BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 2282 Hearing Date: August 11,
2016
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|Author: |Calderon |
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|Version: |August 8, 2016 |
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|Urgency: |Yes |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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Subject: Rental housing: large-scale buy-to-rent investors:
data collection
SUMMARY:
Establishes the Task Force on Institutional Investors within the
Bureau of Real Estate; requires the Task Force on Institutional
Investors, on or before July 1, 2018, to submit to the Governor
and the Legislature a report regarding data collection on
large-scale buy-to rent investors, as specified; defines
"large-scale buy-to-rent investor" as a publicly 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.
Existing law:
1)Establishes the Real Estate Law, administered by the Bureau of
Real Estate (CalBRE or Bureau), within the Department of
Consumer Affairs (DCA), which licenses and regulates real
estate salespersons, brokers, and mortgage loan originators.
(Business and Professions Code (BPC) § 1000 et seq.)
2)Makes finding and declarations that the subject of housing is
of vital statewide importance to the health, safety, and
welfare of the residents of this state, for the following
reasons: (Health and Safety Code § 50001)
a) Decent housing is an essential motivating force in
AB 2282 (Calderon) Page 2
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helping people achieve self-fulfillment in a free and
democratic society.
b) Unsanitary, unsafe, overcrowded, or congested dwelling
accommodations or lack of decent housing constitute
conditions which cause an increase in, and spread of,
disease and crime.
c) A healthy housing market is one in which residents of
this state have a choice of housing opportunities and one
in which the housing consumer may effectively choose within
the free marketplace.
d) A healthy housing market is necessary both to achieve a
healthy state economy and to avoid an unacceptable level of
unemployment.
This bill:
1)Adds findings and declarations that state the following:
a) It is the intent of the Legislature in enacting this
provision to analyze the impacts on the real estate market
in California of the investment activities of large-scale
buy-to-rent investors that, since October 2013, have
involved a mortgage-based security supported by the revenue
from single-family rental properties.
b) The emergence of this type of security is likely to grow
and scale institutionally owned single-family rental homes
to a level that is, at this time, unknown. However, with
home prices currently approaching record highs, yet with
homeownership at historic lows, it is important to
understand the size and scope of investor activity of
single-family homes and the impacts it has on the real
estate market in California.
c) It is in the best interest of the State of California to
help ensure, to the extent feasible, that families and
individuals are able to become homeowners.
AB 2282 (Calderon) Page 3
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d) Large-scale buy-to-rent investors own more single-family
homes than any other population in the United States, a
market once dominated by local, private owners.
e) It is critical to know to what extent these new
investors are crowding out potential owner-occupants or
artificially inflating home prices.
f) Before any meaningful legislative action takes place,
more data needs to be collected and analyzed to ensure the
proper oversight over this new investment activity. There
is currently insufficient data to properly categorize the
problem, and while the impacts are currently unknown,
families and other first-time homebuyers are certainly put
at a disadvantage when having to compete against a large
investment firm. This can exacerbate income inequality
issues in the state and must be addressed sooner rather
than later to protect the American Dream of buying and
owning a home.
g) To the extent these investments are geographically
clustered, they could have unintended ripple effects across
regions throughout California and should be examined more
closely. Should the Legislature wait longer to gather and
analyze the appropriate data, thousands more homes could be
off the market for purchase by families and other
first-time homebuyers.
1)Creates the Task Force on Institutional Investors (Task Force)
within the Bureau.
2)Requires the Task Force to examine the impacts that
large-scale buy-to-rent investors are having on the real
estate market in California.
3)Establishes the membership of the Task Force as the following:
a) The Real Estate Commissioner, or his or her designee,
who shall serve as the chair of the task force.
b) A professor from either the University of California or
the California State University with an extensive
background and knowledge of the real estate market, to be
appointed by the Governor.
