OAKLAND — Galvanized by the Moms 4 Housing standoff that drew national attention to the region’s affordability crisis, Oakland officials may soon overhaul the way homes are bought and sold — and other Bay Area cities are considering similar measures.
The policies would give tenants or affordable housing nonprofits first dibs to buy certain residential properties for market value. The move is intended to beef up the local supply of low-income units, while curbing the influence of real estate speculators on the overheated housing market that is pricing out many long-term residents.
Oakland’s push for a “right of first refusal” policy is a novel approach, but not without precedent. San Francisco recently adopted a right of first refusal policy — it went into effect in September — and Berkeley and East Palo Alto are considering similar rules. Washington, D.C., has had such a policy on the books for more than a decade.
Bay Area activists say they’ve been working behind the scenes on these measures for years, but they’ve only recently picked up the momentum needed to potentially propel them into law.
“The housing crisis has gotten so much worse that people are ready to embrace the policies that will actually address it,” said Leah Simon-Weisberg of the Alliance of Californians for Community Empowerment, which has been working with Oakland officials on the new policy.
Oakland Councilwoman Nikki Fortunato Bas recently introduced the ordinance, dubbed the Moms 4 Housing Tenant Opportunity to Purchase Act, which would give tenants a chance to make an offer if their landlord decides to sell.
The ordinance is named for the Moms 4 Housing activists — a group of homeless women who spent two months squatting in an empty, investor-owned house in West Oakland. The authors hope to add language that also would allow the city or a qualified nonprofit the first bite when a vacant property goes up for sale. And while the language has not been finalized, Mayor Libby Schaaf previously expressed interest in targeting corporate landlords, rather than mom-and-pop owners.
Such an ordinance could have a big impact — there are 5,898 vacant homes in Oakland, according to census data released in December.
Fortunato Bas’ act would mark a big shift in Oakland’s real estate market, and the prospect has property rights lawyers and landlord groups on edge. Part of what makes it so galling, they say, is that it seems to reward Moms 4 Housing’s illegal actions.
Several of those activists were evicted last month from the Magnolia Street house owned by real estate company Wedgewood and arrested. But shortly after, under pressure from the mayor and Gov. Gavin Newsom, Wedgewood agreed to sell the house to the Oakland Community Land Trust and let the activists move back in. Wedgewood also agreed to let the city or a local affordable housing nonprofit make offers on the dozens of other properties it owns in Oakland.
“It’s extremely frightening for people who respect private property and believe in private property,” said San Francisco-based property rights attorney Andrew Zacks.
Still, experts say a right of first refusal policy likely would be legally sound.
“It has some significant precedent, and it hasn’t been successfully challenged in court,” said Oakland-based real estate attorney Rob Selna. “And many other cities are pursuing it.”
On the other side of the bay, San Francisco’s Community Opportunity to Purchase Act requires all owners of multi-family buildings, or vacant lots where a multi-family building could be built, to notify a list of six qualified affordable housing nonprofits when they intend to sell.
If one of the nonprofits makes an offer, the owner is free to reject it. But if the owner gets a better offer on the open market, the owner must give the nonprofit a chance to match it — a policy known as the “right of first refusal.” If the nonprofit matches the better offer, the owner is required to sell to the nonprofit.
So far, nonprofits have bought just two buildings using the new program, according to Max Barnes, spokesman for Mayor London Breed’s Office of Housing and Community Development. Both purchases — a seven-unit building on Mission Street and a six-unit building on 24th Street — were made by Mission Economic Development Agency. The agency plans to close on its third purchase, an 11-unit building on 23rd Street, later this month, said spokesman Christopher Gil.
Part of the reason for the low number of purchases may be a lack of funds. The city loans money to nonprofits for these types of purchases through its Small Sites program. Even so, the San Francisco Community Land Trust — one of the six certified nonprofits — has been notified of several hundred buildings going up for sale but hasn’t yet had the cash to buy one.
“We’ve been close,” said Keith Cooley, director of asset management for the land trust, which already owns 13 buildings around San Francisco. “We’ve looked at several buildings very closely, but we just don’t have the capacity at the moment.”
The intent of the San Francisco policy was to help nonprofits compete with fast-moving real estate speculators and their all-cash offers, said Cooley, who helped draft the act. For example, he said, the land trust was putting together an offer in 2018 to buy a six-unit building in the city’s Western Addition district occupied entirely by seniors. Some of the tenants had been there for as long as 40 years.
“Before we could complete our offer, a speculator was able to buy the building for all cash,” Cooley said.
Now, the new owner is planning to evict the tenants, he said.
Berkeley’s efforts to draft a similar measure got a boost this week with a $220,000 grant from a group of businesses, nonprofits and other groups called the Partnership for the Bay’s Future. The grant gives Berkeley and the East Bay Community Law Center, which has been working with the city on a tenant opportunity to purchase act, extra resources to get the measure off the ground.
As far as landlord attorney Daniel Bornstein is concerned, these types of policies add extra confusion and hurdles to the sale process.
He said the San Francisco ordinance sent shock waves through the industry last year. It’s not fair to allow a handful of nonprofits to jump the line and snatch a property away from another potential buyer — a young couple looking to buy a first home, for example, Bornstein said. Furthermore, it’s not an effective replacement for building new affordable housing.
“It’s now ‘sexy’ public policy because the hard public policy decisions are not being made,” he said. “It’s a feel-good measure, but it isn’t going to accomplish the overall goal.”