MICHAEL WEINSTEIN: California: The new Rust Belt?

Headshot of Michael Weinstein

Michael Weinstein is the president of AIDS Healthcare Foundation, the largest global AIDS organization.

 

When Americans picture the Rust Belt, they have an image of the once-great industrial Midwest, now transformed into rusted-out factory shells and abandoned smokestacks. They think of time leaving cities behind as people decamp to places offering new opportunities. They envision a once-great metropolis that epitomized progress and opportunity collapsing in decay.

If we think this dystopian reality couldn’t possibly hit California, the land of milk and honey, we’d be wrong. When vampires of greed attack, they are not satisfied until they drain every ounce of lifeblood out of their prey.

When corporations shipped middle-class jobs overseas to maximize profit, they accelerated the industrial heartland’s decline. Industries that initially grew fat and happy feasting on an unprecedented middle-class explosion after World War II wanted even more and found it in sweatshops across the world because someone somewhere will always work for less to survive and feed their family.

Today, Californians are leaving the state because they cannot earn enough to afford a decent place to live and lead some semblance of a middle-class existence. Amid the exodus, California currently is projected to have the same population in 2060 as it does today while other states estimate rapid growth.

Whereas the villains of the past were industrial companies shipping jobs overseas, today’s villains are corporate landlords making it impossible for poor and working people to keep a roof over their heads. Hundreds of thousands of people flee California every year, leaving behind only the opposite ends of the spectrum — the wealthiest and those in greatest need. The Rust Belt experienced a similar doom loop.

In 1950, Detroit was the wealthiest city in America. Today, it is almost the poorest, second only to Cleveland. Corporate greed killed Detroit, and if it is left unchecked, it will kill Los Angeles, Oakland and San Francisco.

Just how much are we willing to sacrifice at the altar of Big Real Estate profit? When will we reach the tipping point where the social ills of poverty and homelessness crash the lives we want to lead? Destruction is closer than we want to believe.

The minimum wage in California is $15.50 an hour or $2,687 per month (before taxes). The average monthly rent is $2,781. Even two full-time, minimum wage earners would have to pay more than half of their net income in rent. That is not sustainable.

Big Real Estate will hold out until the bitter end before lowering rents because of their speculative borrowing. At apartment complexes owned by private equity giant Blackstone, for example, the listed rents for new tenants range from 29 to 100 percent higher than the average monthly rent payment for existing tenants. In recent years, 10 billionaire landlords have amassed nearly $200 billion to buy up more properties with the goal of driving up rents even further.

Rents eventually will come down when enough people leave the state, but by that point, the quality of life in California will be unrecognizable — just as it became unrecognizable in Detroit and Cleveland. In the short run, the ultimate loser is the tenant who earns just enough to pay the monthly rent with nothing left over to save or invest.

Uncontrolled rent is an existential risk to the California dream, and we are in denial about the closeness of the proverbial brink. The housing crisis is yet another inconvenient truth that will bite us badly.

As with saving the environment, all Americans need to make sacrifices. So far, real estate oligarchs haven’t made any and are holding us hostage. If we dare to regulate their unbridled greed, they threaten to disinvest in California as they did in the Midwest.

But, at the same time, if we continue to succumb to the terms of Big Real Estate, the doom loop will strangle us, and we’ll have only ourselves to blame.

Michael Weinstein is the president of AIDS Healthcare Foundation, the largest global AIDS organization.