Sacramento Legislative Day Hot Issues

Key Real Estate Insights from the Capitol Just got back from a productive trip to Sacramento, where I had the opportunity to dive deep into some of the most critical issues facing the real estate industry in California. It was incredibly insightful to see the legislative and regulatory processes firsthand and understand the current landscape from various perspectives. Here are some key takeaways from the discussions and information shared:

Advocacy and Legislation Shaping the Future A major theme was the vital importance of advocating for property ownership and homeownership. Real estate professionals are actively encouraged to share their experiences and stories with legislators to influence policy decisions and protect the interests of homeowners and renters. This includes providing instruction on how to effectively communicate with elected officials.

Several housing bills were under review, with some significant proposals aimed at increasing homeownership and addressing the housing shortage receiving overwhelming approval from a committee. Discussions included amendments to increase funding for mixed-transit oriented development and down payment assistance programs. There was also analysis of bills specifically targeting large institutional investors, like one prohibiting REITs and hedge funds from purchasing new construction for five years and another limiting ownership to no more than 1,000 homes.

The Costa-Hawkins Rental Housing Act and its impact were also discussed. Concerns were highlighted regarding the potential negative consequences of extreme rent control measures on housing supply and construction if the act were modified or eliminated.

The trip also coincided with a legislative day focused on advocacy for real estate interests. This event included recognition of individuals who have made significant contributions and financial support for advocacy initiatives, like Hall of Fame inductees, and thanks to dedicated volunteers. Social media engagement was stressed as an important advocacy strategy.

Legislative Wins and Ongoing Battles That Matter for Property Owners A special congratulations to the California Association of REALTORS® for successfully advocating against harmful legislation that would have negatively impacted California homeowners and small housing providers.

📅 AB 647 Defeated
This bill posed a serious risk to existing neighborhoods and infrastructure by enabling greater corporate acquisition of single-family homes. Its failure helps protect the character and stability of our communities and keeps homeownership more accessible for individuals and families—not just large institutional investors.

📅 AB 1157 Successfully Opposed
This proposal aimed to expand extreme rent control measures across the state. If passed, it would have discouraged investment in rental housing, reduced available units, and hurt small landlords who rely on rental income. By opposing AB 1157, REALTORS® helped maintain a more balanced rental market for both providers and tenants.

📢 Support for SB 448: Addressing Squatter Issues
One bill we should support is SB 448, which proposes a more streamlined process for property owners and law enforcement to remove unlawful occupants (squatters) from residential properties. The bill is also designed to protect the rights of lawful tenants, ensuring that real renters aren’t mistakenly displaced. Clear enforcement protocols will help maintain housing security while respecting property rights.

🏗️ Support for Pro-Housing Legislation
Looking forward, it's crucial that we support legislation that accelerates the permitting process and enables more housing construction. Removing bureaucratic barriers is essential to addressing California’s long-standing housing shortage and meeting the demand of first-time buyers, renters, and move-up buyers alike.

Navigating California's Challenging Real Estate Landscape Several significant market challenges were discussed. The insurance market in California is facing significant challenges, with rising premiums and difficulties in securing coverage. Concerns were raised about the impact of rising insurance costs on home sales and affordability. Comparisons were made to states like Florida, which face similar issues due to litigation and natural disasters.

Fire-related issues continue to impact the market and require careful attention. The state of emergency for Los Angeles County due to fires was extended to July 1st, impacting anti-price gouging laws for rental properties in surrounding counties experiencing increased demand. Landlords in these areas must adhere to rent increase restrictions and should consult legal counsel.

Additionally, recent mapping changes have reclassified millions of acres into higher fire zones. Cal Fire's claim that defensible space inspections are mandatory for property sales in high fire zones persists, though it is noted as inaccurate. These reclassifications trigger disclosure requirements for property sales, potentially giving buyers rescission rights. Sellers and listing agents must disclose changes in fire zone designations.

Important Updates on Forms, Regulations, and Compliance There are numerous updates and reminders regarding forms, compliance, and local ordinances. The California Department of Real Estate (DRE) is a key state regulatory agency focused on consumer protection through licensing, exams, enforcement, audits, and regulation creation. The DRE has a staff of around 320 and a budget of about $66 million. While exam administrations have declined, the DRE is working on initiatives to improve real estate education and engage licensees.

From an enforcement perspective, the DRE's Audit Division conducts both investigative and proactive audits, with common violations including trust fund handling, recordkeeping, and commingling of funds. The Enforcement Division investigates complaints and conducts background checks, with a focus on preventing land speculation and price gouging following wildfires. Licensees are advised to regularly check their license status, provide thorough disclosure to clients, and brokers must maintain reasonable supervision of salespersons.

Several real estate forms have been revised, including move-out inspection forms and clauses related to liquidated damages and arbitration. Discussions continue on whether the buyer representation agreement should explicitly include the buyer's broker compensation clause. New forms were also introduced, such as a team member exit agreement.

Regarding buyer representation, all licensees are now required to have a buyer representation contract in place as soon as practicable, no later than when an offer is written. Clarifications are expected on the contract's start date and duration, and agents must clearly explain the difference between exclusive and non-exclusive contracts. Concerns exist about whether listing agents have a fiduciary duty to ensure buyer credit requests align with purchase agreement limitations. The forms committee is reviewing purchase agreement language regarding buyer credit request limits, as exceeding these limits may void additional payments. Confusion exists on who enforces discrepancies between buyer-requested credits and allowances in purchase contracts, with title or escrow companies potentially becoming the de facto enforcers.

Several updates apply to rental properties: • For repairs exceeding $125, photographic evidence of before and after conditions is required.
• Landlords must notify tenants within 21 days of any deductions from security deposits.
• Starting July 1st, before and after photos are required for all security deposit deductions above $125, including photos taken before tenant move-in.
• Landlords of properties with 15 or more units must offer to report positive rental information to credit bureaus. This also applies to smaller landlords if the property is owned by a corporation or trust.

Other regulatory updates include: • Real estate offices with public access must have a workplace violence prevention plan by July 1st, requiring annual renewal.
• Apartment buildings with exterior balconies must be inspected for safety by the end of the year, and disclosure of balcony conditions is required in purchase contracts even before inspections are completed. Similar requirements and past deadlines impact condominiums with wood balconies.
• The Corporate Transparency Act, which previously required beneficial ownership statements for domestic corporations, has been overturned and now applies only to foreign corporations.

Concerns were also raised about excessive HOA transfer fees, which should only cover reasonable actual costs. Challenging unreasonably high fees is possible.

Other Important Discussions Discussions also covered diversity and inclusion initiatives within the real estate organization, emphasizing the need for increased diversity at state and local levels. Various programs and working groups are in place to address these issues.

The Housing Affordability Fund has approximately $450,000 available for grants, with a deadline of July 28th. A $30,000 grant was approved for a smaller realtor association's insurance program. Discussions included using funds for first-time homebuyers and the need for testimonials.

While the sources don't elaborate on these specific interactions in detail, there were discussions regarding collaboration with Eric Terry from Northern California on a retirement community and a meeting with Sylvia Taylor, potentially in Oklahoma County.

This trip truly highlighted the dynamic nature of the real estate industry and the constant evolution of laws and regulations affecting practitioners and consumers alike. Staying informed and engaged in the advocacy process is clearly essential!