Assembly Standing Committee on Judiciary

I also like to note that Assemblymember Wicks will be substituting for Assemblymember Bauer-Kahan for today's hearing, and Assemblymember McKinner will be substituting for Assemblymember Zbur for today's hearing.

I want to show appreciation for our staff because I know there were a lot of bills that potentially could have been before us, but I think a lot of work that happened during the interim with our colleagues who did a really good job in working with our Committee staff so that we have two bills before us today. The rules for witness testimony are that each side will be allowed two main witnesses.

Each witnesses will have approximately 2 minutes to testify in support of or opposition to the Bill. Additional witnesses should state their names, organization, if any, and their position. As we proceed with witnesses and public comment, I want to make sure everyone understands that the Committee has rules to ensure we maintain order and to run a fair and efficient hearing.

In order to facilitate the goal of hearing as much from the public within the limits of our time, we will not permit conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of legislative proceedings. Rules for today's hearings include no talking or loud noises from the audience. Public comment may be provided only at the designated time and must be limited again to your name, organization, support, or opposition of the Bill, and no engaging conduct disrupts, disturbs, or otherwise impede orderly conduct at the hearing.

And please be aware that violations of these rules may subject you to removal or other enforcement processes. But I know everything's going to go very smoothly today because everyone is on their best behavior. So I'd like to start with file item one, AB 82, Assemblymember Weber. And we will start at a Subcommittee because I think we still have to wait for a couple more in order to establish a quorum.

Actually, if I can ask if the secretary could take roll on the present Members, I believe we do have a quorum now.

Cholera. Here. Nixon. Wicks. Brian. Here. Connolly. Haney. Maienschein. Pacheco. Here. Sanchez. Here. Mckinnor. Here.

So we have a quorum established. This is AB 82. And so, Senator Weber, please proceed whenever you're ready.

Thank you, Mr. Chair. And Members of the Committee I am here to present AB 82. AB 82 would ban the sale of diet pills to minors unless prescribed by a Doctor. This Bill would establish an ID check for the sale of dietary supplements and drugs to prevent minors from taking them. Eating disorders are a serious condition for public health. It's a problem that affects people regardless of their race, their age, their genders, but it's especially troubling for our young people.

While California is at the forefront of regulations concerning weight loss, dietary supplement and diet pills, we do not prohibit the sale of these products to minors. Despite well documented dangers. These supplements are regulated as food and therefore do not undergo the rigorous scientific evaluation from the FDA. As other drugs are subjected to weight loss, supplements have been found to be laced with pesticides, heavy metals, anabolic steroids and pharmaceuticals that can cause strokes, cancers and severe liver injury requiring transplant.

As a matter of fact, yesterday the New York Times and other news outlets ran a story with this heading, quote, gas station heroin sold as dietary supplement alarms health officials. The story is about an ingredient that some dietary supplements that are sold over the counter have, and this ingredient is addictive and at high enough doses, can have dissimilar effects to opioids.

200 or 23,000 Americans are sent to the emergency room every year due to dietary supplements, and 25% of those that are sent are due to weight loss supplements. One study showed that 11% of teens already reported using dietary supplements specifically for weight loss. We know that teens are especially targeted by these pills because of self images, issues that are very prevalent within our adolescent years. These teens turn to quick measures without considering long lasting impacts that diet pills and supplements could have on their bodies.

Another study, published in 2020, reported that adolescent and young adult women who use these over the counter diet pills have six times the risk of being diagnosed with an eating disorder within the next three years compared to those that never use the diet pills. It is extremely important that we pass this Bill so that we can prevent our already vulnerable youth from unnecessary health problems and eating disorders associated with these weight loss supplements and over-the-counter diet pills. And for these reasons, I respectfully ask for your aye vote at the proper time.

Our witness, Kate Rogers from GenUp, is unable to make it today as she was in class in Los Angeles. So one of my staffers will be reading her testimony.

Thank you.

Thank you and good afternoon, Chairman Kalra and Members of the Committee. My name is Kate Rogers and I'm currently a junior at UCLA, where I serve as the Policy Director for Generation Up GenUp. As it's commonly known is an entirely student-led advocacy organization focused on advancing educational equity through the legislative process. I'm honored to be here today to represent Jen up and testify in support of Assembly Bill 82. AB 82 prevents the sale of over the counter diet pills and supplements to minors across the state.

In light of the ongoing youth mental health crisis, this legislation is more important now than ever. I, like many other teenagers during the pandemic, turned towards excessive exercise and restrictive eating to cope with the social isolation and digitalization. I know firsthand the long term mental and physical effects of dieting, and I am not alone. According to the University of Michigan Medical School, eating disorders in teens are more than doubled during the pandemic.

