Bay Area cities mull giving tenants the right to buy rentals first

Real estate groups say the head start is unfair to owners, could slow sales

(iStock/Illustration by Steven Dilakian for The Real Deal)
(iStock/Illustration by Steven Dilakian for The Real Deal)


(iStock/Illustration by Steven Dilakian for The Real Deal)

A battle is brewing in Bay Area cities as politicians explore whether to give tenants a head start in buying multifamily properties.

East Palo Alto, San Jose, Oakland and Berkeley are considering ordinances that would give renters, nonprofits or the city a chance to make offers on some multifamily properties before they hit the market, according to the San Jose Mercury News.

Tenant advocates say “opportunity to purchase” acts could be a way to fight affordable housing shortages and keep displacement at bay. Real estate and landlord groups say the rules would amount to “a hostile takeover” of homes and investments at a time when rents in Bay Area cities are still down.

While most of the debates will take place next year, East Palo Alto could become the first Bay Area city after San Francisco to approve such an act after a special study session later today, following a previous meeting on the issue that lasted until midnight. The city’s own analysis showed only about 20 single-family homes and fewer than 10 multi unit buildings would be subject to the ordinance each year, because owner-occupied single-family homes, duplexes and triplexes would be exempt.

Every municipality is considering something slightly different. Yet the ordinances work the same way: If owners of rental properties want to sell, they would first have to notify tenants, qualified affordable housing nonprofits and potentially the city. The seller could list a property on the open market if none of those groups comes up with an acceptable offer, and would still need to give tenants, nonprofits or the city a chance to match the best offer.

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“Over a 10-year period, I think it could have a radical impact,” Leah Simon-Weisberg, legal director for the Alliance of Californians for Community Empowerment, told the Mercury News.

Tenants rights groups have already scored one big win in Oakland, where after more than two years of protests, rent strikes and negotiations, the owner of a 14-unit apartment building agreed to sell it to a local nonprofit that buys market-rate properties and converts them to affordable housing. The East Bay city’s plan to create its own priority buying program, put on hold during the pandemic, will come back before the city council next fall.

Berkeley is set to take up the issue again next year after significant pushback from property owner groups, who argued it will prevent owners from getting the best price possible and could prolong the sales process for months.

Slower sales were also a concern for Sam Liccardo, the mayor of San Jose, whose city will probably revisit a priority purchase plan in the spring, although tenant rights activists there are pushing for a vote in February. Liccardo told the Mercury News that the city needs to assure that any measure won’t shut down the real estate transactions whose taxes help fund affordable housing projects.

“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,” he said.

[SJMN] – Emily Landes

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