Bill Would Bar Corporate Buyers From Purchasing Single-Family Homes for Rentals

Newly constructed single-family homes for sale in Encinitas, Calif., on July 31, 2019. (Mike Blake/Reuters)

In an attempt to support single-family homes and protect future homeowners, Assemblyman Alex Lee has introduced a bill that would prevent investors with more than 1,000 single-family homes from purchasing more of such properties to convert into rentals.

“Corporations are buying up whole neighborhoods’ worth of housing inventory,” the San Jose Democrat said in a Feb. 14 press release announcing Assembly Bill 2584. “First-time homebuyers are not able to compete with cash offers from these large corporate firms. By outbidding homebuyers and converting properties to rentals, these corporations are taking homeownership opportunities away from hard-working Californians and exacerbating the scarcity of single-family homes.”

According to the press release, by 2030 it’s estimated that “institutional investors” would own over 40 percent of all single-family rental homes nationwide. Some of the culprits include Invitation Homes—the nation’s largest home leasing company—which owns thousands of homes in California within areas where rent is more likely to increase.

Lee said the bill is needed because California home listings have dropped 50 percent since 2019, according to data from the economic research group FRED.

With home prices and financing costs on the rise, only 15 percent of California families last year could afford a median-priced home of $850,000, according to a report by the California Association of Realtors, which the press release cited.

“If someone’s dream is to be a homeowner, then they should have a fair opportunity to achieve that goal,” Mr. Lee said. “We have to take a comprehensive approach to ensure housing security for all Californians, and AB 2584 is a key part of my work to tackle the housing crisis.”

According to Mr. Lee, corporate buyers will outbid families for single-family homes, especially smaller homes that would be suitable for first-time homebuyers. Families pushed out of the market lose out on the chance to build equity.

Invitation Homes, for example, owns rental homes concentrated in Stockton, Sacramento, the Inland Empire and the San Gabriel and San Fernando valleys, according to the press release.

The bill would add to efforts by Congress to prevent hedge funds from owning single-family homes, and similar efforts in Minnesota, where a proposed bill could ban conversions of such homes into rental housing, according to the press release.

The bill is currently being heard in an Assembly committee.