Access to weight loss products and diet supplements only makes it easier for young people to fall into dangerous habits. Not only do these products encourage unhealthy behaviors, they are also unsafe. If used in excess weight loss pills can result in serious health consequences, including death. It is time for the Legislature to take the necessary steps to prevent diet pill retailers and manufacturers from profiting off the rise of eating disorders in California. Teenagers.

On behalf of the 4000 associate Members of Genup, I strongly encourage you to support the California youth and respectfully request your aye vote on AB 82 today. Thank you.

Thank you. Is anyone here in support of AB 82?

Just getting ready for opposition.

Sorry. Okay. Is anyone here in opposition? Go ahead and take your seat up here. Thank you.

Thank you, Mr. Chair. Trying to be on my best behavior and prompt. Morning, Mr. Chair. And afternoon, Mr. Chair and Members. Robert Moutrie for the California Chamber of Commerce and we are opposed to AB 82 on a very narrow ground which I've spoken to the author about. We are not opposed to protecting California's youth from the risks of diet pills and the hazards that were discussed. Our focus is narrowly on one provision which while it places potential monetary penalties on employers for failing to comply with AB 82, the Bill presently prohibits employers from disciplining employees who breach AB 82s obligations.

So should an employee not check for prescriptions? Right. Not follow through with what we want, we would be prohibited from disciplining them. So that's a problem for us to make sure we can enforce what the goal is here. It's a narrow concern. We've shared amends. We hope it can be resolved soon. Thank you.

Good afternoon, Mr. Chair and Members Anthony Sampson with Samson Advisors on behalf of the Council for Responsible Nutrition. CRN is the leading trade Association representing dietary supplement and functional food manufacturers and ingredient suppliers. We are neither listed as support nor in opposition to the Bill. CRN actually removed its opposition to the same legislation, AB 1341, in 2022, after many months of discussions and negotiations with then author Assemblymember Cristina Garcia.

Unfortunately, that Bill was vetoed by the Governor in September 2022, and the Governor convened a California Department of Public Health Working group to examine these issues and started a task force to develop findings and potential recommendations for future legislation. CRN was pleased to participate as an observer in the working group discussions. Those recommendations were due at the end of last year. They have not yet been released.

But given CRN's involvement in this issue to date, we certainly eagerly await those recommendations, as I know the Assembly Member does as well. And we certainly would have preferred to have had a substantive policy discussion today on those recommendations, but appreciate the open door policy that the Assembly Member and her Stafford Trent have had throughout the entirety of the process.

And we're looking forward to working together to figure out a way, as we have done in the past, to combat the health problem of eating disorders among our youth. And we believe there's a way to narrowly tailor the policy to achieve these goals while ensuring that legitimate, safe, and regulatory dietary supplements remain available in the marketplace. Thank you.

Thank you. Anyone else here in opposition to AB 82? I'll bring it back to the dais. Any questions, comments or motions?

It's not really a question, it's more of a comment. I want to thank the author for bringing this Bill forward and championing on behalf of our youth. But I do share the same concerns that the chamber shares just with that one section, with allowing employers to be able to discipline employees who are not abiding to this Bill. I think that's important for the business community, but I'm sure there's going to be more conversations. I will be supporting the Bill today, but that's the only area of concern for me. But thank you for bringing this Bill forward.

Thank you very much for that. And yes, that part of the Bill was brought to our attention this week and the amendments were given to us this week. But I've worked with the chamber before and I had a previous Bill, and we were able to make sure that the employees were able to be disciplined if they did not follow the law.

Thank you, Madam Vice Chair.

Thank you, Chair. And I, too, echo the comments. Thank you for bringing visibility to this. I have a question about the retail side and the fine and the burden on the retailer and the training of employees to make sure that they like for any prescription, to see the prescription and qualify that legitimacy of that. So I hope that gets worked out, because otherwise, I think it is good.

It's a good approach and necessary and sad that this is what's happening to over the counter diet treatment or products. I do want to ask you, what were your concerns initially and what are you still waiting for in terms of the policy development?

Yeah. So initially, there was a caging requirement that Assemblymember Cristina Garcia ultimately removed for these products, and then it was really an issue of scope and to make sure that the products being captured in the legislation were actually the products we're looking to go after, which is why ultimately, the language in print today is any products sort of marketed or labeled as. Right.

So the concern initially with language that isn't before the Committee today was that it was overly broad and it would have captured a category of products that I don't think the Assembly Member had originally intended. And so after many months of negotiations working through that, we were able to get there with, then there was the veto.

And so I think the only reason I'm here today with the understanding that those recommendations are going to come out, and presumably there may be potential changes to the Bill that we're looking forward to working with the Assembly Member on. So we're just here in anticipation of those.

Okay, very good. Well, I appreciate what you're doing. I intend to vote in support of it and hope that I can accomplish the goal here without too much more burdens placed on business. All right, thank you very much, Senator Bryant.

