Tax bill targeting rental housing investment dies in Assembly committee

A proposal that could raise state tax costs for those who invest in rental housing has effectively died for the year after being held in an Assembly committee.

AB 1611, by Assemblymember Matt Haney, D-San Francisco, would deny California tax deferral under a 1031 like-kind exchange to rental housing investors who own 50 or more qualifying properties - a category defined to include not just single-family homes but any residential rental with up to four dwelling units, as well as certain condominiums, cooperatives, and mobile homes.

The California Apartment Association opposes the bill, arguing that it would penalize lawful real estate exchanges without addressing California's underlying housing shortage.

In an April 22 opposition letter, CAA and coalition partners said the measure would discourage reinvestment in housing, interfere with capital used to rehabilitate older homes and potentially reduce opportunities for sales to tenants or owner-occupants. The coalition also argued that the bill targets owners based on portfolio size, not conduct.

Supporters describe the bill as a way to limit tax benefits for large "Wall Street landlords" that buy and rent single-family homes. But the bill's reach is broader than that political framing suggests.

The Assembly Revenue and Taxation Committee placed the bill on its suspense file on April 27, according to the bill's official history on the California Legislative Information website. Bills placed on the suspense file do not advance for the remainder of the session.

CAA will continue monitoring the bill and opposing efforts that would restrict rental housing investment without increasing California's housing supply.