SACRAMENTO, Calif. — A California bill aimed at limiting large corporate landlords from buying additional single-family homes has cleared the Assembly, as lawmakers continue to respond to concerns that institutional investors are driving homeownership further out of reach for working families.
AB 1240, authored by Alex Lee, would prohibit institutional investors that own more than 1,000 single-family homes from purchasing additional properties in California and converting them into rentals, according to the author’s office.
Supporters of the measure say Wall Street-backed firms have used their financial advantage to outbid prospective homebuyers, particularly in markets already strained by limited supply and rising prices.
“As the nation struggles to build enough homes and housing prices skyrocket, a new kind of landlord is emerging: private equity firms taking over neighborhoods,” Lee said. “These corporations make profits for their investors by turning for-sale homes into for-rent homes. Everyday people can’t compete with the all-cash offers of wealthy corporate landlords. AB 1240 will stop Wall Street from pricing working families out of homeownership and exploiting the housing crisis. We must give people a real chance to achieve their dream of owning a home.”
The proposal comes amid broader national efforts to curb large-scale investor purchases of housing. According to the release, the U.S. Senate recently passed legislation banning institutional investors from buying single-family homes, and the president signed an executive order targeting Wall Street landlords. California Gov. Gavin Newsom also called for restrictions on corporate home-buying activity during his State of the State address.
Backers of the bill argue that metro areas once considered more affordable for first-time buyers have become prime targets for large investment firms seeking returns in tight housing markets. They say these companies often purchase smaller and lower-cost homes that would otherwise be available to first-time buyers.
The release specifically cited Invitation Homes, which owns thousands of homes in California markets including Sacramento, Stockton, the Inland Empire, and the San Fernando and San Gabriel valleys.
Institutional ownership of single-family homes expanded after the 2007-09 financial crisis, when firms began acquiring distressed properties and converting them into rentals. According to supporters, those acquisitions accelerated during the pandemic as low interest rates and rising home prices created new opportunities for large investors.
Lee is also co-author of AB 1611, introduced by Matt Haney, which would close a tax break for corporate landlords. Supporters say the measure is intended to reduce incentives for large investors to acquire homes that might otherwise be sold to individual buyers.
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A hard concept to legislate. I remember trying to limit the amount of acreage that got water from the Central Valley Project. The land owners were always able to change title without giving up the land. I imagine people will find workarounds.
Removing tax breaks as a disincentive makes more sense.
“Supporters of the measure say Wall Street-backed firms have used their financial advantage to outbid prospective homebuyers, particularly in markets already strained by limited supply and rising prices.”
A simpler solution is to build more housing.
Wall-street backed firms tend to use their leverage in exactly the type of excessive supply markets that you’d prefer.
I don’t believe they’ve attempted it in Davis (but I’m kind of hoping they do, especially as it related to “small a” affordable housing). The reason being that I’m not feeling particularly cooperative regarding the pro-sprawl arguments.
And there you have it. Ron O’s indifference and mendacity on full display.
It’s not merely “indifference”.
I’m profoundly AGAINST the housing shortage people. The same people, by the way, that wanted to INCREASE demand for housing via DISC.
The same people who think the school district should be running the town (more than it already does).
The same people who engage in land acknowledgements, but (when it comes down to it) won’t “give back” the Patwin school site, for example.