I'm glad that we're incredibly optimistic that those recommendations are coming, and I think that optimism is in no small part because of your urgency of now. So thank you for your efforts to recenter this issue and this conversation, and happy to move the Bill. All right, so we have a motion a second. Any other comment? I want to thank you, Dr. Weber, for bringing this forward.

Clearly, there is a need, I think, especially during the pandemic when so many teens were at home, and the social media marketing and targeting. I'm glad to hear that even the opposition, everyone agrees in the end goal here, and I'm confident that we'll get to a resolution on some of the concerns that were raised. But given the way that you approach your legislation, I know that you will sit down and find that appropriate path. We're still in the House origin, so there's still time to do that. And so with that, would you like to close?

Yes. Thank you, chair. I just really want to thank the chair and the Committee want to thank, of course, those that are supporting and those that we continue to work with the Bill to ensure that we create something that is safe for all of our youth here in California. And with that, I respectfully ask for your aye vote okay.

With that. We have a motion from Assemblymember Bryan seconded by Assemblymember Connolly, and the motion is do pass to appropriations. Maybe you have a roll call on the vote, please.

Kalra aye. Dixon aye. Wicks aye Bryan aye. Connolly aye. Haney aye. Maienschein. Pacheco aye. Sanchez. McKinnor.

All right, the Bill is out. Thank you so much, Dr. Robert. And file item two is AB 1333. Assembly Ward. Please take your time and get settled in. And whenever you're ready, feel free to open.

Well, thank you, Mr. Chair. And congratulations on your first hearing as the chair of this Committee. Thank you, Members. I want to thank our Committee staff for their hard work over the last year and this fall on this Bill. AB 1333 would prohibit the bulk sale of newly constructed single family homes to institutional investors who have more than 1000 units in their portfolio.

As California continues to face a housing crisis, we are seeing the data whereby institutional investors are turning to the single family housing market to increase profits. In 2021, it was estimated that capital investment in the single family housing market topped $45 billion in our state and was growing even more in 2022. A subset of this is a trend called build to rent communities, which is facilitated by bulk home sales, and it's a rapidly expanding trend in California and indeed in other states as well.

This severely limits the ability of first time and first generation homeowners from competing for these homes, as institutional investors would leverage their ability to buy in cash at times and bypass appraisals and other typical processes in exchange for discounts on bulk purchases of single family home tracks. Under construction. These bulk transactions lower the overall housing stock, which increases home prices for first time home buyers, takes away home ownership opportunities and wealth generation opportunities for Californians and their families.

During the great Recession, real estate investment trusts were established and flourished through their bulk purchase of foreclosed properties. And in 2022, you all might remember, the Legislature found the trend negatively impacted individual homebuyers and responded by passing AB 2170 which prohibited the bulk sale of foreclosed homes.

AB 1333 similarly would give back lost opportunities of homeownership to Californians at a time when the state's middle and working class residents are forced to choose between the dream of home ownership and the ability of generating wealth, or leaving our state with me to speak in support are Jennifer Svec, the Vice President of public policy and advocacy with the California Association of Realtors, and Adam Briones, the CEO of California Community Builders.

Thank you. Up to 2 minutes each, please.

Thank you, Mr. Chair Members Jennifer Svec on behalf of the California Association of Realtors, we'd like to thank the author for all of the work that he's done on this Bill and to improve the opportunities for Californians to facilitate homeownership opportunities and generational wealth. AB 1333 eliminates bulk sales while preserving the opportunity for all buyers, including reits, to purchase newly constructed single family homes. Buyer competition generally results in higher sales prices and more profits for those that are selling the parcels.

AB 1333 appears to be modeled after a similar Bill that we sponsored last session, authored by Assembly Member Grayson. AB 2170 prohibited large lenders from selling foreclosed homes in bulk, which was defined as two or more single family homes, in order to allow buyers an equal opportunity for our state's working families to be able to purchase and own or occupy more affordable, entry level, market rate homes that are reentering the market post foreclosure.

AB 1333 was significantly amended by the authored and only eliminates the bulk or bundled sales of newly constructed homes to reits that are often funded by hedge Fund purchasers who currently benefit from deep discounts in home price and transactional costs for title and escrow, which is not a similarly offered discount that is given to owner occupants, first time home buyers, or generational wealth buyers.

I think it is important to highlight that the author's thoughtful efforts to resolve the supply issues for families seeking opportunities to purchase entry level market rate homeownership opportunities under AB 1333. It's important to also note that builders can still choose who they sell to. This Bill does not prohibit a builder from determining that they would like to sell continuously to reits. All it does is say that these sales to reits must be done in a one home per transaction basis.

