LA City Council Moves To Ban Companies Like Zillow From Buying Homes
The Los Angeles City Council voted Friday to explore ways of stopping companies like Zillow from purchasing single-family homes in L.A.
The council directed the City Legislative Analyst and City Attorney to report back on potential ways of preventing tech companies from buying up homes in L.A. and flipping them for profit.
City council members Nury Martinez and Nithya Raman co-authored the motion, which argues that “iBuying” is driving up home prices in L.A., putting ownership even further out of reach for many.
“The housing crisis has been further exacerbated by high tech companies such as Zillow, Opendoor, Rockethomes and Redfin,” according to the motion. “Low-income Angelenos, who have lived in their neighborhoods for decades, are unable to compete with these iBuyers. This has led to many longtime residents being pushed out of their homes, neighborhoods and communities."
iBuying (short for “instant buying”) involves tech companies using algorithms to quickly size up a home’s value. The companies then offer a price to homeowners, who may appreciate the convenience of a quick cash offer. The iBuyers’ ultimate goal is to sell the home for a profit.
Some experts say it’s unclear that banning iBuyers would help make homes more affordable for low-income families.
Eric Sussman, adjunct professor of accounting and real estate at UCLA’s Anderson School of Management, pointed to a confluence of other factors driving up home prices: Mortgage interest rates are low, very few homes are coming up for sale, and wealthy Angelenos flush with cash from a booming stock market are in fierce competition to buy those homes.
“I just don't see the iBuyers having any real, meaningful impact given those other factors,” he said.
Sussman also said it’s not clear the city has the legal authority to stop these companies from buying homes.
In any case, iBuying isn’t all that common in Southern California. This year, iBuyers have purchased about 1% of all the homes sold in the L.A. area, according to a recent report from Zillow. The company recently announced plans to get out of iBuying altogether, though it only started purchasing homes in L.A. less than two years ago.