Bill To Ban Corporations From Buying Single-Family Homes for Use As Rentals Passes Assembly Floor

Assemblymember Alex Lee’s bill to protect California’s limited supply of single-family homes passed the Assembly Floor, and the legislation is now in the Senate. AB 2584 will ensure that Californians have the opportunity to become homeowners by preventing institutional investors that own more than 1,000 single-family homes from purchasing additional single-family properties and converting them into rentals. 

“Mega corporations have gone on a buying spree amid the housing shortage,” said Assemblymember Lee. “They are profiting off of the housing shortage by cashing in on rising rents and converting homes to rentals. AB 2584 protects homebuying opportunities that would otherwise be snapped up by large corporations with resources to outbid working families. This bill gives families a fairer playing field, and a better chance to buy their first home.”

Just 15% of California households could afford to buy a $843,600 median-priced single-family home in late 2023. With 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. 

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. 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. 

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.

Assemblymember Lee’s bill is part of a wider effort to protect homeownership opportunities for families nationwide. For example, a proposed bill in Minnesota would ban the conversion of single-family ownership housing into rental housing. In Congress, legislation has also been introduced to prohibit hedge funds from owning single-family homes.