I should also note realtors generally do not sell new construction as builders generally manage their own transactions as buyers are self managed during these situations and self represented. However, due to high demand, limited supply and limited supply, we continue to face a significant shortage of market rate entry level homeownership opportunities for our state's working families seeking to purchase generational wealth opportunities. As the state leaders look to bridge the state's continuing wealth gap.

CAR is proud to support AB 1333 because it seeks to allow families an opportunity to submit offers on the smaller, more affordable homes that will help first time, homebuyers and first generation homebuyers be able to realize their dream of California home ownership. Thank you.

Thank you.

Good afternoon, chair and Members of the Committee. My name is Adam Briones and I'm CEO of California Community Builders, a nonprofit working to close the racial wealth gap, focusing on housing and home ownership. As an organization led by and serving people of color, I'm here today in support of AB 1333. California faces a housing affordability crisis that has slammed the door shut on homeownership for millions.

As we have heard all too often, California does not build enough housing, especially for sale units affordable to moderate and middle income working families. AB 1333 takes the necessary steps of prioritizing homebuyers over large institutional investors by ensuring that these large corporate entities do not have an even greater advantage when it comes to buying these newly built homes.

There are no silver bullets when it comes to the housing crisis, but AB 1333 will help us to support a level playing field for first time homebuyers by ensuring that hundreds of homes can't be taken off the market in a single transaction and turned into rental properties. AB 1333 does not prohibit large investors from purchasing newly built homes. It simply removes some of the economic efficiency that drives their acquisition strategy by requiring them to buy one home at a time, as a normal buyer would.

In this way, AB 1333 levels the playing field with actual California taxpayers that would like to own and occupy a home. Home ownership is a broadly shared policy goal in California and one in which our state invests millions of dollars annually in supporting through down payment assistance programs and other measures. AB 1333 is one reasonable step in protecting that shared goal, which is an unfortunately scarce resource in our state. Thank you for your consideration of this important measure, and I respectfully request your aye vote thank you.

Thank you. Is there anyone else here in support of AB 1333? Anyone here in opposition to AB 1333? Feel free to take a seat up.

Good morning, Chair Kalra and Members of the Committee, Steve Cruz, on behalf of the California Building Industry Association. And we are opposed to the measure and just as a little background, and I want to go over some of our issues, but we did oppose the Bill as it concluded last year, looked at the amendments last week, had a chance to review with a consultant and maintain our opposition.

And what I'm going to share with you today are a number of, we believe, unintended consequences with the Bill. We've got some feedback from our Members, but not complete, but we also have some reservations about the underlying policy. But I want to go over some of these issues because I think they are consequential. First, in many of our projects, we frequently build affordable housing. Sometimes we partner with affordable housing providers who maintain the databases of income-qualified occupants.

Those providers purchase those affordable homes from us in bulk. Those affordable housing providers may beat the definition, excuse me, of an institutional investor as is defined in the Bill. So as written, it would not allow for bundled purchases for new homes to an affordable housing provider such as think of Jamboree, or Eden, or Habitat.

Second, the definition of institutional investor will be very difficult to comply with as a practical matter. For a home builder selling a new home, how will they know if an institutional investor owns how many properties? Where? Is it just in California? Is it across the country? Is it globally? So again, it would be difficult to know if there are many in the name of a subsidiary. So there's a lot of challenges in trying to comply on the builder side of it. Third, there are also builders.

There are situations which builders could meet the definition of an institutional investor who may have more than 1000 single-family homes in California, and then this would come into play, in particular, if through an acquisition or a merger or bankruptcy, where another buyer, another builder who could meet the definition would be defined in vogue. So let me just close by saying for these reasons, we're opposed.

I think if the Committee decides to move before, we'd like to work with the author and then Jim Lights, there was another organization that's not here who does introduce, represent the institutional investors. I think we wanted to highlight the scope of the problem. And does it really exist to the degree? I think the data that they shared with the Committee was, I think, 1%. And this is institutional investors with 500 more units, they represent 1% of home, new homes.

We're not talking about existing, we're talking about new homes. So we wanted to spend a little bit of time with the author on where does the problem truly exist. Thank you.

Thank you. Is there anyone else here in opposition to AB 1333?

Natalie Boust, on behalf of the California Business Roundtable, in respectful opposition.

Thank you. All right, we'll bring it back to the dais. Assembly Member Haney.

First of all, thank you, Assembly Member Ward, for your leadership and definitely appreciate, as I told you, the goal of bringing more opportunities for homeownership, individual homeownership and the way that this would do this. Just two things I wanted to ask about or raise the point about the affordable homeownership opportunities. Is there something that could be done to make sure that those folks wouldn't be captured or is the intention to capture them? Sort of how you're looking at the first example that was given.

And then the second thing is, I know we all are working hard to get more housing built and to do whatever we can to address, I think the lack of homes that are being built across the state.