AB 2282 (Calderon) Page 4
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c) A local government official with an extensive background
and knowledge of the real estate market, to be appointed by
the Governor.
d) A real estate expert, to be appointed by the Senate
Committee on Rules.
e) A real estate finance expert, to be appointed by the
Speaker of the Assembly.
f) A legal services expert with expertise on homeownership
from northern California, to be appointed by the Speaker of
the Assembly.
g) A legal services expert with expertise on homeownership
from central California, to be appointed by the Governor.
h) A housing counselor certified by the United States
Department of Housing and Urban Development from southern
California, to be appointed by the Senate Committee on
Rules.
i) An expert from a county assessor's office, to be
appointed by the Governor.
1)Requires, on or before July 1, 2018, the Task Force to submit
to the Governor and the Legislature a report that includes,
but is not limited to, all of 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, and 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, the length of time
large-scale buy-to-rent investors are holding their
property as a rental, and how many homes they are selling
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each year.
c) Data on the structure of the investment instruments in
which properties in California are held, including, but not
limited to, factors that could affect the timing and
quantity of property turnover in California by investors
and the potential effects of the investment structure on
California's rental and homeownership markets.
d) Recommendations to the Governor and the Legislature on
how to increase homeownership among the residents of
California, and the tracking and monitoring of large-scale
buy-to-rent investor holdings, including proposed
legislative or regulatory actions, homebuyer assistance
programs, and any other recommendations the task force
deems appropriate.
1)Defines "large-scale buy-to-rent investor" as a publicly
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.
2)Includes an urgency clause to provide for the expedient
collection of data on large-scale buy-to-rent investors. In
turn, this measure will provide for meaningful legislative
action that will help alleviate the pressing concern of rising
home prices.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. The Author is the sponsor of this bill. According
to the Author, "AB 2282 will establish the Institutional
Investors Impact on Real Estate in California Task Force that
will examine the impacts large-scale buy-to-rent investors
are having on the real estate market. The task force will be
composed of nine members with varying expertise in the real
estate market.
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In conducting the report, the task force will focus on the
number, density, and percentage of single-family homes each
large-scale buy-to-rent investor owns, and 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, the length of time large-scale buy-to-rent
investors are holding their property as a rental, and how
many homes they are selling each year, amongst other things."
2. Background on CalBRE. Real estate licensing in California
commenced in 1917. CalBRE is the state entity currently
charged with responsibility to enforce the Real Estate Law,
the Subdivided Lands Act, and the Vacation Ownership and
Time-share Act of 2004. CalBRE's programs are in place to
satisfy the Bureau's statutorily mandated obligations of
licensing and regulating salespersons, brokers, mortgage loan
originators, real estate and prepaid listing service
licensees, reviewing and approving subdivision and time share
offerings, and approving continuing education (CE) and
pre-license courses. Within the framework of requirements of
Division 4 of the BPC and the Regulations of the Real Estate
Commissioner as contained in the California Code of
Regulations, each of CalBRE's programs contribute toward
satisfying its mission of protecting and serving the
interests of the public in real estate transactions and
providing related services to the real estate industry.
Specifically, BPC § 10050 requires the Real Estate
Commissioner to enforce all laws commencing with BPC § 10000
and
BPC § 11000 of Part 2 in a manner that achieves the maximum
protection for the purchasers of real property and those
persons dealing with real estate licensees.
3. The Housing Market and Rise of Large-Scale Buy-to-Rent
Investors. In the aftermath of the financial crisis and
Great Recession, the supply of vacant homes far exceeded the
demand for owner-occupied homes. This severe imbalance
created a unique opportunity for a small number of
well-funded investors to purchase large numbers of
single-family homes. In October 2013, an institutional
investor created the first triple-A-rated, mortgage-backed
security supported by revenue from single-family rental
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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.
Some analysts predict the funding of single-family rental
acquisitions through securitization will likely become a
dominant model quickly, and thus, continue to shrink the
already short supply of homes. One institutional investor,
Blackstone, has already become the largest single-family home
owner in the country. According to Department of Finance,
California has over nine million single family homes. The
estimated portfolio of homes turned to rentals owned by
Invitation Homes, a subsidiary of Blackstone, is around
10,000-12,000 in California.
When rent-backed securities premiered on the market in
October 2013, the $479 million offering from the private
equity company Blackstone Group generated more demand from
investors than the private equity firm could accommodate.
