July 27, 2021 - From the July, 2021 issue

Josh Stephens Justifies Wall Street Commodification of R-1 Zones

With CA Senate Pro Tem Atkins' SB 9 and Sen. Wiener's SB 10  now pending—bills that would effectively eradicate single-family neighborhoods throughout the state without requirements for affordability—and in light of Wall Street's continued large-scale acquisition of single-family homes and rent-controlled apartments in overburdened housing markets across the US, TPR shares this perhaps counterintuitive op-ed by writer, urbanist, and former TPR editor, Josh Stephens. Opining on the relationship between corporate homeownership and housing scarcity, Stephens asserts that Wall Street commodification of housing is basic economics resulting from overly restrictive local land use practices. Calling Blackstone a 'red herring' in arguments over the impacts of statewide upzoning, Stephens argues the best way to hamper speculators is to override local control over planning in an effort to produce more housing. It is noteworthy that existing local inclusionary zoning and density incentives are undermined by state legislation that adds density by right without requirements for affordability or community benefit. TPR presents an excerpt below, find the full piece, originally published in the California Planning & Development Report, here.

Josh Stephens

"Many homeowners are their own little Blackstones" —Josh Stephens

 "I know next to nothing about commodities trading. But I do know this: people who buy pork bellies do not make bacon.

Whether they end up on a breakfast plate, on a bun, in a McRib, or as the centerpiece of a celebrity chef's paleo-inspired menu is immaterial to the people who own them. Investors buy commodities (or, rather, the financial idea of commodities) not for what the commodities do but for the simple fact that they exist. They profit when demand grows relative to supply or supply shrinks relative to demand. 

To the person who owns pork bellies, the fewer pork bellies there are in the world the better. 

How, then, is a house like bacon? 

Investors buy a commodity when it is A) relatively scarce; and B) undervalued relative to its scarcity. Homes are undervalued when the cost of purchasing them is relatively less than the cost of renting them (accounting for carrying costs, value-add improvements, etc.). If investors can buy homes such that the value of rent exceeds the cost of ownership ,then they make a profit. This is Real Estate Investing 101. (Not to be confused with Real Estate Developing 101.)

This capitalist axiom makes Los Angeles a ripe target, since the city has some of the highest rent-to-income rates in the country.

Over the past few years, concerns about “Wall Street ownership” of houses in California has grown increasingly serious, with the The Blackstone Group being the poster child for a handful of finance companies that buy up single-family homes, often in disadvantaged areas, only to kick out tenants and increase rents.

They charge as much rent as the market will bear, with little concern for communities and the urban fabric. As absentee landlords, they probably aren’t going to get involved in civic life. Maybe they’re outbidding real people who want their pieces of the American dream and would be better stewards thereof. Maybe they’re going to distribute their profits to horrible human beings who each already own five homes of their own. They are surely displacing and evicting vulnerable residents.

All of those things are bad. But those bad things are all made possible by the opportunity that Blackstone has been given. And, yet, somehow the (justified) ire against Blackstone leads many stakeholders to conclude that, to really stick to The Man, we need to limit new development. This is completely backwards.


Many homeowners are their own little Blackstones. Many of the same people who decry the purchase of thousands of homes by Wall Street are the same people who protest the development of new homes in their neighborhoods. Why? Sure, some of them care — a little — about “neighborhood character.” But California’s NIMBY movement has not endured the decades, beginning with its Prop. 13 temper tantrum in 1978, because of neighborhood character. It’s because they don’t want to endanger their property values."

Read the full piece on CP&DR, here


© 2024 The Planning Report | David Abel, Publisher, ABL, Inc.