Skinner Bill Would Bar Hedge Funds from Snatching Up Single-Family Homes

Photo by Marcus Lenk on Unsplash

By David M. Greenwald
Executive Editor

Sacramento, CA – Last week California State Senator Nancy Skinner introduced SB 1212, which prohibit an investment entity from purchasing, acquiring, or leasing a single-family home or duplex.

“My bill would prohibit these large hedge funds and large investment type firms from being able to purchase single-family homes or duplexes,” Senator Nancy Skinner told the Vanguard in a phone interview on Thursday.

She noted it wouldn’t cut them out of other parts of the residential market.

Skinner explained that California since the Great Recession has seen the number of owner-occupied homes drop to the lowest level in decades.

“We’re at the lowest number,” she said.  “What with the hedge funds and other large investment firms having now decided to look at single-family homes as an asset class, they have the capability because they can pay in cash because they can outbid to outcompete a family who’s trying to buy a home.”

She added, “It’s just furthering the inability for California families to reach home ownership, which is the essence of the American and the California dream.”

Many experts believe that investment firms have been buying up single-family homes, exacerbating the housing crisis and driving up prices.

In an article that ran in the Courthouse News in November 2022, it reported that Berkeley City Leaders “cited large investment firms as contributing to the local housing availability crisis through real estate speculation.”

In a report to the Berkeley City Council, “city officials said large financial companies like BlackRock are some of the largest real estate owners in the country and may have a detrimental influence on the Bay Area market.”

The report found “private equity-backed landlords are 18% more likely than corporate landlords not backed by equity to evict tenants,” “who are themselves more likely to do so than small landlords.”

“Redfin data shows that 13% of homes in Oakland were purchased by an institutional investor or business in the fourth quarter of 2021, a 16.9% increase over the year before. In San Francisco, 18% were acquired by institutional investors,” the report noted. “This follows a concerning nationwide trend where large institutional investors have since the beginning of the pandemic purchased an enormous number of homes; over 75% of these offers are in all cash, and many without any inspections, pricing prospective homeowners out of the real estate market.”

Vice, in December, reported that “hedge funds have invaded the housing market” and noted, “A sweeping new bill introduced in Congress would essentially ban hedge funds and private equity firms from buying single-family homes.”

Congress saw a bill introduced in December by U.S. Senator Jeff Merkley and Washington Rep. Adam Smith.

Called the End Hedge Fund Control of American Homes Act, the bill would require large funds to sell off 10 percent of their homes each year over a decade.

“We shouldn’t allow private equity firms to buy up vast quantities of American homes and create a generation of lifelong renters. Congress needs to act fast and help promote access to safe, affordable housing and homeownership for American families, not Wall Street,” Smith said in a December press release.

Senator Skinner noted that one of the more alarming facets of these hedge funds is that they can pay in cash, outbidding families who are quickly outbid, and they often do it before the home is even listed.

Skinner said, “There’s federal bills right now talking about this.”

She explained, “There’s other bills talking about it because seeing this kind of, we’ve been seeing it since recession. There was a lot of entry of large corporations and hedge funds buying homes during foreclosure crisis. It kind of died down a little, and now it seems to be on the upswing. “

Whether this will be able to pass muster at the courts is anyone’s guess.

“We work with the legislative staff… to write a law that is can withstand whatever court challenges. But you can’t predict and you never know.”

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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