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Astronomical prices are forcing a rising share of California families to postpone buying a house. As a result, the state’s record-low homeownership rate has been a boon to one growing segment of California’s housing market: single-family home rentals.

Between 2005 and 2015, the number of owner-occupied homes in California shrunk by nearly 64,000 units, according to the Public Policy Institute of California. Meanwhile, the number of renter-occupied homes increased dramatically: California now has 450,000 more homes used as rentals than it did a decade ago. Compare that to the 1990s, when the number of rented homes grew by less than 120,000, while the state added 700,000 homes owned by the people who live in them.

The rising tide of single-family rentals has renewed attention on where the rent payments that nearly 2 million Californians make each month are going. Lawmakers and first-time homeowner advocates have been scrutinizing a relatively new form of landlord: private investment firms that snapped up thousands of homes during the foreclosure crisis and now rent them out. With nearly one in four California homes now purchased in all-cash, these well-financed institutional investors have also been blamed as unfair competition against families bidding on starter homes.

So how much are institutional investors impacting California’s housing prices? The data says not so much now.

Institutional investors accounted for less than 2 percent of California single-family home sales last year.

Typically, the term “institutional investor” refers to private investment firms that buy dozens of residential properties with the explicit aim of generating a steady income stream through rentals. They often invest the money of wealthy individuals and public pension funds, like those established for California state workers and teachers.

The best example is Blackstone, a publicly traded Wall Street firm that barreled into the country’s single-family home market in the depths of the Great Recession in the late 2000s. Through its residential investment-focused subsidiary, Invitation Homes, Blackstone is now the largest owner of single-family homes nationwide. In California, the company owns about 13,000 homes.

But firms such as Blackstone have stopped buying wide swaths of California homes. According to the real estate data firm ATTOM Data Solutions, which defines institutional investors as entities that buy 10 or more homes in a given year, institutional investors accounted for less than 2 percent of the state’s single-family home and condo sales in 2017.

That’s a pretty steep drop from as recently as 2012, when institutional investors accounted for about 7 percent of sales.

Why the decline? California no longer has a glut of cheap houses that can be easily gobbled up in foreclosure auctions. A sustained economic recovery and a lack of new-housing construction has sent housing prices skyrocketing. It’s now too expensive for institutional investors to buy lots of California homes. Blackstone’s Invitation Homes bought only 82 California houses last year.

“The low inventory and homeownership rates are good (for investors) if they own the property—it means more renters,” says Daren Blomquist, senior vice president at the real estate data firm ATTOM. “But it’s bad if they’re trying to acquire more properties.”

Those all-cash offers beating out would-be homebuyers aren’t coming from large investment firms anymore. Wealthy “mom-and-pop” landlords—families that can afford to buy another house and rent it out as an investment—now dominate the single-family rental market. Among all single-family rentals nationally, about 80 percent are owned by individuals that rent out just one or two homes, according to ATTOM.

But aren’t institutional investors keeping houses off the market—and doesn’t that drive up prices?

Institutional investors aren’t keeping enough homes off the market statewide to blame them entirely for California’s astronomical housing prices. But in certain markets—especially in areas hit hard by the foreclosure crisis, such as the Central Valley and in the Inland Empire—it’s impossible to pretend they have no influence.

Among cities with at least 100,000 residents, Sacramento has seen the most properties sold to institutional investors since 2007, according to ATTOM’s data—about 6 percent of all homes sold in the city during that time span. Just down Interstate 10, San Bernardino and neighboring Rialto have seen the largest share of their housing stock bought by institutional investors, at roughly 10 percent.

Firms have largely stayed away from Bay Area cities, where the foreclosure crisis was less acute, and where housing prices are among the most expensive in the country.

“We do not believe our activity impacts prices at any level,” a spokeswoman for Blackstone subsidiary Invitation Homes wrote in response to questions.

Institutional investors have targeted the typical starter home in these cities—three-bedroom, two-bath houses at a price point that a few years ago could have been afforded by younger families. So in some cases, would-be first-time homebuyers are now renting in places they may have bought just a few years ago.

Still, the stock owned by investment firms in these areas is much lower than in places such as Atlanta or Phoenix, where private firms have been responsible for nearly one in four home purchases. And young families are more likely to be renting single-family homes from smaller landlords.

Proposed laws to help first-time homebuyers have stalled

Reports of institutional investors making all-cash offers on California homes caught the attention of state Sen. Ian Calderon, a Democrat from Whittier, when he was attempting to move out of his apartment and purchase his first house last year. While the 32-year-old lawmaker acknowledges that institutional investors don’t own a large chunk of California’s housing stock, he says he’s concerned their influence is yet another hurdle for young homebuyers to overcome.

“I just want to be able to have more information about these firms, and ultimately I want to advantage first-time homebuyers,” said Calderon. “I want to make sure that people aren’t getting screwed.”

Multiple attempts by Calderon to impose more transparency on institutional-investor activity while blunting their ability to make all-cash offers have not gone far in the Legislature. Two years ago, a bill that would have forced homeowners to wait 90 days before selling to large institutional investors failed to clear both chambers with that provision intact.

Last year, a bill that would have required investors who own more than 100 properties in California to register with the state and provide detailed information on their activities again failed to reach the governor’s desk. Caldeorn says there’s a good chance that bill will be resuscitated this year.

The California Apartment Association, which represents landlords across the state for both multifamily and single-family units, has opposed much of Calderon’s legislation, arguing that much of the information it seeks is available in public stock exchange filings. That’s mostly true, but that only applies to publicly traded firms, and the data is not in the most accessible format.

Landlords also say Calderon’s bill doesn’t address the root cause of the problem.

