The London investment arms of Goldman Sachs and Blackstone were accused last night of jacking up the rents of Madrid’s poorest people after they bought thousands of the city’s council flats.
Many, unable to afford their new terms, have now been threatened with eviction or moved out.
During the financial crisis, the city was advised by the accountants PwC to sell off swathes of its social housing in order to raise desperately needed funds. It sold 5,000 flats to investors including Goldman and Blackstone.
Nothing changed in the tenants’ rents until their leases ran out, when, in many cases, the charges shot up dramatically.
Reuters interviewed over 40 households who have been thrown into difficulties by the rent rises. They include Jamila Bouzelmat, a mother of six who lives in a four-bed flat now owned by Goldman and a Spanish property firm. She said her family had been paying €58 (£46) a month rent from her husband’s €500 unemployment benefit. But in April, her new landlords suddenly took €436 from her account.
Ms Bouzelmat said she only discovered the problem when she tried to pay an electricity bill: “We went to take money out and there wasn’t a cent left in the bank,” she explained.
One in five adults in Madrid are unemployed.
Goldman and Blackstone are entirely within their rights to charge market-price rents. However, a number of lawsuits have now been launched by local politicians against the councils that sold the homes.
The problem is particularly bad in Spain because it already had one of the smallest stocks of social housing in Europe. Now 15 per cent of it has been sold off to London banks and private equity firms, there is even less.
Goldman’s properties had about 400 households on reduced rents, often negotiated individually with the council and set for up to two years.
Goldman referred inquiries to Encasa Cibeles, the local firm set up to manage the flats. A spokesperson said: “Evictions occur in an extremely small number of cases.”
Blackstone’s tenants have been on longer leases but most have been paying below-market rents. As leases approach expiry, rates have risen 40 per cent. Blackstone referred inquiries to Fidere, the local estate management company, which said “some people have lost the public subsidy they received from the council”. It is negotiating with the 2 per cent of its tenants in that situation.
Reuters said the bidders were clearly informed of the impoverished status of the tenants when they were competing to buy the properties.
Another part of the local outrage is over the low price the flats fetched for the city: Blackstone paid an average €67,200 and Goldman €68,500 per flat. That represented around €970 per sq m against around €2,000 for other properties in the area, Reuters reported, citing local property websites. It is not clear how fair those comparisons are, but local agent Fernando Encinar said the price was “very cheap”.