Since then, Blackstone and several other firms specializing
in the rental of single-family homes have sold more than $3
billion of these bonds. This type of securitization has been
hailed as an exciting new asset class, with financial
analysts at Keefe, Bruyette & Woods estimating that it could
swell into a nearly $1 trillion industry over the next six
years.
4. Arguments in Support. Housing and Economic Rights Advocates
argues that, "AB 2292 takes a thoughtful approach to the
issue of the impact on homeownership of having larger scale
investors in single family dwellings that are turned into
rentals. This bill recognizes that the scale of investment
raises questions that localities and the state should have
answers to regarding the impact on the homeownership
market?We have seen the single family home to rental
investment model take root nationally, as well as in our
state, and it seems likely to remain a feature of our modern
housing market."
5. Arguments in Opposition. The California Association of
Realtors (C.A.R.) underscores that, "CalBRE is a special fund
agency which derives its operational budget from licensing
fees and subdivision filings. Unfortunately, AB 2282 seeks
to use real estate license fees and resources to investigate
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a community not regulated by CalBRE." Additionally, C.A.R.
highlights that, "The Legislative Analyst's office would be
the most appropriate entity for examining the issue as they
recently released a report on Why Housing is So Expensive in
California."
6. Author's Technical Amendments. The Author's office has
agreed to the following amendments to alleviate concerns
about the language in the findings and declarations section
of the bill. These amendments will be taken in Senate
Appropriations and will help better capture the bill's
intent.
On page 3, line 7, strike out "to what extent
these new investors are", and strike out lines 8 and 9
and insert " the impact these new investors are having on
California's housing market ."
The new BPC § 65009.5(a) (5) now reads:
(5) It is critical to know the impact these new
investors are having on California's housing market .
On page 3, line 13, strike out "problem, and while
the".
On page 3, line 14, strike the phrase "are
currently unknown," and insert the word " on ".
On page 3, line 14, strike lines 15 to 19 and
insert " home buyers ."
The new BPC § 65009.5(a) (6) now reads:
(6) Before any meaningful legislative action take place,
more data needs to be collected and analyzed to ensure
the proper oversight over this new investment activity.
There is currently insufficient data to properly
categorize the impacts on families and other first-time
home buyers .
On page 3, line 21, strike the phrase "they could
have unintended ripple" insert " the task force shall
examine the ".
AB 2282 (Calderon) Page 9
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On page 3, line 22, strike out "California and"
and insert " California, which ".
On page 3, line 23, strike out "wait longer to
gather and analyze" and insert " delay in gathering and
analyzing ".
On page 3, lines 24 and 25, strike out "purchase
by".
On page 3, in line 25, strike out "homebuyers."
and insert " home buyers to purchase. "
The new BPC § 65009.5(a)(7) now reads:
(7) To the extent that these investments are
geographically clustered, the task force shall examine
the effects across regions throughout California, which
should be examined more closely. Should the Legislature
delay in gathering and analyzing the appropriate data,
thousands of more homes could be off the market for
families and other first-time home buyers to purchase.
On page 4, line 4, strike out "expert," and insert
" expert with background in the buy-to-rent industry, "
These amendments will allow the buy-to-rent industry to
provide speedy input and information to the Task Force.
On page 5, between lines 9 and 10, insert:
"(d) The task force shall be funded by an appropriation
from the General Fund. No funds appropriated to the
Bureau of Real Estate for purposes other than the task
force shall be used to fund the activities of the task
force . Members of the task force shall not be paid a
salary, but may receive a per diem reimbursing them for
expenses associated with the activities of the task
force."
These amendments help address C.A.R.'s concern that
special fund monies will be used for a non-regulatory
purpose and to investigate a community not regulated by
AB 2282 (Calderon) Page 10
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CalBRE.
NOTE : Referral to the Senate Committee on Appropriations.
SUPPORT AND OPPOSITION:
Support:
Housing and Economic Rights Advocates
Opposition:
The California Association of Realtors (C.A.R.)
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