Why Is Big Real Estate Money Laundering to Stop California’s Prop 21?
It’s the big question of the day: Why is Big Real Estate, including Wall Street landlord Blackstone Group, resorting to money laundering to stop California’s Proposition 21? On the face of things, it doesn’t make any sense.
Proposition 21 is the November ballot measure that puts limits on unfair, sky-high rent increases, reins in corporate landlord greed, and prevents homelessness. Top experts at USC, UCLA, and UC Berkeley agree that sensible rent limits are key for stabilizing California’s housing affordability crisis. It’s why U.S. Senator Bernie Sanders, labor and civil rights icon Dolores Huerta, Congresswoman Maxine Waters, among many others, have thrown their full support behind Proposition 21.
Big Real Estate, of course, hates the initiative. Corporate landlords such as Blackstone, Essex Property Trust, and Equity Residential want to keep charging outrageous rents so they can continue to make billions off the backs of hard-working Californians. That runaway greed has fueled the housing affordability crisis.
Prop 21 reins in these predatory landlords, but they want none of that. Billionaires Steve Schwarzman (CEO of Blackstone and pictured above) and Sam Zell (co-founder of Equity Residential), among many other real estate hotshots, have gotten used to king-sized bonuses, monumental profits, and luxurious lifestyles by charging obscenely high rents. In the 2010s, according to Zillow, U.S. renters paid a staggering $4.5 TRILLION to landlords.
“On Dec. 1,” Zillow reported last year, “the nation’s renters didn’t just make their last rent payment of the year — their landlords also collected their last rent payment of what was a very lucrative decade. All-in-all, U.S. renters paid roughly $4.5 trillion in rent during the 2010s, capped off with $512 billion in 2019 alone.”
Zillow continued: “The total amount of money spent on rent nationwide over the past 10 years is higher than the GDP of Germany (a shade less than $4 trillion in 2018), the world’s fourth-largest national economy. Total rent paid in 2019 alone is higher than the entire 2018 GDP of Thailand ($505 billion) and just short of Argentina’s ($518 billion).”
California landlords were especially raking in monstrous profits.
Zillow found that in 2019 alone, Los Angeles renters paid a shocking $39.2 billion to landlords. San Francisco renters shelled out $16.4 billion. San Diego renters forked over $10.3 billion. Riverside renters wrote checks totaling $7.4 billion. San Jose renters paid $6.5 billion. Sacramento renters delivered $4.8 billion to landlords. Ridiculous amounts paid by seniors living on fixed incomes, working-class families, recent college students, and teachers and nurses.
In the meantime, Schwarzman and Zell own multiple homes in such swanky destinations as Malibu, the Hamptons, Sun Valley, and Saint-Tropez.
Now there’s Proposition 21, which will disrupt Big Real Estate’s years-long feast. It’s the kind of thing that rattles real estate executives down to their toes — and may cause them to make bad decisions.
The Yes on 21 campaign recently found out that Blackstone Group, billionaire landlord Geoffrey Palmer, Western National Group CEO Michael Hayde, and a host of other real estate titans delivered millions in cash to a kind of shell committee known as the California Business Roundtable Issues PAC. That PAC then funneled money to No on Prop 21: Californians to Protect Affordable Housing. So far, the PAC has delivered $5.6 million.
The Yes on 21 campaign also learned that No on Prop 21: Californians for Responsible Housing sponsored by the California Apartment Association was hiding exactly who was contributing money to them. The California Apartment Association’s committee is the lead committee for the No on Prop 21 campaign.
Yes on 21 filed a formal complaint with California’s Fair Political Practices Commission, noting that Californians to Protect Affordable Housing and Californians for Responsible Housing have “committed serious violations of the Political Reform Act. The nature of these violations has been to obscure the true source of money contributed to their campaigns: in short, money laundering.”
The complaint further stated: “Yes on 21 urges the FPPC to investigate these committees’ and their donors’ reporting methods, because doing so will shine a light on these duplicitous practices and the way in which these activities have undercut the powerful political reporting requirements established by the Legislature and enforced by the FPPC.”
This is no small matter. So why did Steve Schwarzman, Geoffrey Palmer, Michael Hayde, and other corporate landlords decide to launder their money? Why not contribute directly, and openly, to No on 21?
One answer could be that Schwarzman, Palmer, and Hayde, among others, wanted to avoid the media scrutiny and public ire of shelling out millions to stop Proposition 21. They took major heat for contributing millions in campaign cash to successfully stop Proposition 10, Californian’s 2018 ballot measure that attempted to allow local governments to expand rent control policies. Even the United Nations took Blackstone and Schwarzman to task for that.
Another answer may be that they can’t help themselves. The real estate industry is well-known for shady dealings, twisting the truth, and screwing over people to make a buck. Take the widespread, real-estate money laundering in New York, Miami, and California, which prompted a New York Times investigative series called “Towers of Secrecy” and federal government probes. Money laundering and other shady schemes are a routine way of doing business.
On top of that, billionaires Schwarzman (known as a “modern-day robber baron”) and Palmer may think they’re above the law — because of their vast fortunes.
Any way you slice it, Big Real Estate’s decision to do money laundering to stop Proposition 21 shows that corporate landlords will stoop low and lower to defeat the Yes on 21 movement — and California voters can’t trust anything the No on 21 campaign does or says. That’s especially true for No on 21’s controversial spokesman Steve Maviglio, a longtime mercenary for corporate America.
Considering all this, it’s not outlandish to say that a vote against Proposition 21 is a vote for Big Real Estate’s greed-driven agenda and underhanded tactics.
On the other hand, a vote for Proposition 21 sends a crystal clear message: not only is Big Real Estate’s fleecing of California renters over, but Californians want an urgent, sensible solution to finally address the state’s ongoing housing affordability crisis. As the COVID-19 pandemic rages on, with middle- and working-class tenants struggling to pay sky-high rents, Proposition 21 is needed more than ever.
Patrick Range McDonald is the award-winning advocacy journalist for Housing Is A Human Right.