Bill aims to restrict corporate home-buying in California

An Assembly bill is targeting large corporate entities that own extensive portfolios of single-family homes, proposing to limit their ability to purchase additional properties in California.

AB 2584 by Assemblyman Alex Lee, D-San Jose, would prohibit a "business entity" that already owns more than 1,000 single-family homes in the state from acquiring more.

Earlier this month, the bill advanced from the Assembly Judiciary Committee and now awaits a hearing in the Appropriations Committee.

Under the proposed legislation, the term "business entity" is defined to include a variety of legal entities such as associations, companies, firms, partnerships, corporations, and real estate investment trusts, but notably excludes nonprofit organizations.

AB 2584 would authorize the California Attorney General's Office to initiate legal action against entities in violation. Convicted entities could face penalties of $100,000 per violation and may be required to sell the properties to independent third parties within a year of the court judgment.

Lee argues his bill aims to level the playing field for first-time home buyers who are often outbid by large firms with substantial financial resources. The legislation hearkens back to a trend after the 2008 financial crisis during which corporations purchased single-family foreclosed homes from banks.

It's worth noting, though, that the purchase and renovation of these properties during and after the foreclosure crisis helped stabilize the housing market, relieved neighborhood blight, and provided rental opportunities in a time of financial uncertainty.

Also, as home prices have increased in recent years, corporate ownership of single-family homes has waned.

"Ownership of single-family homes by 'business entities' in California is extremely limited, estimated at 0.15 of 1%," Debra Carlton, executive vice president of state government affairs for the California Apartment Association, writes in a letter opposing the legislation.

Carlton continued: "It may be a better approach for AB 2584 to focus on requiring these businesses to give tenants in the home the first right to purchase the home when the entity decides to sell. We believe this is a better focus for AB 2584 and may give more tenants the option to become homeowners."

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