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Bill To Ban Corporate-Owned Single-Family Homes Rentals Passes First Policy Committee

For immediate release:

Mega corporations are buying up swaths of single-family homes, taking homeownership opportunities from hardworking families. Assemblymember Alex Lee’s legislation, AB 2584, will protect California’s limited supply of single-family homes, and prevent these corporations from profiting off of the housing scarcity. AB 2584 is headed to the Appropriations Committee after passing the Judiciary Committee. 

AB 2584 proposes to ban institutional investors that own more than 1,000 single-family homes from purchasing additional single-family properties and converting them into rentals. The bill would authorize the Attorney General to bring a civil action for a violation of the provisions of AB 2584.

As of June 2022, large institutional investors owned more than half a million single-family homes in the U.S. Some firms own thousands in California alone, targeting areas prone to higher rent growth. For instance, Invitation Homes, a real estate investment trust spun off from private equity firm Blackstone, owns roughly 12,000 rental homes across the state. 

“Mega corporations outcompete new homeowners, buy up existing houses, and convert them to rentals,” said Assemblymember Lee. “These are homes that would usually be purchased by first-time homebuyers. But everyday families are not able to compete with all-cash offers. In our housing shortage, we should not be letting corporations profit off of the scarce inventory of homes. AB 2584 will protect Californians’ opportunities for homeownership.” 

Just 15% of California households could afford to buy the $833,170 median-priced home in late 2023. With the sky-high housing prices, homeownership rates statewide have declined over the years. Roughly 55% of California homes were owned by their occupants in 2022, down from a high of about 60% in 2006 at the peak of the housing bubble. As for Californians aged 35 to 45, the decline was even greater as homeownership rate declined from about 49% to nearly 40% between 2000 to 2021. 

Meanwhile, corporate ownership of homes surged in the wake of the Great Recession, with subprime mortgage foreclosures making a vast amount of homes available for low prices. Institutional investors are able to outbid working families for single-family homes by tapping into their wealth, buying these properties in cash. They have been buying smaller, more modest homes — properties that would usually be purchased by first-time homebuyers. These homes tend to be in traditionally more affordable markets with low housing growth and increasing demand. For instance, properties owned by Invitation Homes are concentrated in metros like Sacramento, Stockton, the San Fernando and San Gabriel valleys as well as the inland empire.

“Every corporate bought single-family home is another ownership unit taken away from the limited stock that would traditionally be available to families who are buying their first homes,” said Assemblymember Lee. “AB 2584 makes housing attainable for first-time homebuyers who are unable to compete with large investment firms funded by Wall Street.” 

See here for Assemblymember Lee’s explainer on AB 2584.