A state lawmaker from San Francisco wants to put a cap on corporate rental housing.
Assemblyman Alex Lee has introduced a bill that would prevent any company that owns more than 1,000 single-family homes from buying more properties and turning them into rentals, the San Francisco Standard reported. The bill will be heard in committee on March 16.
The lawmaker is targeting firms he says have profited off a state housing crisis and made it worse by limiting supply and driving up prices, putting starter homes out of reach for families.
“First-time homebuyers are not able to compete with cash offers from these large corporate firms,” Lee said in a statement. “These corporations are taking homeownership opportunities away from hard-working Californians and exacerbating the scarcity of single-family homes.”
His Assembly Bill 2584 would authorize the state attorney general to pursue any violators in court.
If found guilty, an investment firm would have to pay a penalty of $100,000 for each violation. It could also be forced to sell the property to an independent third party within a year of the court judgment.
Lee likely capped the cut-off at 1,000 homes to not unfairly exclude “mom-and-pop” investors, according to Ryan Lundquist, a certified residential appraiser in Sacramento who used tax billing data to map out how Dallas-based Invitation Homes gobbled up more than 10,000 homes in California.
Invitation Homes, the largest owner of single-family homes in the Bay Area, agreed to pay $3.72 million in civil penalties and refunds last month to resolve allegations it illegally raised rents on hundreds of homes.
Companies such as Invitation were able to exploit the 2008 mortgage crisis when hundreds of thousands of homes were foreclosed upon, Lundquist said.
“Invitation Homes was incredibly savvy,” Lundquist told the Standard. “They entered the market when it was at its very bottom, targeted neighborhoods that were attractive to first-time homebuyers, bought [single-family homes] dirt cheap and rode the wave of exponential rent growth.”
There are four other businesses that own more than 1,000 single-family homes in California, according to an analysis by the State Library’s California Research Bureau.
Critics of Lee’s bill say that targeting institutional investors is misguided. A study by USC and Arizona State University last year found no evidence that single-family home rental companies crowd out homebuyers or increase home prices.
David Howard, CEO of the National Rental Home Council, cited national figures by Freddie Mac that showed large investors in the single-family home renting business own less than 3 percent of the total housing stock.
He also pointed to a Redfin study that showed that one-third of all home purchases last year were bought with cash, suggesting that potential homeowners compete with other homeowners more than they do with large rental providers.
“This bill only makes housing less attainable and affordable,” Howard told the Standard. “Instead of attacking housing providers, the council would rather Assemblymember Lee consider working with the housing industry to create legislation encouraging and incentivizing expanded development in California’s housing market.”
— Dana Bartholomew
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