Blaming Blackstone doesn’t reduce the rent

Building housing does

When housing costs soar and homelessness hits record highs, the search for villains becomes irresistible. And there’s no shortage! This is a pretty typical article about corporate landlords, poverty, rents, and blame—here’s a screenshot of the beginning:

I want to dive into this because corporate ownership of homes came up at the Santa Fe housing forum for which I was a panelist last week. (If the video hasn’t dropped yet on that page, check back, they will put it up.) In fact, the corporate role in housing unaffordability comes up pretty much every time housing comes up. When housing costs soar and homelessness hits record highs, people get very angry about it, as they should—and “who is to blame?” requires an answer. The article above captures understandable populist rage toward corporate ownership of rental housing—and specifically asks us to pick Blackstone as the villain¹.

Before any myth-busting, I want to acknowledge the emotions: While working families struggle to afford basic shelter, Blackstone CEO Steve Schwarzman pockets another billion dollars from his rent-collecting empire. A private equity billionaire doubling rents while 770,000 Americans sleep outside? Right, let’s just launch Steve Schwarzman into space.²

Adobe stock photo

But as disgusting as I, too, find billionaires profiting from scarcity, the bottom-line problem is not the billionaire but the scarcity. To solve the housing crisis, we must name both the correct causes and the causes that lend themselves to solutions. “Greed” might be a real cause, but it’s not an actionable one. While Blackstone’s profits feel obscene, focusing on corporate villains distracts us from actionable solutions. Even if we wiped Blackstone off the face of the earth, we would not see a meaningful change in homelessness or U.S. rents overall.

Why? Because what they contribute to the problem is not as much as what other players contribute.

The data don’t support the narrative

According to 2022 Congressional Research Service data, large corporations don’t control rental housing:

• Individual landlords own 37.6% of all rental units nationally

• Small business entities (LLPs, LPs, LLCs) own 40.4%

• REITs and real estate corporations combined own just 4.3%

• Large institutional investors own only ~3% of single-family rentals

You’ll find different numbers across different sources because of fuzzy things like “what is a corporate landlord,” but there is scant evidence that Blackstone has a monopoly on U.S. rental housing. Blackstone is large in absolute terms, but in a market of 49.5 million rental units, even massive corporate portfolios represent a small fraction of the total supply.

Therefore, even if Blackstone disappeared tomorrow, the underlying supply/demand imbalance would persist, rents would still go up, and people would still be forced onto the street.

How profit and scarcity interact

Blackstone’s massive profits aren’t the cause of high rents—they’re a symptom of housing scarcity. When housing supply is artificially constrained, any increase in demand gets channeled into higher prices rather than more units. Blackstone can charge outrageous rents because local zoning laws prevent builders from creating competition.

A way to think of it: If you banned all but three restaurants in a city, existing restaurant owners could charge $50 for a burger because enough hungry people with thick wallets will pay that. If you stop new housing from being built in a city, enough house-hungry people with thick wallets will pay high rents.

We see this in Los Alamos and Santa Fe: Housing costs skyrocketed after Los Alamos National Laboratory had a huge hiring spree without policymakers allowing commensurate housing to be built.

We see it in Santa Fe and Albuquerque, with similar job/housing imbalances. Politicians are more responsive to incumbent homeowners and their “neighborhood character” slogans than to renters. Corporate landlords, in fact all landlords, profit because NIMBYs—a sort of homeowner cartel—won’t let housing be built in their city. (Notably, this blockade is also quite profitable for the homeowners.)

When cities restrict housing construction through exclusionary zoning laws (which are explicitly anti-renter!), existing landlords gain pricing power regardless of whether they’re mom-and-pop operators or private equity giants. A scarce market is a landlord’s market.

We can’t fix immorality in the heart of mankind, but we can make rent-gouging landlords sweat by ending the supply scarcity they depend on. An abundant market is a tenant’s market.

This is the Christian version of “blame capitalism.” In either case, the villain is a vague, menacing mist. There are no policy solutions offered, there is nothing to organize around. We just have to shake our helpless, angry fists and carry on. Source

Builders are not landlords

When people who care about housing affordability see apartments advertised as “luxury” going up in their city, they understandably feel angry at the builders. (For a closer look at why builders today are locked into that market, see this piece from Strong Towns.)

But it’s important to note that the builders who create the housing have completely different incentives from the landlords who set the rent. This distinction matters enormously for policy solutions. Builders profit by creating housing supply, which puts downward pressure on rents. Landlords profit by owning scarce housing, which allows them to charge premium rents.

So when we try to punish the builders by blocking new apartment construction, we’re going after the wrong target. Every apartment building blocked by neighborhood opposition is another competitor that can’t undercut rents. Every single-family zoning law that prevents duplexes creates artificial scarcity that boosts existing landlords’ profits.