To the extent that this is a way that they fund the home building itself by working with these institutional investors, is there any concern that you have that this would sort of affect home building because of the lack of being able to put together these kind of investment opportunities that may include these kind of deals on the front end? That would be a concern. And obviously, we want more individual home ownership opportunities that takes more homes being built in general.

So just what kind of sort of analysis on that second point did you do around making sure that we're not going to slow the home building generally?

100%? Thank you for the questions. Really important to really vet through, and we have thought through some of these. So a couple of things. One, I'll work backwards, look, sort of from a common sense lens through this, that if you are developing a new tract of homes that you would need to rely on a bulk sale transaction which operates at a discount. In one transaction, it's discounted off your books as opposed to selling things over on a cumulative nature at the original market value.

So think about that again. We are not able to construct these hundred homes if they were at regular market value, but we can construct them and we can give them away in one bulk sale at a discount. So it doesn't add up for me that this is going to somehow affect the price or the cost of development. In fact, if anything, there seems to be some cost savings to be able to get things off of their books on the back end.

And this isn't something that I think is necessarily thought of as, you know well, we have a lot to do on entitlement process and how long it takes to actually get new homes constructed. These are transactions that usually come towards the end of that timeline.

On affordable housing, I've not heard from any affordable housing developers of any concerns on this, and I think that some of the examples that were raised. For example, Habitat for Humanity is not going out there and buying in one singular transaction, bulk purchases of thousands of homes. That's not who's doing this. And so we are, through the Committee's guidance, really trying to tailor this to what we are seeing.

The evidence support that we have a growing investment of real estate investment trusts or whatever iteration they may morph into that are coming into the single-family home market. And so we believe that this singularly response to that. I'd like Ms. Svec to add anything maybe that I had missed to your two questions, but I appreciate the questions.

I think there's a couple of things to point out. CAR sponsored a Bill, AB 323 last year by Assembly Member Holden. That particular Bill is actually addressing what my colleague from the builders was talking about, which is the wholesale purchase of subsidized affordable housing or housing constructed due to a density bonus. And it's part of your set aside or housing that's part of an inclusionary zoning piece.

One of the things that we sought to resolve with Assembly Member Holden last year was builders choosing, instead of selling a unit that was income restricted based on ownership, they would shift the affordability even when they had applications for homeowners. In one instance, there was 80 applications of families and the parcel was shifted to become, down in San Diego, a rental unit that was owned by a large-scale REIT. And in those instances, we fixed the law specifically for that piece last year.

With respect to this Bill, it specifically focuses on homeownership for market rate, entry-level housing. It does not include anything related to the distribution. The sale of the deed-restricted affordable homes, whether they're rental or owner-occupied. We can make probably, I would assume that the author might consider amendments that would explicitly note that in the instances where those subsidized units or the below market rate units that are included within the development would be excluded from the prohibition.

I think that's probably an easier amendment for the Assembly Member to handle with respect to a builder that goes defunct during the middle of construction and they haven't obtained occupancy permits for those particular units. This Bill wouldn't apply. The Bill only applies once those units have been certified for occupancy pursuant to the statute.

Thank you. Any other questions? Yes. Assembly Member Connolly.

Thank you Chair and also my thanks to the author for bringing this forward. We're all hearing about this issue in our communities and frankly, with rising levels of concern about it. I've got a few questions and then maybe some comments as well. So it was commented that this is a rapidly expanding practice in the market. Wondering if you can provide a little more context. For example, how much has the practice of bulk purchasing increased in the last decade?

Do you have more?

Bulk sales didn't really exist in this particular space until the Great Recession. By way of history, many of us experienced, or our families experienced someone that lost a home during the foreclosure crisis. A lot of the parcels that we lost into this type of ownership model, it wasn't done thinking that we would create large-scale REITs to reduce the amount of deficient foreclosed properties on the books of our secondary mortgage market or the federal lending institutions at the time.

But foreclosures often happened to our entry-level, first-generation, first-time homeowners that were entering the housing space back in '06, '07, '08. And that's when we saw obviously a lot of things that led to those homes then being returned back to the banks for one reason or another.

In response, because there was so many foreclosures coming in, they had to figure out some kind of way to create space in the secondary mortgage market, to continue to offer loans to new homeowners, and to start to replenish and recover in the housing market. REITs were established then as a response to a market problem that we had.

In response to that, after a few years of seeing the secondary mortgage market package and bulk sale properties that realtors and their clients wanted to access and potentially purchase for owner occupancy. Because back in '09, we had the most affordable or no, 2012 was the most affordable housing market that we have had in decades.

56% of all families in California could afford afford a medium-priced house then, compared to 2007 and today, when we have the most constricted affordability at 15% of families in the state being able to afford entry-level market-rate housing. So the REITs didn't exist before the foreclosure crisis, and they've continued to find different models to operate in. We don't have a problem with sellers having a choice of who to sell to.

