Newsom plans crackdown on corporate landlords

from Ben Christopher and Jeanne KuangCalMatters

This story was originally published by CalMatters. Sign up for their newsletters.

In his final year in office, Gov. Gavin Newsom plans to go after big investors who buy and own homes in California — in the same week that President Donald Trump also took aim rhetorically at Big Landlord.

It’s an unlikely meeting of the minds of two political foes who, in a race to fend off constituents’ worries about affordability, settled on the same populist message: Blame Wall Street.

Newsom plans to say during his State of the State address to lawmakers on Thursday that he wants to work with them to regulate the practice of investors buying large quantities of homes to rent them out, forcing Californians to compete with them to afford a home purchase, according to the governor’s office.

The proposals could include “increased state oversight and enforcement and potential changes to the state’s tax code,” according to the governor’s office.

“When housing is treated primarily as a corporate investment strategy, Californians are feeling the impact,” an office source said. “Prices are going up, rents are going up and fewer people have a chance to buy a home.”

This sounds similar to a Trump made an offer on his social media platform Truth Social on Wednesday. The two were previously closely associated with politics related to clearing homeless camps.

“I am taking immediate steps to prohibit large institutional investors from buying more single-family homes,” the president wrote, sending stock prices of major publicly traded residential real estate investment firms soaring. He urged Congress to turn the proposal into law and promised to unveil additional housing policy proposals at the World Economic Forum summit in Davos, Switzerland later this month.

Newsom stopped short of calling for an outright ban on institutional investor ownership, though the source said he would seek to “limit” it in order to make homeownership more affordable for Californians.

He hasn’t offered anything concrete yet. Whatever Newsom wants to do, he will need the approval of the state legislature.

Trump, for his part, did not offer any details on his proposal, such as how institutional investors would be defined under the proposed law or why he specifically targeted single-family homes. The White House press office did not respond to an email seeking these questions.

The dual announcements come after years of sustained efforts by California progressives to address the growing number of companies that have been buying up single-family housing stock since the Great Recession. The matter has been the subject of renewed concern in Los Angeles since the fire, where a recent report from RedFin showed that investors (loosely defined as any buyer with a name that includes “LLC,” “Inc,” or “Corp”) bought 27 of the 61 burned vacant lots that sold in Altadena — more than 40%.

Asked about this report in an interview with MS Now this week, Newsom said he signed an executive order last year aimed at protecting homeowners who find it too expensive to rebuild from being hit with “predatory” low offers on their properties. But he acknowledged that “broader market conditions are challenging.”

The proposals mark new territory for Newsom’s affordable housing platform. The governor, now in his final year in office, has spent most of the past seven years focused on construction boost. It’s a turn toward populism for the governor, who is expected to run for president in 2028.

Blaming deep-pocketed investors for the nation’s housing woes has become an increasingly ideological exercise in recent years, with politicians as diverse as New York’s Rep. Alexandria Ocasio-Cortez and Vice President J. D. Vance championing the cause.

Shortly after Trump took office, Republican Sen. Bernie Moreno of Ohio, an enthusiastic supporter of the president, vowed to introduce legislation in his own post to X.

Is this really a problem in California?

Many housing industry professionals, economists and policy researchers are skeptical.

“It’s really hard to buy a house right now, so people are looking for someone to blame, but I think (institutional investors) are more a symptom of the affordability crisis than a perpetuation of it,” said Caitlin Gorback, an economist at the University of Texas at Austin who has studied the effect of investors on local real estate markets.

Research on the topic is mixed, although most analyzes have found that by taking owner-occupied housing and turning it into rentals, these companies tend to increase the rental supply. This puts downward pressure on rents while taking away homes that can be bought, leading to higher prices.

Less than 3% of all single-family homes in the state are owned by companies that own at least 10 properties.

It also takes away opportunities for future homeowners to purchase a desirable single-family home. But even that comes with an underappreciated upside, Gorbak said: They give more expensive renters the chance to live in single-family homes — typically in wealthier, whiter and resource-rich neighborhoods — something historically reserved for those who can afford to buy.

Although apartment buildings are typically owned and operated by large financial companies, renting single-family homes wasn’t seen as a Wall Street-worthy money-making opportunity until after the Great Recession. Since then, companies such as Invitation Homes, Blackstone, Progress Residential and AMH Homes have generally focused on markets with relatively low prices and a rapidly growing population.

This does not describe California. As a result, larger investors — however they are defined — make up a relatively small share of single-family landlords in the state. Less than 3 percent of all single-family homes in the state are owned by companies that own at least 10 properties, according to an analysis by California Research Bureauwhich conducts research for state legislators. Only 20,066 are owned by firms with portfolios of 1,000 units or more. The largest of these owners is Invitation Homes, which owns over 11,000 homes in the state and reached an agreement with Attorney General Rob Bonta’s office last year on charges that he overcharged tenants and illegally raised rents on more than 1,900 properties.

There are more than 16 million rental units statewide, according to Census data.

While attacking big investors over high housing costs is a “huge distraction,” it has obvious political appeal, said Stan Oklobdzija, a professor of public policy at UC Riverside. “Attacking institutional investors is the latest iteration of pretending to do something without actually doing anything… It’s just the kind of archetypal cheap talk.”

For nearly a decade, Democrats in the state legislature have proposed bills to track or ban the practice. Former Gov. Jerry Brown in 2018 vetoed a bill to create a registry of institutional investors who own 100 or more single-family homes, noting that “collecting the data will not stop the purchase of these homes by private investors.”

In 2024, lawmakers proposed barring investors who own at least 1,000 single-family homes from buying more houses and renting them out, barring institutional investors from buying single-family homes for any reason, and barring developers from selling entire new single-family subdivisions to rental investors. All three bills died in committee.

deputy Alex Leeauthor of the first proposal, resumed the account last year. It passed the Assembly and awaits a Senate committee hearing.

Lee, a Democratic Socialist who has long criticized the role of big money in the state’s real estate market, said he was “stunned” to find himself on the same page as Trump, whom he described as a “far-right fascist.” While he expressed doubts that the Trump administration would follow through on the promises the president made in his social media post, he said “Democrats need to wake up to this populist but fair stance.”

“We can’t let the far right take over the housing positions that people care about,” Lee said.

Newsom apparently agrees.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.