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Should renters get first dibs in Bay Area real estate deals?

This was originally published in the San Jose Mercury News on December 21, 2022. Read the originally story here.



As the Bay Area grasps for new ways to quell its affordable housing shortage, several cities are considering controversial policies that would give some tenants a shot at buying their homes — a move that’s sharply dividing property owners and renters.


To prevent big-pocketed investors from scooping up homes, raising rents and forcing tenants out, East Palo Alto, San Jose, Oakland and Berkeley are eyeing ordinances that would give renters, nonprofits or the city first dibs on some sales. Known as opportunity to purchase acts, the ordinances have been heralded by tenant rights advocates as a way to give renters a leg up in the overheated housing market. But the idea faces strong opposition from some landlords and real estate groups who argue they represent an unconscionable interference in the rights of property owners.


“It’s going to be a battle,” said Sandy Perry, a board member of the South Bay Community Land Trust, which seeks to buy residential buildings and convert them to affordable housing. “We’re fighting against the real estate industry, which doesn’t want this to happen. But I think it’s a great opportunity. It’s an opportunity to do something very concrete against this wave of displacement that’s still going on in San Jose and in Silicon Valley.”


The proposals vary, but generally they require owners of multi-unit rental properties to notify the tenants in their building, qualified affordable housing nonprofits and/or the city if they intend to sell. If none of those groups produce an offer the seller finds acceptable, the seller can list the property on the open market. After selecting the best offer, the seller then needs to give the tenants, nonprofits or the city the chance to match it. If that occurs, under East Palo Alto’s proposed ordinance, the owner would have to sell to whoever matches the offer. The buyer would be prohibited from raising rents past a certain level.


Under the model San Jose is workshopping, the owner would get the final say in selecting the buyer.


The San Francisco Community Land Trust is in the process of buying its first two buildings under the city’s two-year-old purchase act — 40 units in the Tenderloin and four in Russian Hill. But though the city’s ordinance gave the land trust an unprecedented chance to compete with corporate investors, it’s challenging for nonprofits to find the cash to close deals, said Keith Cooley, director of asset management for the land trust. Other cities weighing opportunity to purchase acts are considering coupling them with city funds.


At an East Palo Alto City Council meeting earlier this month, heated debate over the city’s proposed purchase act lasted until midnight, forcing council members to postpone their vote. Opponents called the proposed ordinance unconstitutional and said it amounted to a “hostile takeover” of people’s houses, while supporters said it might be their only means of ever buying property. The City Council is set to revisit the item Wednesday.


Jennifer Liu, vice president of the homeowner-focused Business and Housing Network, worries that East Palo Alto’s policy will prevent owners from selling to tech companies or their employees and getting the best price possible. She also worries the ordinance will bog down sales in months of red tape.


“Those are my lifetime savings for my retirement,” Liu said of her real estate investments. “So my concern is that later when I need the money and I need to sell it, I cannot sell it. And the price would be discounted because of this policy. I am deeply concerned.”


The ordinance wouldn’t impact a huge number of sales in East Palo Alto, according to a city analysis. Owner-occupied single-family homes, duplexes and triplexes would be exempt. Based on historical sales data, fewer than 23 single-family homes and seven multi-unit buildings would be subject to the ordinance each year.


In Oakland, a group of tenants last week convinced their landlord to sell their Fruitvale building for $3.3 million. The Oakland Community Land Trust is poised to buy it and help the tenants become partial owners. But the process took more than two years of rent strikes and protests, including a recent procession to the landlord’s house.


Advocates say an opportunity to purchase ordinance could have made the process easier. And if one is passed, it could open up the chance to buy for more tenants.


“This is something that over a 10-year period, I think it could have a radical impact,” said Leah Simon-Weisberg, legal director for the Alliance of Californians for Community Empowerment.


Oakland has been toying with the idea of an opportunity to purchase act since early last year, spurred by the activist group Moms 4 Housing, which skyrocketed to national fame when members started squatting in a vacant house with their children. Progress stalled during the pandemic, but Councilwoman Carroll Fife plans to bring the idea back for a vote next fall.


In Berkeley, Mayor Jesse Arreguín put discussions around a proposed tenant opportunity to purchase act on hold, after significant pushback. The city expects to present an updated version early next year.


San Jose housing officials also are working on an ordinance and expect to bring it before City Council next spring.


Mayor Sam Liccardo said the city wants to make sure the measure won’t grind the housing market to a halt. After all, taxes on real estate transactions help fund affordable housing, he said.


“We need people to be able to engage in the market without thinking, hey, in San Jose you’re never going to be actually able to transact a sale because of the red tape,” Liccardo said.

Community group SOMOS Mayfair, which held a rally in support of an opportunity to purchase ordinance outside San Jose City Hall last week, is pushing officials to vote by February.


“We’re hoping that this policy will give folks the opportunity to remain in the communities that they currently are, remain in the housing that they currently are,” said Andrea Portillo, community organizing and policy manager for the group, “and not be displaced once their property is sold.”

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