Newsom vows crackdown on corporate homebuying in | Real Estate news

In his last State of the State speech, Gov. Gavin Newsom took purpose at a group that some say contribute to California’s housing affordability disaster: corporate landlords.

Newsom vowed to take a harder stance toward institutional buyers, such as hedge funds and personal equity teams, that buy up tons of or hundreds of properties in order to rent them out.

“It’s shameful that we allow private equity firms in Manhattan to become some of the biggest landlords in many of our cities,” he said, including that the follow crushes the dream of home possession and raises rents for Californians.

It’s unclear precisely which type the crackdown will take.

“Over the next few weeks we will work with the Legislature to combat this monopolistic behavior, strengthen accountability and level the playing field for working families,” he said. “That means more oversight and enforcement, and potentially changing the state tax code to make this work.”

It’s a uncommon second of political alignment between Newsom and President Trump, who vowed a related directive in a social media post in which he announced quick steps to ban institutional buyers from shopping for single-family properties.

The post despatched shockwaves through the market, decreasing stock costs of corporate housing giants such as Invitation Homes and Blackstone Inc., but no particular actions have been announced.

In California’s case, Newsom could have to work with the state legislature. The invoice that most carefully aligns with the initiative is AB 1240, which seeks to ban buyers that own at least 1,000 single-family properties from shopping for more properties in order to rent them out.

The invoice, launched by Assemblymember Alex Lee, handed the state Assembly last 12 months but stalled after fierce opposition from real estate brokers and the California Apartment Assn. It awaits a Senate committee listening to.

Institutional investment in real estate grew to become a point of interest during the pandemic, when low rates of interest despatched the housing market into a frenzy, and first-time homebuyers competed with buyers viewing the home as an asset, not a home. During the second quarter of 2021, 23% of home gross sales in L.A. County went to buyers fairly than somebody wanting to live there.

But data show that corporate possession makes up a a lot smaller share of the market. Analysis from the California Research Bureau confirmed that 2.8% of single-family properties in the Golden State are owned by firms that own at least 10 properties.

The greatest chunk of that seems to be smaller mom-and-pop landlords fairly than giant companies. Roughly 80,000 properties are owned by firms with more than 100 properties, while almost 235,000 properties are owned by firms with 10 to 49 properties.

Still, renters across the state have confronted issues with institutional buyers. In 2024, Invitation Homes, the most important corporate landlord in California with more than 11,000 properties, agreed to pay $20 million to resolve allegations of unpermitted renovations. That same 12 months the company agreed to pay $48 million to settle allegations of unfair eviction practices and withheld security deposits.