Legal Updates: New Photoshopping Rules, Stacked Development Near Transit, and Limits on Institutional Investors
By Colette R. Thomason, Esq.
We have recently seen several noteworthy updates in the legal real estate arena. The first new law discussed below has been implemented, the second will be in the summer, and the third is still evolving.
1) Effective January 1, Business & Professions Code § 10140.8 (AB 723) requires agents to disclose when a property photo has been digitally altered by including a label such as “digitally altered,” and to provide the original, unaltered image alongside the altered version. The law applies to still images modified through photo editing software or artificial intelligence to add, remove, or change property elements, including fixtures, furnishings, finishes, floor plans, landscaping, façades, and visible exterior features or views. Routine edits for lighting, color correction, sharpening, cropping, straightening, angle, white balance, or exposure are excluded.
Examples of edits that require disclosure are digital staging, adding appliances that aren’t actually there, changing carpet to hardwood floor, changing the color of interior or exterior walls, hiding scratches in floors/walls, removing power lines, or changing the view out a window.
The local MLS now requires both the photoshopped and the unaltered images be uploaded for full transparency.
In my eight years at DeLeon Realty, I do not recall us ever photoshopping a photo to the extent a disclosure would be required under this new law. However, many agents do make these edits and with advances in AI and photoshop, it can be impossible to tell when a photo has been altered.
To illustrate, compare the photos below. Both are digitally altered, but only one is within the limits of the law. The photo on the right has had the powerlines, a utility pipe, crosswalk sign, and a patch in the road removed, plus greenery added to the front yard. The photo on the right is misleading, thus the need for this new law.
2) In recent years, California has enacted rezoning measures to promote housing affordability. The latest, Government Code §§ 65912.155–65912.162.1 (SB 79), requires cities in certain counties, including San Mateo and Santa Clara, to allow high-density housing within one-half mile of qualifying public transit stops, such as Caltrain stations. The law establishes height and density standards based on proximity to transit and service frequency. Because Caltrain is classified as Tier 1, with 72 or more daily trains, projects may reach 75 feet in height within one-quarter mile of a station and 65 feet within one-half mile, provided the city has a population of at least 35,000.
This could mean developers would be permitted to build up to seven-story apartment buildings within one-quarter mile of the Menlo Park and Palo Alto Caltrain stations, and up to six stories within one-half mile of those stations. As shown on the maps below, this encompasses a broad area, extending into Old Palo Alto and even a portion of Atherton, whose Caltrain station closed approximately five years ago.
Opponents of the bill express concern about the impact of high-density projects with mandatory affordability requirements in otherwise affluent residential neighborhoods, particularly as cities are already managing other state housing mandates and must now comply with this measure beginning July 1, 2026. Proponents argue that increasing housing near transit is essential to meeting affordable housing demand while reducing reliance on freeway traffic through greater use of public transportation.
The maps on this page show the estimated quarter-mile and half-mile distances from the Menlo Park and the Palo Alto California Avenue Caltrain stations.
3) Perhaps unexpectedly, President Trump and
Governor Newsom share a policy position blaming large institutional investors for contributing to housing unaffordability. On January 7, President Trump announced via Truth Social a proposal to limit the number of single-family homes a large investment company may own. He urged Congress to codify the restriction into law and stated that he was taking immediate steps to bar such investors from acquiring additional single-family homes.
Following suit in his address on January 8, Governor Newsom spoke about big investors, such as private equity and hedge funds, snatching up single-family homes from regular individual homebuyers, thus making housing unaffordable and driving up rents in California. Governor Newsom pleaded with lawmakers to pass a ban on large private equity landlords in California.
Neither the President nor the Governor provided details regarding their respective proposals, including which landlords would be affected or how any ban or limitation would be implemented. In recent years, California legislators have introduced, but rejected, bills that would have capped company ownership of single-family rental homes at 1,000 properties. As of this writing, it remained unclear whether a similar limit would be adopted at the state or national level. President Trump is expected to address housing affordability proposals at the World Economic Forum in Davos on January 19–23. For now, there appears to be bipartisan alignment at both the state and national levels around improving housing affordability.
Disclaimer: Please note the laws discussed herein are very nuanced and detailed. The above is a brief summary and not a complete explanation of all aspects of each law.
Colette Thomason | colette@deleonrealty.com | 650.543.8525
DeLeon Realty, Inc. | DRE #01903224 | Equal Housing Opportunity
