Does New Ordinance Level the Playing Field or Bulldoze Your Rights?
East Palo Alto, California, has a divisive ordinance on its radar right now. The Opportunity to Purchase Act (OPA), introduced in late 2021, is intended to stop investors from buying up local properties and, in turn, raising rents and displacing tenants. The ordinance, which is slated to hit the City Council’s agenda in early 2022, would allow renters, affordable housing nonprofits, or the city the opportunity to purchase for-sale properties before they’re made available to public bidders.
Under the proposed OPA, owners of multi-family buildings and certain rental properties would need to notify tenants, nonprofits, and/or the city and give them a chance to put an offer on the building before it gets put on the market. The owner is, however, able to reject the offers from any of these aforementioned groups in favor of a better one, but then has to allow those groups the opportunity to match the counteroffer.
Here’s the catch: if the tenants, nonprofit, and/or the city can match that better offer, the building owner must sell it to them. Then, if that’s the case, the new owner has to keep the building’s rent below a certain threshold. If a property owner violates this ordinance, they would be find 10% of the sale price of the property.
East Palo Alto isn’t the first city to think of this solution, if that’s what you want to call it. Neighboring cities of Oakland, Berkeley, and San Jose have long sought resolutions to their out-of-control affordable housing shortages, and are likely watching East Palo Alto closely as it navigates this new venture. San Francisco, California, and Washington, D.C., already have their own version of OPA laws, with the latter undergoing scrutiny after an investigation found renters were holding up home sales and charging exorbitant prices.
It sounds great, right? While there are definite upsides, such as keeping people in their homes at reasonable rents, there are several reasons to give pause to this idea. Opponents of OPA have been vocal about their concerns since the ordinance was introduced. Bay Area real estate developers and agents are worried that this type of government interference will chill the booming real estate market and stagnate the upward trajectory. Plus, while the ordinance would help renters, what’s to be said about the property owners? OPA doesn’t take into account what property owners want to do with their buildings.
The Business and Housing Network, a non-profit trade association representing homeowners in California, argues that OPA will essentially condemn rental properties and scare away prospective housing providers. Or, if OPA is passed, the bureaucracy that will be tied to it will be astounding. On average, the escrow timeline in the Bay Area ranges from 30-60 days, and this is with standard operating procedures. So, imagine how that buying/selling timeline will look once a non-standard procedure is put into play. OPA could delay property sales transactions for weeks, or even months in East Palo Alto. California is already a state that has so much red tape around real estate transactions that it scares away investors. It’s not hard to see why so many Californians are fleeing The Golden State, particularly when ordinances like these are introduced.
OPA walks a fine line between guaranteeing affordable housing for citizens and violating building owners’ property rights. Proponents of the Act argue that it will have a minute impact on the housing market in East Palo Alto, which is one of the hottest housing markets in the country. However, is that really the issue? Or, does the issue stand more with people being afraid of constant governmental overreach? The East Bay Community Law Center states that this type of ordinance promotes a democratic-residential control of housing. That sounds like an oxymoron to me.
You might think, “This doesn’t affect me since I don’t own a multi-family property.” I thought that first, too. But, what happens when this ordinance snakes its way down to single-family dwellings, or smaller rental properties? That has me a bit worried, and it should worry you, too.