University of California’s $4-billion real estate investment will worsen housing crisis, unions say

People walk and hold signs saying "UAW on Strike. Unfair Labor Practice."
Unionized academic workers across the University of California’s 10 campuses picketed in November, calling for better pay and benefits. Unions representing 110,000 university employees say UC’s Blackstone deal will only make housing more unaffordable.
(Christina House / Los Angeles Times)

With property values sinking, investors rushed to withdraw money from a real estate fund managed by private equity giant Blackstone last month. But the fund soon found a savior in the Golden State: The University of California poured in $4 billion even as other investors fled.

University officials said they believed the privately negotiated deal would provide profits and benefits for the college system, students and employees for years.

UC employees and housing advocates dispute that. They point out that the fund has been buying up homes and apartments in California and other states, which they say is causing rents to rise and making the cost of housing even more unaffordable.


“Through this new partnership with Blackstone Inc., the University will become a major driver of this affordability crisis for the UC community and the rest of California,” wrote unions representing 110,000 university employees in a letter to administrators last week.

The letter called on the university to immediately divest its interests in Blackstone Real Estate Income Trust.

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After the housing crash of 2008, Blackstone began buying up large numbers of single-family homes that banks had foreclosed upon and turning them into rentals. Other Wall Street firms followed suit, and investors big and small continue to scoop up an increasing number of homes across the country.

According to Redfin, the number of homes bought by investors reached a high of more than 20% of all purchased homes in late 2021, up from about 10% a decade before. That percentage has now fallen slightly as interest rates have risen, making property less attractive as an investment.

Blackstone reports that 55% of its $69-billion fund is invested in rental housing.

The unions said in their letter that many UC workers are paying more than 30% of their salaries in rent. Among service workers, 95% said they could not afford a single-bedroom home near the UC campus or medical center where they were employed.

UC officials declined to answer a list of questions, instead referring The Times to Blackstone.


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In a statement, Blackstone executives said the fund owns less than 1% of rental housing in the United States and has “virtually no ability to impact market rent trends.”

They said that 67% of the fund’s residential properties in California are designated as affordable housing where rents are set by the federal government. “We have committed $500 million to maintain and improve these communities, while working to preserve affordability beyond when government programs expire,” they said.

“We believe we have the most favorable resident policies among any large landlord in the U.S.,” they said. “For more than two years, Blackstone chose to not make a single eviction for non-payment across our U.S. rental housing portfolio.”

In December, Blackstone’s shares fell sharply when executives announced they were limiting withdrawals from the real estate fund because investors were taking out more money than the fund allowed.

That’s when UC’s chief investment officer, Jagdeep Singh Bachher, contacted Blackstone President Jonathan Gray, according to a Wall Street Journal report. Bachher asked Gray whether they could work together.

The resulting deal is designed to bring UC an annual return of 11.25% over the next six years, according to a Jan. 3 news release sent by Blackstone and UC. The university must pay Blackstone management and incentive fees in amounts that were not disclosed. Blackstone will also get more money if UC’s annual return exceeds 11.25%.

The university could lose money if property values decline sharply. Other investors in the fund can withdraw funds monthly, but UC has no access to its investment for the next six years.


“The team at UC Investments has a deep partnership with Blackstone and we are highly aligned through this investment to further our relationship,” Gray said in the release.

UC Regent Richard Sherman, who is also the chief executive at David Geffen Co., called the deal an “opportunistic investment” that would benefit UC’s students, faculty, staff and pensioners.

University officials performed extensive research on the fund before deciding to invest, Blackstone said.

On Tuesday, tenants living in apartments Blackstone purchased in San Diego in 2021 spoke at a UC regents meeting at UCLA.

One of those speakers was Sarah Guzman, who has been working to organize the tenants as part of her work for the Alliance of Californians for Community Empowerment.

Guzman said families in the San Diego apartments have recently received annual rent increases of 8% to 9% — higher than those imposed by the previous landlord. She said tenants have complained about poor maintenance, including cockroach infestations and poorly done repairs.


Blackstone said Thursday that it had completed nearly 20,000 work orders since acquiring the San Diego rentals and is spending $100 million on improvements. “We are investigating every single claim to ensure we are delivering a best-in-class experience,” the company said.

Guzman said the tenants plan to continue to press the university to keep Blackstone from raising rents by more than 3% or evict tenants during the COVID-19 pandemic.

“This investment shows the University of California doesn’t care about the housing crisis or how low-income people of color are being pushed out of their communities,” she said.