves to bring down housing costs, indeed the opposite is often happening. And residents in cities in both the U.S and Canada are speaking out along the same lines in places like Vancouver, as shown in this framing of the situation here re. Pause the Plan (Vancouver Canada - Rally at City Hall, Nov. 23, 2024).  The results in the Province of Ottawa make it clear that a large majority of newly built condos (are being purchased by investors, as seen in an October 3, 2024 article aptly titled “Ontario’s Big Cities Saw Investors Buy Up To 85% of Condos, Fueled By Gov Incentives”  published in the journal Better Dwelling. The Boston Foundation’s 2024 Housing Report Card pointed out that cities in this area should  purchase existing multi-family housing to keep it affordable. This is what Boston has chosen to do.  Cambridge appears to have no plans to do this, leaving the future of our city up to investors and their own profit interests.