People who used to qualify for homeownership are now forced to rent

This is another important point about incentives: The corporate rental phenomenon isn’t just about greedy companies swooping in, it’s also about federal policy changes that pushed millions of families out of homeownership.

After 2008, regulators dramatically tightened mortgage lending standards, with the average credit score for approved mortgages jumping from around 710 to over 760 and staying there. This had huge consequences and was not just a temporary correction. It became a permanent shift that cut off access to homeownership for an estimated 10-20 million families. Those families have now become renters by necessity, not choice.

So even if we could force every corporate landlord to return single-family rentals to owner-occupied housing tomorrow, those millions of families still can’t qualify for mortgages under current federal rules. That means they need rental housing! Landlords who flip single-family housing into rental housing are responding to this market signal. Think about what would happen if they didn’t.

So we’re in this pickle where the feds created artificial demand for rental housing through credit restrictions while at the local level, we’ve been busily blocking the construction of new rental units through zoning laws. We’ve essentially trapped millions of families in a rental market that we refuse to let grow.

If people need to rent because federal policy makes ownership impossible, we’d better make sure there are enough rentals available or we are screwing these people over. Meanwhile, maybe we should revisit those overly restrictive federal lending standards that pushed millions into the rental market in the first place? When credit score requirements jumped 50 points overnight and stayed there for 15+ years, I think it’s safe to say we may have overcorrected from the lessons of 2008.

Real solutions help real people

Back to immediate solutions to help renters: Evidence shows that allowing more housing—including market-rate (aka “regular”) housing—stabilizes housing costs. Studies from multiple cities demonstrate that new construction lowers nearby rents by 5-7%, saving residents $100-159 per month. Rents in Minneapolis and Austin have fallen as a direct result of zoning reforms. These cities eliminated parking mandates, legalized missing middle housing, and rents came down.

Anti-corporate advocates like Invisible People say the solution, instead, is for people to call their legislators and ask them to write a bill saying “housing is a human right.” I think the anger behind the words is justifiable, the call for human rights is understandable, and there are certainly areas of strong agreement I have with these words on an emotional level.

But I do not think calling your legislator and asking them to “stop placing profits over people” is a very good solution. It’s not concrete enough. Words like “housing is a human right” don’t really mean anything by themselves, and offer no action. If housing is a human right, we have to build it! We build it through reforming city rules to unleash competition with existing landlords. We need to legalize missing-middle housing in single-family neighborhoods, streamline permitting processes, and eliminate parking mandates that inflate construction costs.

Call your legislator, yes. But if you need a good slogan, if you’re going to ask for one simple thing, it’s “legalize housing.” Tell them, “Housing reforms aren’t just popular, they are effective!” You can point them to Austin, Houston, Minneapolis, Milwaukee, New York City, Columbus, Walla Walla, South Bend, or the entire state of Montana.

Why misdirection matters

Every problem we name comes with an implied solution—otherwise you’re just griping, right? If greed is the problem, ending greed is the solution. If capitalism is the problem, then ending capitalism is the solution. If exclusionary zoning is the problem, ending exclusionary zoning is the solution.

One of those things, while not easy in absolute terms, is quite a bit easier than the others.

While the populist left and right aim their rhetorical guns at corporate landlords, local planning commissions quietly continue blocking apartment buildings. City councils quietly maintain exclusionary zoning. Neighbors show up to every rezone-for-density meeting with pitchforks. These are the actual mechanisms perpetuating housing scarcity.

By focusing on easy bad guys instead of real supply constraints, we’re inadvertently protecting the very system that enables those corporations to rake in huge profits. And we’re taking away energy needed to help unhoused folks and people struggling to pay rent.

There is so much evidence that housing is fundamentally a supply problem. There are pragmatic solutions that affordability advocates can lobby for to reduce housing costs quickly. Energy spent posting angry things about corporate landlords would be far better spent organizing to overhaul the rules that prevent builders from creating competition. Don’t think this won’t be a bruising political fight! Rewriting the rules means taking on individual landlords, small business entities, REITs, and others—in other words, all those parties that together own the other 97% of the single-family rental housing stock in the country.

Steve Schwarzman’s billion-dollar payday is a symptom of a broken system. But going after something that is not likely to make a difference while ignoring what’s happening right now in neighborhood meetings? That’s an argument for preserving the status quo through inaction.

And the status quo is bad.

1. Or BlackRock: Honestly, these corporations do seem to pick villainous names. What’s next, EvilPebble? DeathBoulder?

2. Rhetorically. The vigilantes out there can put down their pitchfork-shaped spaceships.