The problem that we had during the foreclosure crisis was the same, and the Federal Government decided to pass or enact some regulations that stopped the bulk buying in its entirety. And then California codified that practice two years ago in the same measure that I had mentioned that Assembly Member Grayson carried. And so that's how the Federal Government dealt with it in the foreclosure space. So if you can't buy properties in the foreclosure space in bulk, where do you go?

Well, the next place that you go to, I think, is to new homebuyers. I don't think anybody envisioned that that would be the next location. But again, the problem for my members is specifically that we have a supply crisis, period. We're looking in some areas I know that I just recently heard in Orange County, they have four listings, four homes available for sale. How are we supposed to find housing for people? We have far more demand than we do available.

The largest time that we were able to produce housing was '04 and '05, where the builders were able to produce 200,000 units annually. Since then, it's anywhere between, what, 80 and 120,000 units. I don't know what the difference is in the market that the builders were able to generate so many homes during that period. And since then, we've been stagnant as Assembly Member Wicks and so many others have sought to streamline and create these additional opportunities.

But we've been kind of stagnant at what the number is. We don't know how to get there. And with the high interest rates and the lack of supply, this is just sort of one of those tightening opportunities that's out there. And we appreciate the opportunity to participate in the conversation and try to find ways to create ownership in a very constricted space. It's very expensive. The builders are under a lot of pressure to build and sell these homes. And we understand that.

But we also understand that it's tough if you don't actually have competition out there, because we also see an opportunity that builders can make more money, potentially from the individual sales. But that's not our say, right? We're not deciding who sells what. We're just saying that we agree with the Assembly Member's goal of allowing more competition and the opportunity to purchase. We're not saying that they have to sell it.

All this Bill is saying at this point, which is why we support it, is builders have an opportunity to choose. It just has to be in a singular transaction so that a family can bid at the same time that a REIT does.

Yeah, and that pretty much answers my second question. But worth putting a finer point on. This legislation is not prohibiting purchases by these corporate investors. It's narrowly tailored toward these bulk purchases. Is that accurate?

Same is true in the foreclosure space. Nobody prohibits the REITs from buying properties. They're just taking away the discount essentially by doing it in a singular transaction. Homeowners pay a variety of inspection fees, whether it's new construction or existing construction, as they look to do their due diligence in buying a home, they also are required to pay title and escrow fees. Makes sense that a REIT would pay the same amount of title and escrow fees that a homeowner might pay.

Yeah, I think Mr. Brionis had articulated it succinctly that this Bill is about leveling the playing field to make sure that the procedures are the same. Whether you're a traditional homeowner or corporation, whatever scale size that corporation might be, this is trying to make sure that there is not an advantage on an entity that probably already has some natural advantages at play, that we are making sure that we're defending the opportunity for Californians to have that runway to be able to compete.

Question to the opposition, if I might. You say in your letter that this practice is helpful to single mothers and professional women who don't want to deal with the hassle of home ownership. Yet the analysis prepared by the Committee, well written, I might add, outlines several instances of high eviction rates, excessive rents, and subpar living conditions from corporate landlords.

How is it helpful for these families to have a landlord that is usually detached from the community in which they're purchasing and could be likelier to evict folks out of their housing? How's that a benefit?

Yeah. Thank you for the question, Assembly Member. So first, I represent CBIA and I don't represent the institutional investors. Of course, there's a lobbyist for them.

But from the builder side, I think we did include that information in our letter because we did hear from our members just and have done the work in terms of the price of a home is so high that the mortgage payment is not affordable for a lot of folks. If there is someone that buys it and could set the rent at a lower rate because they have the equity unit, then they have availed those opportunities.

And what they pointed to us was a lot of single mothers and businesswomen and someone that may not be quite at the point in their career to afford the mortgage but could afford the rent. So I think that was in the letter. And if I could just respond to one thing, I think we obviously want to work with the Chair of the Housing Committee. We've worked with reward very closely over the years.

And so I think the things like the affordable housing issue, it doesn't cover it today. As the Bill is written today, it doesn't cover that instance. And so I wanted to bring that to the author's attention and the sponsors. In fact, it actually could conflict with the other Bill that was referenced. I think the other thing that we wanted to make sure to put on the record is there are a lot of home builders, and there are open houses all over California. We have homes available.

And so the issue of the competition, there are homes available for people who want to buy them and can buy them. And so selling them at a discount is not something that they want to do. It's not part of their business model. There is, at times, some flexibility needed, as I mentioned in our letter. But otherwise, I think we want to work with the author if there's a way to fix these things. I think the underlying policy we're not crazy about.

Right. I mean, sort of how we, when we need that, needed flexibility. But that's where we're at today.

Thank you. Assembly Member Ward.

