gentrification

A top executive at a Wall Street private equity firm called out for its gentrification practices is such a big fan of Pete Buttigieg that he recently hosted a private fundraiser for him at his home.

Hamilton E. James, whose net worth is at nearly $2 billion according to Forbes, is the executive vice chairman at Blackstone Group — one of the world’s largest private equity firms. Roughly $140 billion of Blackstone’s estimated $512 billion in assets is in real estate, making it the second-largest type of investment the firm oversees, next to private equity.

Blackstone and Buttigieg

gentrification
South Bend, IN mayor and 2020 presidential candidate Pete Buttigieg on NBC’s Meet the Press (Photo: NBC)

On Sunday, the New York Times reported that Wall Street was beginning to coalesce around three Democratic candidates as a means of stopping Senators Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts), whom bankers have named as their biggest adversaries in 2020. Two of those candidates are former Vice President Joe Biden and Senator Kamala Harris (D-California), who have attracted the support of various hedge fund managers and investment bankers.

But as the Times noted, Hamilton James “hosted Mr. Buttigieg at his home” last Thursday. It’s unclear whether or not this is the same event which Fox Business reported charged donors $2,800 per person to attend, though this is far from the first financial sector fundraiser Buttigieg has benefited from. In April, CNBC reported that Buttigieg got $11,200 from one Chicago-based investment firm during the first quarter of 2019.

This is a particularly significant development, as James once hosted a $35,800-per-plate dinner for President Barack Obama in 2012 and was a backer of former Secretary of State Hillary Clinton’s doomed presidential run as early as 2014, according to Reuters. Given Blackstone’s history of actively funding gentrification — in which working-class residents are pushed out of their homes in favor of wealthier residents — Hamilton James’ early support of the South Bend, Indiana mayor could be chalked up to the record Buttigieg has in gentrifying his city.

In March of this year, the United Nations named Blackstone in particular as one of the biggest contributors to the ongoing affordable housing crisis in the United States and around the world. As the UN Special Rapporteur on affordable housing wrote in a report, private equity firms like Blackstone buy up housing geared toward low-income tenants, assess it as “undervalued,” pour millions into renovating it, and price out working-class tenants in favor of wealthier ones. Companies were also accused of gouging residents with processing fees, automatic late fees, and swift eviction if a tenant is late on rent.

“Blackstone’s and its subsidiaries’ business model is pushing low-income, and increasingly middle-income people from their homes,” the Special Rapporteur wrote. “Landlords have become faceless corporations wreaking havoc with tenants’ right to security and contributing to the global housing crisis.”

“What makes this practice particularly egregious is that it is being done without any monitoring, or accountability mechanisms in place,” the report continued. “Governments seem not to have made the connection that this new form of finance is taking place in an area that is governed by international human rights law, which imposes obligations on them.”

How Buttigieg used gentrification to transform South Bend

gentrification
Vacant lot in South Bend, Indiana following Buttigieg’s demolition campaign (Photo: Jackie Bailey for Grit Post)

In April, BuzzFeed News published a lengthy investigation into Mayor Buttigieg — specifically his agenda of tearing down 1,000 buildings in 1,000 days or less. The outlet talked to Regina Williams-Preston, a member of the South Bend city council who witnessed Buttigieg tear down several of the homes that Williams-Preston and her husband had purchased as investments but fell behind on restoring due to her husband contracting a serious illness.

“I’m just constantly telling the administration: If we do what we’ve always done, we’ll get what we’ve always gotten. And what we have always gotten in cities all across the country is displacement of poor people and people of color,” Williams-Preston said.

Williams-Preston isn’t the only South Bend resident who witnessed gentrification under Buttigieg. Jackie Bailey, who has lived in the city for more than 50 years, told Grit Post that while the changes that have transformed South Bend didn’t begin with Buttigieg’s tenure, he exacerbated the squeeze on lower-income residents. Bailey said a lot of Buttigieg’s planned demolitions were in a five-block corridor where many black and Latino families owned property. Bailey said while some housing has been built in its place, there are mostly just empty lots where Buttigieg bulldozed.

“There were some houses that were bad, but a lot of them were good, they could have been fixed up,” Bailey told Grit Post. “Right after that, that’s when South Bend started to really have a homeless problem. A lot of people were displaced.”

“You have to understand, South Bend was a blue-collar, union town going back quite a few years,” he added. “In the neighborhood I live in, they doubled the property tax in the last year alone. Me and my girlfriend are on a fixed income… I feel like they’re trying to move people out. If you ain’t got the money, they’re gonna move you out.”

Big money and no accountability for gentrifiers

gentrification
National Association of Realtors headquarters in Washington, DC (Photo: Gund Partnership)

As Grit Post reported in April, Buttigieg received several high-dollar donations from the real estate sector after his gentrification campaign in South Bend. But it isn’t just Buttigieg: In the 2018 midterm election cycle alone, the National Association of Realtors (the trade association representing the real estate industry) donated more than $17 million to federal candidates nationwide, and spent more than $72 million lobbying Congress, making them the second-biggest lobbyist in 2018.

Currently, there’s no law preventing private equity firms like Blackstone from profiting from gentrification. According to Forbes, big banks like JPMorgan Chase and Wells Fargo have “bundled and securitized rent streams,” primarily for single-family homes, and sold those rent streams to investors, much in the same way that banks securitized subprime mortgages in the run-up to the 2008 financial crisis. And just as was the case with mortgage-backed securities, credit rating firms are rating those securitized rent streams as AAA in order to make them more appealing to investors.

Several 2020 candidates have rolled out plans to address the affordable housing crisis. In his 2016 campaign, Bernie Sanders proposed expanding the National Housing Trust Fund by at least $5 billion per year to “construct, preserve, and rehabilitate at least 3.5 million affordable housing units over the next decade.” Sen. Warren has introduced a bill that would do just that, which she proposes paying for by lowering the estate tax threshold from $22 million and up to inheritances of $7 million and up.

Buttigieg has not yet endorsed that proposal. However, he did laud construction of an affordable housing project in South Bend in a 2018 tweet, calling for more “inclusive economic growth in our city.” As of this writing, Buttigieg has not yet responded to Grit Post‘s request for comment. This article will be updated in the event of a response.

 

Carl Gibson is a politics contributor for Grit Post. His work has previously been published in The Guardian, The Washington Post, The Houston Chronicle, Al-Jazeera America, and NPR, among others. Follow him on Twitter @crgibs or send him an email at carl at gritpost dot com.

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