Mind the rent gap: Blackstone, housing investment and the reordering of urban rent surfaces

Brett Christophers

doi:10.1177/00420980211026466

Abstract

Recent years have seen a burst of new writing on the opening and closing of urban rent gaps. Such studies generally consider individual cases. Rarely does the opportunity arise to readily compare and contrast rent gaps across multiple cities and territories, least of all within the context of a single developer or investor portfolio. Such an opportunity has arisen in the past decade, however, as the US investment firm Blackstone has pursued a multi-territory housing-investment strategy specifically of identifying and closing rent gaps, which it styles ‘buy it, fix it, sell it’. This article examines that strategy and the varying nature of its implementation in Danish, German, Swedish and US cities. It argues that the rent gap is a paradoxical phenomenon: vast gaps, promising vast profits, frequently open up and frequently remain open for long periods before being closed – if they are closed at all. A primary reason is that successful and profitable closure requires not just favourable local political-economic conditions but a singularly well-funded, determined and aggressive investor – an investor, that is, such as Blackstone.

Highlights

In the period since the global financial crisis of 2007–2009, the Wall Street investment firm Blackstone has built one of the world’s largest and most international portfolios of residential property
In the process, housing has delivered vast profits to Blackstone, its executives, and the investors such as pension funds whose capital it is that Blackstone – which operates as an asset manager – puts to work
Blackstone has not exited in Berlin, either, where, as we saw earlier, it used its Blackstone Property Partners Europe (BPPE) fund to purchase around 3700 residential units in 2017–2018; and where, as we saw, ‘buy it, fix it, sell it’ – closing the gap between in-place, capitalised rents and market-level, potential rents – was again the stated strategy

Summary

Introduction

In the period since the global financial crisis of 2007–2009, the Wall Street investment firm Blackstone has built one of the world’s largest and most international portfolios of residential property. If we were to put Blackstone’s ‘buy it, fix it, sell it’ housing-investment approach, as exemplified by Invitation Homes, into the conceptual language of urban studies, we would say that the business model fundamentally was – and remains – identifying and closing rent gaps.

Results

Conclusion