Let me add on to, I just wanted to state, because my ears are burning, that we shouldn't necessarily presume or accept on its face that a single mom raising kids is going to prefer a rental as opposed to homeownership. And in fact, for me, it's very much worse for somebody with some challenging life circumstances, that they would not have an opportunity for home ownership because these activities going on around us are allowed to occur without counterbalance, is our duty to be able to step up.

Not far from us, many of us go to the airport to be able to go home to our districts is a community called Tanzanite, and it's just developed. You saw it under construction last year. It's open for residents this year, and it was completed through a transaction of this nature, 211 homes. And when you run the numbers, they average one bedrooms to three bedrooms between 2400 and $3500 in rent.

But when you run also, the pricing that would have otherwise been obtained through probably comparable sales of those types of units, even at today's interest rates, they would come up to $3,500 a month for a mortgage. So this is a shift. It's not about that. They can't afford one over the other, still having to pay that rent. They're still having to pay it out of their paycheck. They're denied the opportunity for homeownership.

Assembly Member Pacheco.

Thank you and thank you to the author. Thank you for making that comment as well, because I agree with you, as a single mom with children, would want to own a home instead of rent. And I think homeownership is very important. I think it's something that we should all strive to. And I know there may be some unintended consequences. And I know Jennifer had brought up a potential amendment. So maybe just working through that amendment and working through some other issues may be helpful.

But I'm pleased to see that there is potential room to take care of those unintended consequences. But I agree we need more homeownership, more opportunities for people to own their homes. So thank you to the author. I will be supporting this Bill today.

Thank you. And a motion and a second. Madam Vice Chair.

Thank you, chair. It's an interesting dynamic here. I think we all believe we need more homes and more homes for rent, perhaps, but more homes for sale.

This has been an issue that I've been concerned about for a number of years, is I've actually tracked this unknowing about this legislation, because Wall Street Journal has been writing about this for years, and I'm concerned about the distortions in the marketplace for home ownership that we all know young people who are saving, saving, saving to save up that first down payment and then to be presenting an offer for that purchase of that single-family residence, to be outbid by some larger entity, even private equity, whatever hedge fund, whatever, out of New York.

As coming from local government, putting that hat on, many of us have served in local government. I mean, it's the homeownership and families in our neighborhoods that create communities. And that's a concern of mine. And if young or old or whatever age families are priced out of the home buying marketplace because of this external, global kind of purchasing opportunity or business opportunity or business model, that's concerning to me. I mean, we all know we have a housing crisis.

I've been saying this in the context of housing units as we were dealing with RHNA at the local level, we're really not talking about housing single-family homes, because those are really kind of being zoned out. We're really talking about rental units. So I'm very concerned that this state, under RHNA, Governor's goals of 3.3 million housing units, are really going to be largely rental units. And now we're compounding these financial mechanics that are creating more housing units.

I'm a total proponent and advocate for the housing industry, for the building industry. I'm just trying to understand where the housing killer Bill that you described this as a housing. Why is this a housing killer? We all want people to live in homes that they own, primarily because that's for stable neighborhoods, stable communities, stable financial situations. To get in the way of encouraging homeownership or making it better and creating this competitive disadvantage is a concern to me.

But explain to me, why is this Bill a housing killer?

Well, we don't want to dilute the title for the reserve for some of the worst bills and worst, forgive me for that term, but I believe it was constricting capital. I think that was one of the sort of metrics. Does this Bill do that? I also think it was on the original version of the Bill. I think it may still be in the letter, but the original version of the Bill, actually, as written, would have limited the way it could have been.

Every home builder could only sell one home. It was just poorly drafted, and I think that's why it got that designation. It probably should not carry over to where we're currently.

So that's not relevant now?

It's not as relevant now.

Okay. All right. And then also in your letters, as long as we're addressing that, you make a distinction between a developer and a home builder. So what was that point? I mean, I know the difference, but why don't you just explain that?

Yeah, I think it was the. I tried to cite it in the example about that they could serve in multiple hats. Some of our builders are developers, some are just home builders. But in the practice of acquiring lots, they could be both, and they could be included in the definition of an institutional investor, and it may inadvertently capture them when that's not the intent of the Bill.

Okay, so let me ask the author, Mr. Ward. So there was a mention, maybe mention in your letter that duplexes or triplexes would be covered by this. We're really talking about homes that, single-family homes. Is that still in the Bill?

Right. Under our undercoat, single-family homes are by definition, one to four units.

All right, so the bundling definition. So if it's a duplex, that would be automatically covered?

If they were part of a bulk transaction.

How big is that bulk transaction? 1000 homes or what is the bulk transaction?

Sale of two or more parcels.

Okay, that's a concern.

Parcels.

Parcels.

Right.

So a company that is prohibited, if they own 1000 units or more, that's prohibited. But for one or two bundled units, that would be prohibited as well.

