Against the backdrop of a national shortage of affordable housing, due in large part to government policies, California lawmakers want to restrict corporate investment in single-family rental properties. This would make the Golden State’s housing affordability crisis worse. Since California is often a bellwether for both federal and other states’ policies, renters should hope the flawed idea dies before it spreads.

One California proposal, Assembly Bill 2584, recently introduced by San Jose Democrat Alex Lee, would establish a quota system, banning “institutional investors that own more than 1,000 single-family homes from purchasing additional properties and converting them into rentals.” A second proposal, Senate Bill 1212, introduced by Berkeley Democrat Nancy Skinner, would prevent hedge funds and “other corporate investment entities” from buying single-family homes in California, starting next year.

Both lawmakers claim that deep-pocketed institutional investors, such as private-equity firms, hedge funds and real-estate investment trusts, buy so many single-family homes that first-time and low-income home buyers are priced out of the market. This claim shows how little these California lawmakers understand about the role most institutional investors play in the housing market.