California flips out over investors
who flip distressed properties
Government efforts that rig the system to produce more affordable housing are neither effective nor noble — especially when policymakers target a trend that has captured the public’s imagination while improving and increasing the housing stock.
Home flippers have become prominent players in the housing market as well as part of popular culture. Quite a few have become famous. According to IMDb, the internet movie database, “House-flipping shows have dominated the reality landscape for over 20 years and show no signs of slowing down.”
Not everyone is enamored with, or even tolerant of, flippers. To some critics, they are vipers who exploit prospective buyers by driving up prices. Profiteers who spoil old, charming neighborhoods. A Minnesota Realtor sums up the widespread irritation when she says “everyone loves to hate house flippers.”
But just as corporate owners are beneficial to the housing market, so are home flippers. That same Realtor points out what should be obvious to all when she says that “sometimes flippers are the only thing standing between a gorgeous vintage home and a bulldozer.”
California has even tried to quash their business model, and all the good that flows from it, in the name of “affordable housing.” Senate Bill 1079 (2021) and Assembly Bill 1837 (2022) tried to limit access to the housing market by corporations and flippers, who at times are the same. SB 1079 gave tenants and nonprofits 45 days to outbid investors at a foreclosure auction. AB 1837 restricted out-of-state and other bidders, and extended the first bill’s five-year period.
But some profit-seeking flippers found ways around the law, so legislators have had to go back to the policy lab to draw up a law that will “prevent investors from flipping distressed homes,” The San Diego Union-Tribune reported last month.
Two bills this year sought to tighten up the laws by addressing problems that emerged from the original legislation. Assembly Bill 1158 would have cracked down on flippers who allegedly manipulated the SB 1079 process by pretending to be owner-occupiers or who used straw buyers or created non-profit entities to complete a purchase. That bill died. Assembly Bill 1957, which passed the Assembly and now is in the Senate, likewise tries to clamp down on those who supposedly misuse this process.
But the bill also forbids owner-occupants from bidding on the properties which, as the California Association of Realtors points out in its official opposition, “undermines the original purpose of SB 1079, which was to ‘expand homeownership opportunities and stabilize communities by prioritizing owner-occupant participation in the acquisition of foreclosed homes.’”
Wouldn’t it be easier for the Legislature to simply allow willing buyers and sellers, including flippers, to engage in these transactions?
Maybe the efforts are well-meaning. Politics, though, is too often the art of vilification, with lawmakers always looking for a demon to slay on behalf of the public good, especially when there are frustrations, such as the state’s housing crisis. Somebody has to pay and house flippers are a convenient mark. But they are hardly the reckless monster that they’ve been made out to be.
While flippers have reshaped the housing market, they are far from dominant. Just 7.4% of all housing sales in 2025 were flipped single-family homes or condominiums, down from 2024’s 7.6%. Last year’s total was not quite 3-million units. Both figures fall below the peaks of 2022, when more than 454,000 units, 8.7% of total sales, were flipped.
The argument is that flippers, which tend to be small businesses, are pricing buyers who plan to live the homes they buy out of the market. That idea is turned upside down by the data. “Competition for homes remains strong in many markets due to constrained supply,” said Rob Barber, CEO of data company ATTOM. “With prices staying elevated, investors are finding it harder to secure deals that deliver strong returns.”
Returns on investments have slipped, as well. Realtor.com says flipping “hit a wall in 2025 with resale profits plummeting to their lowest levels in nearly 20 years.” Per-unit profit, which isn’t guaranteed — one in 10 flips breaks even or loses money — has also tumbled, from $77,000 in 2024 to $65,981 last year. Expect overall sales and profits to continue fall in California, should lawmakers get their way.
Which is a shame, because flippers improve neighborhoods. They buy and renovate homes that often are in hopeless states of disrepair, increasing the value of nearby housing and boosting the aesthetics of entire communities, some of which might otherwise decline. When abandoned homes are repaired and flipped, the scarce housing stock — the estimated national housing deficit is about 4.7-million units — is pushed upward.
Sellers gain, too, as “most buyers these days don’t want to buy a house that needs work,” says the Miami Herald. But flippers, “who are increasingly putting their own money into the houses they buy,” are ready to take on the “fixer-uppers.” Selling homes as-is can be risky, especially for those going through financial hard times. Owner-occupiers can “end up costing themselves more than they would have spent to make the necessary repairs — if they are able to sell their homes at all.”
The benefits of flipping extend beyond the housing market. Flippers, says Scott Beyer, CEO of the Market Urbanism Report and an occasional Free Cities Center contributor, tend to be “young, jack-of-all-trades entrepreneurs, not big investors,” who use their profits from flips to “fund bigger endeavors, whether broader real estate investing or large development projects.” Flippers provide business for contractors and subcontractors, who create and maintain jobs, primarily in the working class.
California’s housing market is in need of repair, but outlawing or even hobbling a legitimate enterprise is not going to improve matters.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.