Newsom’s remarks seem to signal a shift from his earlier sentiment that increasing housing construction is the primary solution to the affordability crisis. Now in his final year as Governor, Newsom has decided to serve a more populist critique of Wall Street-backed landlords.
“I just humbly submit, I think it’s shameful that we allow private equity firms in Manhattan to become some of the biggest landlords here in our cities in California,” the Governor said during the address, going on to pledge his administration will work with Sacramento lawmakers to curb “monopolistic behavior, and strengthen accountability, level the playing field for working families.”
Action could include heightened oversight and enforcement, with changes to the state tax code also on the table. California may follow in the footsteps of New York, where lawmakers have disincentivized large investment entities from buying single and two-family homes en masse by preventing investors from claiming certain tax deductions on the homes they own.
Whatever Newsom seeks to do, he’ll need the approval of legislators who are likely to gang up on large landlords.
There is no love lost between California lawmakers and Big Landlord, with Sacramento politicians codifying their disfavor of large landlords in many laws. An easy example is the Tenant Protection Act of 2019 (AB 1482), a law that exempts certain properties from statewide rent control unless the property is owned by a corporation, real estate investment trust, or LLC in which at least one member is a corporation. Lawmakers were wary of these ownership structures because the actors were likely to be sophisticated enough to take advantage of loopholes and go on a buying frenzy.
Another example is Senate Bill 1079, dubbed the “Homes for Homeowners, Not Corporations.” This law was designed to give individuals, families, tenants, and non-profits a fair shot by curbing the bulk purchase of foreclosed homes by large investors and corporations. “Individuals who have a little bit of money can come and play in a way that normally you would not be able to,” Daniel Bornstein told the Mercury News, explaining the no-bundling rule could benefit our clients who have more of a level playing field.
How big is the problem?
How many homes are being scooped up by institutional investors depends on who you ask – the numbers are all over the board – but the consensus is that corporate landlords make up a small share of single-family homes statewide. We believe that while deep-pocketed investors may exacerbate the lack of access to affordable homes, it will take a multiplicity of efforts to solve the housing shortage, such as addressing long-term undersupply, zoning limits, construction shortages, and high costs.
Owner move-in evictions are a pathway to long-term home ownership
With so few vacancies in today’s red-hot rental market, it may be challenging for renters to find their first home. At Bornstein Law, we take enormous pride in welcoming first-time homebuyers recognize the dream of homeownership through a proper owner move-in eviction.
When allowed in rent-controlled jurisdictions, it is a relatively easy process for owners to gain possession of a unit for their own use as long as there is no history of acrimony between the new owner and the outgoing tenants. Individuals who have just sprung for a mortgage and plan on staying in the home for several years should have no problem getting into the home, but there are a host of procedural requirements. We need to consider relocation payments, as well.
We conclude by asking how many people wash a rental car? Not that many, because they rent it. It’s not theirs. We want younger generations to work toward obtaining that shiny new home they can call their own and applaud any measures that pave their way.
