The Los Angeles City Council is considering banning iBuyers and private equity firms from acquiring some single-family homes as speculative investments.
City Council President Nury Martinez is set to introduce a motion to that effect on Friday, according to the Orange County Register.
If approved, the motion would instruct city staff, including the City Attorney, to draw up means to stop those companies and investors from purchasing “affordable” properties, suggesting that a ban would specifically target homes at the lower end of the market.
Martinez named Zillow, Opendoor, Rockethomes, and Redfin among the companies that engage in speculative single-family home investment in the city. Private equity wings of companies such as BlackRock and others also are part of the trend.
IBuying is a service that allows homeowners to sell their properties to companies such as those, which typically aim to flip them quickly for a profit. The companies pitch the service as less stressful and time-consuming than selling on the open market. They often close on the purchase of a house in just a few days.
Critics of the model say these companies squeeze out everyday homebuyers and drive up home prices. A wider frenzy in post-pandemic homebuying in Southern California has also driven prices up to new highs practically every month since the beginning of last summer.
The motion introduced by Martinez, who represents a largely working-to-middle class section of the city, said those companies and private equity firms exacerbate the city’s housing crisis when they “target affordable, single-family homes and compete to buy up as much inventory as possible, flip them and then sell them for a profit.”
“Low-income Angelenos, who have lived in their neighborhoods for decades, are unable to compete with these iBuyers,” the motion continues. “This has led to many longtime residents being pushed out of their homes, neighborhoods and communities.”
Zillow earlier this month shut down its Zillow Offers iBuying service, citing “unpredictability in forecasting home prices.”
Zillow and other iBuyers ramped up their home purchases in Southern California this spring, buying 789 homes in the first three months of the year.
Opendoor is currently the largest iBuyer in the country. It purchased a record 15,000 or so homes nationwide in the third quarter alone.
[OC Register] — Dennis Lynch