East Palo Alto to discuss controversial housing purchase policy

A housing policy proposed by the city of East Palo Alto is attracting the attention — and vitriol — of homeowners and landlords.

On Sunday, opponents rallied in front of East Palo Alto City Hall to protest the policy. In recent weeks, residents and outside community members have waited in a digital queue to comment in hourslong, evening City Council meetings that extended close to midnight.

And on social media and in email inboxes, criticism and sometimes calls for termination have been lobbed at city officials.

“There have been folks on the social media pages, in public, who have directly attacked staff, asking for their firing,” Mayor Carlos Romero said during a council meeting on Dec. 7. “This is depriving someone of their livelihood. … I don’t think that’s appropriate.”

The controversial law in question is the Opportunity to Purchase Act (OPA), which so far has been characterized as a tool to create more affordable housing by proponents and a destructive policy that meddles with the rights of homeowners and mom and pop landlords by opponents.

“The big lie in OPA is that renters are going to be the homeowners of this process,” said Mark Dinan, one of the lead opponents of the policy and moderator of East Palo Alto Neighbors, a Facebook group with more than 8,000 members, including a few council members. “They’re not. They’re going to be the ones living there, but they’re just gonna have a different landlord.”

The gist of the policy, which the council is scheduled to deliberate on in a special meeting Wednesday night, is to give tenants, affordable housing nonprofits and the city itself first dibs to purchase a property before it’s put on the open market.

The process proposed in East Palo Alto so far is as follows: For a property to which OPA applies, an owner provides a notice to eligible purchasers of his or her intent to sell the property. Eligible purchasers, such as a tenant, a nonprofit or the city, can express interest in buying the property or can waive that right.

If the prospective purchaser is not interested, the owner can put the home on the market. If one of the three groups wants to buy, however, they will make an initial offer.

Owners can then choose to reject or accept it. If the owner rejects, then they can proceed to list the property on the market and enter into what’s called a “conditional contract” with a third party. During that time, the interested tenant or nonprofit may still have a chance to match the offer of the third party.

Other Bay Area cities where housing is a hot-button issue have implemented or are considering this policy, including San Jose, Oakland and Berkeley. San Francisco passed its own version of the law in 2019, called the Community Opportunity to Purchase Act (COPA), which gave nonprofits first rights to purchase multifamily residential buildings.

The spirit behind implementing the housing policy is the same — to establish more affordable housing.

‘We have people on city staff say that delaying the home sale by (270) days would not affect the home price, and that’s just flat out wrong.’

Mark Dinan, opponent of OPA

But each version of the law is different in subtle and large ways, with varied ramifications depending on where the policy is enacted.

Most of the concerns about the policy center on the impact on home prices, which would drop, OPA critics say. City leaders have disputed this, saying that owners can still sell their homes at market value.

Part of this fear comes from the ordinance’s inclusion of unoccupied single-family homes — houses in which the owner does not live.

The city has exempted occupied single-family dwellings from the OPA proposal, including those that have accessory dwelling units (also known as granny units), but it has done little to convince the opposition that this exemption will prevent property devaluation.

If one rental home is sold at a certain price, Dinan argues, then other real estate buyers will use “strongarm tactics” to lower the appraisal value of surrounding homes.

In an interview, Romero said that the assertion of dropping home values is baseless. He has heard figures thrown out that assessed the total value of every single-family home in the city — around $7 billion — would drop by 30%.

“They have absolutely no either academic or empirical studies that can point to any type of diminution in value,” Romero said.

But if owner-occupied single family homes are exempt from the law, which unoccupied single-family homes does the city have in mind? According to Romero, the city wants to target the 33% of city’s single-family homes owned by “outside investors.”

‘They have absolutely no either academic or empirical studies that can point to any type of diminution in (property) value.’

Carlos Romero, mayor, East Palo Alto

“That is a huge percentage of our land that has been acquired through the foreclosure crises or through just a natural escalation in housing prices, in which outside investors have decided to try to have some sort of arbitrage here and make money off of our housing,” Romero said. “That’s fine. It is the market. But nevertheless, it is one of the police powers of the city to try to address some of these issues of accessibility — not affordability, at this point — but accessibility to making an offer on properties.”

Another concern of opponents surrounds the timelines offered to the potential buyers.

Every OPA policy dictates a timeframe for each step of the purchasing process. And cities can implement deadlines that depend on the type of home that’s up for sale. For example, East Palo Alto proposes that purchasers of a dwelling of four or more units have 90 days to give an initial offer. From the statement of interest to closing, purchasing a home through East Palo Alto’s OPA can take anywhere from 100 to 270 days.

Dinan argues that the city’s timeline appears to be “intentionally designed to kill home prices.” He points to other jurisdictions, such as San Francisco, which gives five days to show interest, whereas East Palo Alto provides 30.

“We have people on city staff say that delaying the home sale by (270) days would not affect the home price, and that’s just flat out wrong,” he said. “You can’t make an offer on a house in June and wait until December to see if you got it. That’s just not how real estate works.”

Opponents also fear that the law will provide a legal tool to strong-arm homeowners. They often cite a recent change in 2018 to Washington D.C.’s Tenant Opportunity to Purchase Act (TOPA), which was first enacted in 1980. An investigation found that some renters used OPA as a cudgel to charge landlords an exorbitant amount of money to be released from their TOPA rights. As a result, the D.C. council exempted all single-family homes from the law.

Dinan and many homeowners who have launched a campaign against OPA believe that, ultimately, the policy as it currently stands doesn’t protect local residents or safeguard against large investment firms swiping up homes but instead targets smaller mom and pop landlords. They propose, at the very least, that the city continue to do more outreach particularly to property owners and call for an economic analysis of the policy’s impact in the city.

Dinan also argues there are other mechanisms to address affordable housing, but OPA, and including single-family homes in the policy, is not one of them.

“If you’re really concerned about addressing affordable housing and displacement, you do not use single-family homes to do that,” he said. “You rezone East Palo Alto. You build more apartment buildings that have an affordability component. Using single-family homes to address displacement is like using Teslas to address the issue of how you get kids to school in the morning. You use school buses; you don’t use any $80,000 cars.”

Romero, however, argues that OPA is just one of about 14 other laws that East Palo Alto has already implemented that he hopes will provide some stability for the city’s residents.

“This is one additional policy that neither serves as a silver bullet or a panacea but is another tool, simply stated, that we can use to attempt to (create) further stability in the city,” he said.

Wednesday’s council study session meeting will be held on Zoom starting at 6 p.m. To access the meeting, go to us06web.zoom.us/j/86520513649. Those wishing to speak at the meeting must use the link on the city’s website to sign up before 5:45 p.m.