Today the County Board of Supervisors approved Supervisor Terra Lawson-Remer’s plan to crack down on Wall Street investors manipulating the local housing market and increasing the cost of living.

“We need to safeguard housing for renters, first-time homebuyers and working families,” said Supersvior Lawson-Remer, vice chair of the Board of Supervisors. “This action gives the County the tools it needs to help us keep homes in the hands of our friends, family, and neighbors, not greedy corporations. 

“We’re tackling the rising cost of rent and buying a home so our kids and grandkids can raise their families here in the community where they grew up,” Supervisor Lawson-Remer continued. “Homes in our neighborhoods should be for people, not corporate raiders working on behalf of Wall Street hedge funds. San Diego is ground zero for this alarming trend and now the County is doing its part to fight back.”

In recent years, private equity giants and large corporations are increasingly buying up the nation’s scarce supply of homes, including in the San Diego region — driving up prices for their own profit and making the housing affordability crisis worse. 

This practice not only puts homeownership out of reach for many hopeful buyers but also undermines the character, stability and diversity of San Diego neighborhoods. 

Supervisor Lawson-Remer’s accepted a friendly amendment from Supervisor Jim Desmond to include examining townhouses, condos in addition to single family homes, add a threshold number of 25 on what is considered a mom-and-pop business, and the sequencing. The policy aims to hold corporate bad actors accountable, protect communities from illegal business practices, and safeguard housing options for first-time homebuyers and working families. It includes the following actions:

• Analyzing how pervasive commercial ownership of single-family residential properties is in San Diego County using data from property tax rolls to estimate the share of single-family detached homes owned by owner-occupants versus commercial entities like LLCs, banks, partnerships, and look at single-family detached property sales over the past five years to see trends in ownership.

• Explore affirmative litigation options against corporate bad actors and institutional investment firms to address allegations of price gouging, tenant harassment, and price-fixing across the San Diego County real estate market.

• Consider local ordinances and legislation that would address the increasing threats to renters, single-family homeowners, and mom-and-pop landlords posed by unfair and anti-competitive practices. 

• Supporting state legislation to rebalance the housing market and limit institutional investors' influence.

Since the pandemic, low-interest rates have fueled a Wall Street frenzy, with private equity giants buying up homes and apartment buildings to squeeze for profit, leaving tenants and local communities to pay the price. These institutional investors use their huge capital reserves to make all-cash offers and scoop up available properties. This reduces the already-slim inventory in the marketplace and creates a more acute affordability crunch for first-time homebuyers.

The impacts of this corporate home buying spree are also being felt in the rental market. As institutional investors gobble up more and more homes, they are serving as landlords to an increasing share of our residents and they are using questionable practices, including the use of algorithms, to unfairly set rental prices.

Facts

• According to the Federal Trade Commission, rental prices have surged nearly 20 percent since 2020, particularly affecting low-to-middle-tier apartments rented by lower-income residents. 

• Rising shelter costs account for two-thirds of the inflation pressure driving up the cost of living.

• Investor home sales hit an all-time high in the fourth quarter of 2023, with 35.2 percent of California homes being sold directly to institutional investors, more than any other state in the country. This alarming trend is projected to increase, with institutional investors forecasting a tenfold increase in corporate home buying by the end of the decade (from 700,000 single-family homes in 2022 to 7.6 million homes by 2030).

• Blackstone is the largest residential landlord in the U.S., with an estimated 300,000 rental units in their portfolio. A recent report by the Private Equity Stakeholder Project explains that institutional investors like Blackstone aim to maximize shareholder profits, which translates to maximum allowable rent increases, evictions, the rise of hidden fees, reduced investment in maintenance, and even efforts to influence state and local housing policy with the objective of increasing opportunities for profit at the expense of residents and communities. One Blackstone executive even noted that increasing evictions could serve as a “cash flow growth possibility.” These impacts are hitting communities across San Diego County, especially in lower-income neighborhoods and communities of color.

With this policy, the County of San Diego joins our state and federal government in taking action to address this problem.

The Federal Trade Commission and the Department of Justice have filed a joint legal brief explaining that price fixing through algorithms is still price fixing and that landlords and property managers cannot collude to set rental prices, including through the use of algorithms. 

The DOJ has opened up a criminal probe into one such company, RealPage, and the FBI recently raided the headquarters of a large corporate landlord in connection to the investigation. Numerous lawsuits across 10 states allege that owners, operators, and managers of large residential multifamily complexes have abandoned their independent pricing based on supply and demand, and instead used algorithm-based software, such as RealPage, to keep rental prices above market rates and share non-public, commercially sensitive information as part of the conspiracy. The landlords agreed to follow RealPage’s pricing recommendations, on the expectation that competing landlords would do the same. Price-fixing artificially inflates rental prices that burden tenants and distort local housing markets.

California Attorney General Rob Bonta has also led on this issue, settling a lawsuit against corporate giant Invitation Homes, a spinoff corporation of Blackstone that owns over 80,000 homes, for price-gouging and unlawful rent increases.

The County’s Chief Administrative Officer will report back to the Board of Supervisors in 90 days with additional data about corporate home ownership, explore options for the County to file or join litigation efforts, and report back in 180 days with options for policies and ordinances that can be adopted to bar anti-competitive behavior, price fixing, and unlawful rent increases.