California Bill Will End Tax Breaks for Wall Street Landlords

AB 1611 would end a tax break used by large landlords who buy and rent out single-family homes, curbing the growing threat of corporations competing with first-time family homebuyers.

SACRAMENTO, CA - Today, California Assemblymember Matt Haney (D-San Francisco) announced legislation to end a tax break that helps Wall Street landlords buying up homes that should be within reach for working families and first-time buyers. The bill would get rid of a profiteering scheme Wall Street landlords use to avoid paying taxes on their massive profits from buying moderately priced single family homes and selling them at a huge markup. This change is aimed at reducing incentives for Wall Street landlords to keep buying up homes that working families and first-time buyers are trying to purchase.

AB 1611 targets large-scale owners who directly or indirectly own more than 50 single-family homes. Under the bill, those owners could no longer defer California taxes on profits by selling a single-family home through a like-kind exchange, commonly known as a 1031 exchange. Instead, the gain would be recognized for California tax purposes, requiring the seller to pay taxes on the profit from the sale.

"Working people are doing everything right and still getting outbid by Wall Street. A home should go to a family, not a corporation. California shouldn't be underwriting corporate profits while rigging the housing market against regular families who simply want to realize the dream of owning a home, " said Assemblymember Haney, Chair of the Committee on Housing and Community Development and California Renters Caucus. "For too many first-time buyers, it feels like the chance to buy a home is over before it starts. They walk into an open house, and a faceless corporation shows up with cash and wins. When a family loses a home to Wall Street, they lose the chance to build equity and security.

Nearly half of Californians do not own a home, and investor ownership remains a major feature of the state's housing landscape. Recent reporting based on property records estimates that roughly 19% of California homes are investor-owned, about 1.45 million homes statewide, placing California among the states with the largest total number of investor-owned homes.

"AB 1611 will give families a fighting chance to attain homeownership and build assets, while discouraging investors primed to take advantage of distress, as we are seeing right now in the aftermath of the LA fires," said Paulino Gonzalez-Brito, Chief Executive Officer of Rise Economy. "By swooping in with millions of dollars and outbidding local families through cash offers, Wall Street and private equity corporations are driving up prices and making it harder for people to purchase a home and build a stable future. We have seen this movie before. The status quo favors Wall Street investors with yet another tax break unavailable to most Californians. Let's put California families first."

In the wake of the Los Angeles wildfires, corporate investors have also been moving quickly to purchase burned or damaged properties from homeowners facing financial hardship. In some cases, families who once owned their homes are now renting in the same neighborhoods after investors bought their properties at distressed prices. This trend has raised concerns that disaster recovery is becoming another opportunity for large corporations to expand their rental portfolios at the expense of displaced homeowners.

California's housing market remains among the most expensive in the nation, and limited inventory has made it difficult for many families to buy homes. All-cash and quick-close offers have become more common in competitive areas, leaving buyers who rely on mortgages at a disadvantage. Investor ownership is also uneven across the state. In several rural and mountain counties, investors are estimated to own more than half of homes, including Sierra, Trinity, Mono, and Alpine counties, while many large urban counties are closer to the mid-teens. AB 1611 would limit that benefit for the biggest players. The measure would apply to sellers who, directly or indirectly, own more than 50 single-family homes. When those large owners sell a single-family home, the bill would require them to recognize the gain for California tax purposes rather than deferring it and rolling the proceeds into more housing.

The bill will be heard in Assembly Revenue & Taxation today, April 27.

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