BILL ANALYSIS Ó AB 2282 Page 1 ASSEMBLY THIRD READING AB 2282 (Calderon) As Amended May 31, 2016 Majority vote ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Housing |4-2 |Chiu, Chau, Lopez, |Steinorth, Beth | | | |Mullin |Gaines | | | | | | |----------------+-----+----------------------+--------------------| |Banking |7-4 |Dababneh, Bonilla, |Travis Allen, | | | |Brown, Chau, Low, |Gatto, Hadley, Kim | | | |Ridley-Thomas, Mark | | | | |Stone | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |14-6 |Gonzalez, Bloom, |Bigelow, Chang, | | | |Bonilla, Bonta, |Gallagher, Jones, | | | |Calderon, Daly, |Obernolte, Wagner | | | |Eggman, Eduardo | | | | |Garcia, Roger | | | | |Hernández, Holden, | | | | |Quirk, Santiago, | | | | |Weber, Wood | | | | | | | | | | | | AB 2282 Page 2 ------------------------------------------------------------------ SUMMARY: Requires the Department of Business Oversight (DBO) to create a report on the activities of large-scale buy-to-rent investors and their impact on the real estate market, and prohibits a homeowner from selling their home to a buy-to-rent investor for 15 days when the home is not a short sale or a foreclosure. Specifically, this bill: 1)Requires DBO, on or before January 1, 2018, to submit to the Governor and the Legislature a report that includes but is not limited to the following: a) Information regarding how many large-scale buy-to-rent investors own property in the state for the purpose of renting the property and which regions of the state their investment activity is occurring; b) The number, density, and percentage of single-family homes each large-scale buy-to-rent investor owns; c) An analysis of the potential impacts their investments are having on the local real estate market, including the price of homes, the ability of individual home buyers, specifically those who need financing, to compete against the large-scale buy-to-rent investors; d) The length of time large-scale buy-to-rent investors are holding their property as a rental; and e) How many homes large-scale buy-to-rent investors are selling each year. AB 2282 Page 3 1)Allows DBO to hire an independent third party or obtain assistance from another state department to analyze the information necessary to complete the report. 2)Prohibits a large-scale buy-to-rent investor from placing a bid on a normal sale of a single-family home that is not a short sale, foreclosure sale, or real estate owned property for a period of no less than 15 days after the home has been placed on the real estate market. 3)Defines a "large-scale buy-to-rent investor" to mean a publically traded company devoted to holding and managing single-family home rental properties, either on behalf of clients or for itself, and which owns more than 100 single-family homes during a calendar year. 4)Repeals or makes the reporting requirement in this bill inoperative four years after the bill is enacted or four years after the due date of the report. 5)Requires the report created by DBO to be submitted to the Secretary of the Senate, Chief Clerk of the Assembly, and Legislative Counsel. FISCAL EFFECT: According to the Assembly Appropriations Committee, minor costs, likely in the low tens of thousands of dollars to compile information and produce a report. COMMENTS: AB 2282 Page 4 During the foreclosure crisis companies like Blackstone purchased homes in foreclosure or short sales. These companies rent these homes and securitize the rental income. According to their representative, Blackstone owns 10,000 to 12,000 rental homes in California. Blackstone is buying homes in conventional sales and their rate of home acquisition is about 300 per month nationwide. It is not clear how many of that 300 are in California. This bill would require DBO to analyze the activities of large-scale buy-to-rent investors and provide a report to the Governor and Legislature that describes how many large-scale buy-to-rent investors there are in the state, how many properties they own, and where they are located. Large-scale buy-to-rent investors are defined as publicly traded companies devoted to holding and managing single-family home rental properties that own more than 100 single family homes during the calendar year. DBO would need to determine the impact of these companies on homebuyers, specifically those who would need a mortgage and are not paying cash for a home, to compete against large-scale by-to-rent investors. This bill would also prevent a large-scale buy-to-rent investor from bidding on a home sale that is not a short sale or a foreclosure for at least 15 days from the time the home is placed on the market. Purpose of this bill: According to the author, "Over the last few years, institutional investors, such as Blackstone, have bought up billions of dollars-worth of single-family homes. Instead of renovating and reselling them or just waiting [f]or the real estate market to recover, they have converted these properties into permanent rental homes. Of the five largest metropolitan areas in the [United States] U S where concentration of this type of investment is highest, three of them reside in California: Los Angeles, Riverside, and AB 2282 Page 5 Sacramento. At the time, the vast majority of these purchases were foreclosures or short sales; however, purchases of homes coming from natural sales have recently increased. The CEO of Colony American Homes, which is one of the largest single-family landlords in the country, said it himself 'the first phase was distressed homes, the second phase is acquiring homes in a more regular way.' "In October 2013, an institutional investor created the first triple-A-rated, mortgage? backed security supported by revenue from single-family rental properties. The emergence of a new form of mortgage-backed securities tied to single-family rentals is certain to have an impact on the housing market, communities, and tenants. A mortgage-backed security is created by pooling assets together and then selling interests in that pool to investors, who then receive regular payments from the asset pool. This process provides access to a much larger pool of investors than would otherwise be feasible, increasing liquidity and generally providing a less expensive source of funding than traditional borrowing from banks or private investors. "While institutional investors only represent a fraction of those in the housing market - midsized companies and small mom-and-pop investors who own less than 10 properties have historically been far more prevalent in most markets -securitization is likely to shift this balance. That being said, one institutional investor, Blackstone, has already become the largest single-family home owner in the country. In fact, some analysts predict the funding of single-family rental acquisitions through securitization will likely become a dominant model quickly, and thus, continuing to shrink the already short supply of homes? Families already have a difficult time trying to save up enough money for a down payment, having to compete against an institutional investor who has the financial backing of big banks and pension funds, just isn't fair from both a monetary standpoint and technological." AB 2282 Page 6 Analysis Prepared by: Lisa Engel / H. & C.D. / (961) 319-2085 FN: 0003248