Yeah, if the recipient, of course, was designated institutional investor as defined.

Okay, so there is this large investor and the small investor.

Yes.

So we're talking about real estate transactions now. That's the reason I kind of want to jump in, because it gets really kind of. And here we go with ADUs. I would like to thank our leaders that have created opportunities for us to facilitate the development of accessory dwelling units in the State of California. So we no longer really have anymore a single-family standard where there is a one single-family standalone unit as we build new construction, as we change our existing housing stock.

I can tell you I live in a new development, and I have ADUs that are developed at the same time, in the same manner that they're building the initial single-family detached home that they are building one to two depending on whether or not they're detached or attached.

Sometimes they do both at the same time, at the same manner with the new construction, where you end up with three units per lot, but it's still a single family home because the way that the lending industry works as we do our transactions or facilitate transactions.

Single-family is defined as single-family one to four, where you can get an owner-occupied loan, which means that you buy all three of those units together, or two if it's a duplex, or if it's, say, a single-family home with an ADU, you buy those in one transaction and you can either rent out the other one, or you do it in a combined purchase with you and your mother or you and your daughter or you and your son to be able to have your own independent living.

And so you can do that as an owner-occupied loan, which gets you the lower interest rate, which means that you're not buying as an investor, which usually gets you kicked to a higher interest rate, and you're still a conforming loan with the way the federal lending standards work. So when we talk about one to four from the real estate transaction space, that really is somebody that can owner occupy as opposed to an investor.

What I think you're trying to get to is condos, and condos may have 15 or 20 units that are attached together, but they're still sold in single family units, as in individual units, where you buy the inside of the wall.

The bottom line is, are those units that you're describing could be the ADU complex or could be. Are they prohibited under this Bill?

They're prohibited. So they would be included in the Bill. So that.

They would be prohibited for, for what?

If it's a REIT that has 1000 or more parcels and they're publicly traded company, the REIT would not be able to bulk purchase 500 homes that have maybe ADUs, maybe not ADUs or duplexes. They can buy it.

Pardon me?

Yes, they can buy it.

They're not excluded?

No. It applies to the REITs. This doesn't apply to homeowners.

There's a type of business.

That is acquiring the property.

Correct.

Correct. It's about the type of business. Homeowners can buy a single family, one to four under this.

Type of business and the nature of the transaction.

Okay. And so who goes around validating, who's a REIT and who's a personal home buyer?

That's what the definition in the Bill is supposed to do. And title and escrow is responsible for validating transactions.

Okay. Okay. Thank you.

Sorry about that.

Thank you for clarifying.

Thanks for the clarifications. Any other comments? Well, I want to thank the author for putting this forward and for the work. And a lot of work has been done by our Committee staff and the author and his staff in recent weeks leading up to this hearing. And I know that it's challenging when you come in the second year Bill and amendments come in, you're still kind of trying to figure out how to negotiate that. We saw that with the prior Bill we just heard.

There's still plenty of time for those continued conversations, which is a good thing. But I do think that this Bill is important, especially when you're thinking about kind of these build-to-rent models where there's bulk sales, and then you're literally taking single-family homes that could be for sale, off the market altogether. And I've seen this happen in my jurisdiction where there was a tower and it was going to be all for sale.

They basically sold all bulk, the whole building, and it went all to lease. And cities, our state, but also cities and jurisdictions plan out how many homes are being built for sale. And when those kinds of last-second transactions occur where they bulk sale, it really throws those numbers into a really challenging position. And I know that there's thoughts that this practice may not be so widespread, which is a good thing.

However, we do see it expanding in other states, kind of like a canary in a coal mine, that we're going to anticipate that will eventually come here even with more vigor. And so it's always good to get ahead of these kinds of acts as well. So, Senator Ward, would you like to close?

Thank you. In the interest of Ms. Wicks and all your time, I will just briefly say, one, I think you all know I'm going to work sincerely on any opposition efforts, especially where it comes down to a definition or things that we need tightening up so that there's no unintended consequences. Two, we have a housing affordability crisis, and it's largely driven by supply. And that is not lost on me as the Chair of our Housing Committee. And we are going to continue to work on those solutions.

But while we are in a constrained market that's not operating well, that we want to make sure that through this Committee's lens, we are looking at the nature of transactions and making sure that when there's a David and Goliath situation, that we are being fair for all parties, and that's what this Bill does. And so with that, I respectfully ask for your Aye vote.

Thank you and I do want to thank Assembly Member Wicks and Mckinnor for subbing in today. Take a roll call on the vote, please.

The vote. Motion is do pass. [Roll call].

All right, that Bill is out. And so the only other item we have, well, we have AB 82. If Assembly Member Maienschein would like to add on to that.

On AB 82, Maienschein Aye.

Okay, thank you so much, everyone. We're adjourned.