BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2282|
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THIRD READING
Bill No: AB 2282
Author: Calderon (D)
Amended: 8/15/16 in Senate
Vote: 27 - Urgency
SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 6-1, 8/11/16
AYES: Hill, Block, Hernandez, Jackson, Mendoza, Wieckowski
NOES: Bates
NO VOTE RECORDED: Gaines, Galgiani
SENATE APPROPRIATIONS COMMITTEE: 5-2, 8/11/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
ASSEMBLY FLOOR: 52-24, 6/2/16 - See last page for vote
SUBJECT: Rental housing: large-scale buy-to-rent investors:
data collection
SOURCE: Author
DIGEST: This bill 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; and 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.
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ANALYSIS:
Existing law:
1)Establishes the Real Estate Law, administered by the Bureau of
Real Estate (CalBRE or Bureau), within the Department of
Consumer Affairs, which licenses and regulates real estate
salespersons, brokers, and mortgage loan originators.
(Business and Professions Code § 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
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.
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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.
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 the impact these new investors
are having on California's housing market.
f) 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.
g) 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.
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,
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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.
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 with background in the rent to buy
industry 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
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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.
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)Requires the Task Force be funded by an appropriation from the
General Fund.
2)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.
3)Includes an urgency clause to provide for the expedient
collection of data on large-scale buy-to-rent investors
intended to provide for meaningful legislative action that
will help alleviate the pressing concern of rising home
prices.
Background
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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.
"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."
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 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.
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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 the 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, this bill
would incur costs to provide staff support for the Task Force,
collect required data, and draft the required report by the
Bureau.
SUPPORT: (Verified8/11/16)
Housing and Economic Rights Advocates
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OPPOSITION: (Verified8/11/16)
California Association of Realtors
ARGUMENTS IN SUPPORT: Housing and Economic Rights Advocates
argues that, "AB 2282 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."
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 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."
ASSEMBLY FLOOR: 52-24, 6/2/16
AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,
Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh,
Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia,
Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,
Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, Maienschein,
McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,
Thurmond, Ting, Weber, Williams, Wood, Rendon
NOES: Achadjian, Travis Allen, Baker, Brough, Chang, Chávez,
Dahle, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey,
Linder, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson,
Steinorth, Wagner, Wilk
NO VOTE RECORDED: Bigelow, Burke, Beth Gaines, Waldron
AB 2282
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Prepared by:Mark Mendoza / B., P. & E.D. / (916) 651-4104
8/15/16 20:10:17
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