Today, Assemblymember Alex Lee introduced AB 2584 to protect California’s limited supply of single-family homes, and ensure that residents have the opportunity to become homeowners. The legislation proposes to prevent institutional investors that own more than 1,000 single-family homes from purchasing additional properties and converting them into rentals.
Institutional investors are increasingly buying homes that would have been available for first-time homebuyers. By 2030, institutional investors are estimated to own over 40% of all single-family rental homes nationwide. Some firms like Invitation Homes, a real estate investment trust spun off from private equity firm Blackstone, own thousands in California alone, targeting areas prone to higher rent growth.
“Corporations are buying up whole neighborhoods worth of housing inventory,” said Assemblymember Lee. “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. I am introducing AB 2584 to protect Californians’ opportunities for stability and homeownership.”
California’s inventory of for-sale housing has dwindled over the years, with active home listings falling to a little over half of what they were in 2019. Meanwhile, both home prices and financing costs have been rising. As a result, homeownership remains out of reach for the vast majority of Californians. Only 15 percent of families statewide could afford to purchase a median-priced home of nearly $850,000 in 2023.
Institutional investors are able to outbid working families for single-family homes by tapping into their wealth, buying these properties in cash. Further, 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 in California 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.
“If someone’s dream is to be a homeowner, then they should have a fair opportunity to achieve that goal,” said Assemblymember Lee. “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.”