“The bottom line here is about supply,” said Debra Carlton, lobbyist for the California Apartment Association. “There’s just not enough housing to go around, so you end up in these unfortunate situations where people can’t buy and can’t afford a place to rent.”

A previous story investigated another player with a greater effect on California’s housing market—foreign buyers. CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Local Issues

There’s something spiff-alicious about opening a delectable bottle of wine after drinking low-budget swill for a couple of weeks.

I select a bottle from my wine cellar (read: garage). I break out the fine wine glasses, caress the delicate glass. I touch the bottle, read the label.

Madroña Zinfandel. El Dorado. 2012.

It’s an $18 bottle of wine from mixed vineyards—so no big whoop, right? But I recently jammed through a six-pack of low-end Blackstone cabs, cheap zins made from old vines (the nerve!), and a Yellow Tail merlot that turned out to be palatable with sketti. While cost is not necessarily an indicator of quality in wine—or anything else—it turns out 10 bucks a bottle makes a huge difference.

At my house these days, even the wine-formerly-known-as-average is saved for visitors. Tonight, that’s my husband, Dave, who has made his monthly sojourn from his home in Reno to my place in California.

I pull out the cork and pause, donning glasses to read descriptive text on the bottle’s back: “Situated at 3,000 feet in the El Dorado appellation of the Sierra Foothills, Madroña’s hillside vineyards offer ideal growing conditions.”

Madroña has single vineyard wines in the $50 range, but we love this wine. We’ve had this zinfandel at the winery’s tasting room in Camino, Calif. For the money, it’s excellent. Recently, I spotted this bottle on The New York Times Wine Club website.

I pour, giving the liquid some air, and inhale. Spice and berry balance on the nose. The first sip is nectar of the goddess. Wars might be fought and won for this wine. I’ve never tasted a better zinfandel. At least not in the past two or three weeks. Hence the hyperbole.

“It’s a little young,” suggests Dave. I’m reminded that he lives far away in a grand house with a wider-ranging wine selection.

“It’s perfect,” I argue.

“No, it’s really good,” he says.

“It’s amazing,” I reply, “especially as a change from Three-Buck Chuck.”

Oh yeah. I’m poor. Poor and, I admit, super-duper privileged at the same time. This year, I bought a house, and delectable wine became a luxury.

I was tired of renting and having to move when a landlord decided to sell or move back in. A few years back, I rented a house owned by a man who pocketed my dough and didn’t pay the mortgage. Bank foreclosed. House sold on the courthouse stairs to the highest bidder. Which was not me.

Saving for a house has meant limiting my wine appreciation on behalf of thriftiness.

Sort of. Perhaps I enjoyed fewer wine extravagances. An occasional weekend in Anderson Valley, Mendocino County, drinking pinot noirs flavored by fog. And, yes, there was that spring camping trip to Paso Robles. And a handful of sojourns to the wine meccas of Lodi and Murphys.

Still, it took a while to collect enough dough for a down.

Wine connoisseurship gets pricey fast. In August, my daughter and I hit a couple of the tasting rooms on Santa Cruz’s trendy Westside. We’d been camping on a beach north of Monterey. Fires had been built, and marshmallows roasted. Before leaving for home Sunday, we drove up the coast to explore. We wandered into a tasting room while we had sunburns and our hair was smelling of charcoal and sea air—not intending to spend much. A chatty winemaker poured generous quantities of ruby ware, mostly pinot noirs in the $25-$30 range.

My daughter Steph, a doctoral student at Case Western Reserve’s School of Medicine, likes to say she knows little about wine. Yet she consistently identifies the most complex and refined wine in a tasting flight. In this case, the wine she most enjoyed was a new release, a 2012 pinot noir not on the winemaker’s tasting notes—or on his price list.

I had intended to buy a bottle; the $25-$30 range is doable if I’m only buying one bottle. My daughter liked the 2012. “We’ll take it,” I said. The winemaker handed me a credit card receipt for something like $45. The new release of pinot noir was $42, he said.

It’s entirely likely the winemaker wasn’t trying to exploit our inebriation but had merely raised the price of his pinot noir to reflect market demand. And neglected to tell us. I could have asked. I could have said no when I saw the credit card charge.

I did neither. Steph and I have a lovely bottle of $42 pinot noir. We’ll drink it when she graduates in 2018 or so. A well-crafted pinot noir ages nicely. We’ll see how this one holds up.

I have a few other bottles too fine to drink on the average kick-back-and-watch-Scandal sort of night. That said, I enjoy a glass of red wine most evenings. In search of affordable reds, most often I buy cases at wineries during various sales.

An overnight wine run to Murphys in early June netted six bottles of assorted varietals (at about $10 each) from Black Sheep Winery, a $99 case of Stevenot Winery merlot, and a $50 case of 2012 syrah—blowout sale!—from Sobon Estate in Amador County. Now it’s almost all gone. I blame adult children and plenty of parties.

Hence the grocery store six-pack. Think battery acid on the nose, with the mouth-feel of Kool-Aid. I won’t name the worst of the dreck. The Yellow Tail merlot was OK, which snooty me pronounced “not terrible.”

That’s why, tonight, the Madroña zinfandel provides a nice contrast to low-budget liquids. The wine’s complex fruit profile reminds Dave, he says, of the mourvedre varietal.

“Don’t you get that?”

Sure, I get that—and so much more.

The wine reminds me that deliciousness exists, and that I’ve never experienced anything like poverty—not even close. I own this house, in theory. I drive a Prius to shop for organic veggies at the farmers’ market. I have a great job. And family. And friends. And dogs. I have this wine and many other bottles to discover on other nights.

That’s not hard to swallow, not at all. Gratitude ensues.

Published in Wine