Calif. Bill Limiting Corporate Homeownership Advances

Last week the California State Assembly passed a bill limiting the number of houses that a corporation can buy and rent out now moves to the state Senate. The bill would prevent companies from buying more than 1,000 single-family home properties to serve as rental units.

Three companies already own more than 1,000 single-family homes each and a fourth owns 977, according to USA Today citing California Bureau of Research figures. Invitation Homes owns the most at 12,000 houses as of December.

The bill had its first reading in the Senate on Wednesday and then moved to the Senate Rules Committee for assignment to a policy committee. If it passes the Senate it goes to Gov. Gavin Newsom for his signature.

The state has a history of passing legislation favorable to tenants. Last October, for instance, Newsom signed a bill limiting landlords on the amount of the security deposit – now it can’t be larger than one month’s rent.

But California is not the only state proposing such legislation. Nebraska, New York, Minnesota and North Carolina are all considering similar bills. Another bill in Ohio would heavily tax institutional owners. At the national level, there is pending legislation that would force large owners of single-family homes to sell houses to family buyers and cap their ownership of homes to no more than 50. Although the national bill is sponsored by Democrats, the states’ efforts are bi-partisan as many conservative legislators believe that the tight housing market and its affordability issues are in part due to institutional investors’ purchases of single-family homes.

“Corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home,” Republican Gov. Greg Abbott wrote on X recently. “This must be added to the legislative agenda to protect Texas families.”

There are studies that support this view. An Atlanta study was conducted by researchers Nicholas Polimeni and Brian Y. An of Georgia Tech’s School of Public Policy found that corporate ownership of single-family homes in the city resulted in the loss of $1.25 billion in equity from affected neighborhoods between 2010-2022. And $681 million of that loss fell on the city’s majority-Black neighborhoods, where corporations are involved in 70% of single family transactions, compared to 30-40% for other neighborhoods.

These bills are coming at a time when investor purchases of single family homes are increasing after a period of retrenchment over the past two years. They bought some 44,000 homes in the first quarter, up 0.5% from the previous year, marking the first increase since 2Q 2022, according to a Redfin analysis.