BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2282


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          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           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |








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          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.








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          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:  










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          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  








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          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." 









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          Analysis Prepared by:                                             
                          Lisa Engel / H. & C.D. / (961) 319-2085  FN:  
          0003248