Hotop on the true essence of COPA and some proposed alternatives

Small property owner Dean Hotop has previously written critically in Opp Now of San Jose Housing Department’s (SJHD) proposed Community Opportunity to Purchase Act (COPA) and the unintended consequences it will produce (see here). In this essay, he takes a step back and gives a 10,000 ft view of what COPA really is, in its essence, and then proposes some alternatives {for anyone who still thinks it’s a great idea to use gov’t funding (i.e., taxpayers money)} to facilitate the transfer of privately-owned, market rate housing units to Non-Profit Organizations and converting them to low-income housing forever.

The Essence of COPA
COPA is an admission of failure by SJHD. That’s it, really. Forty-three years of rent control has failed to bring down housing costs in San Jose. As have the following: Tenant Protection Ordinance, Ellis Act Ordinance, Rent Registry Ordinance, RUBS Elimination, Source of Income Ordinance, Mobile Home Rent Ordinance, Inclusionary Housing Ordinance, Affordable Housing Fees and let’s go ahead & throw in the Covid eviction moratorium & rent freeze, as well. All have failed.

All of the above have not only failed but have had opposite effects of their seemingly well-intended goals, which is now why SJHD is proposing COPA. Nothing else has worked, so let’s go ahead and quadruple duple down on more bad policy! If at first you fail, try, try and try again. When will they learn? (Rhetorical question, just in case you haven’t yet finished your morning coffee)

Other ways to accomplish the same thing
Two things should now be abundantly clear to anyone with a pulse; 1) SJ has a housing affordability crisis (i.e., housing shortage) and 2) SJ’s leaders & unelected bureaucrats have not only done a terrible job of managing this crisis (err shortage), they’ve made it exponentially worse with misguided policies at the behest of SJHD.

But let’s put that aside and imagine that permanently converting market-rate housing to low-income housing is a miraculous, instantaneous benefit to all of San Jose’s residents. It’s not, but we’ve so far managed to remain convinced (somehow) that all the prior policies would do the same, so let’s say we stay on that same policy thought train and continue pursuing COPA. Wouldn’t it make sense to compare alternatives side-by-side? Similar to how a business does comparative analysis of competing investment alternatives to decide which would provide the best outcome.

I would propose, and even offer up for free to any willing policy maker, the following COPA alternatives to put forth for consideration:

Incentivize property sellers to VOLUNTARILY give NPO’s first crack (only) at the deal, under reasonable timelines for both parties. The following incentives could be put forth to encourage sellers to enter into a COPA negotiation with an NPO:

The City waives all transfer taxes/fees, including Measure E.
Similar to how already paid property taxes are prorated between buyer/seller on transfer, the City gives prorated refunds for all annual City taxes/fees already paid by seller (sewer, garbage, business license, Housing Department fees & Building Department fees, etc.). These can add up to 10’s of thousands of dollars’ worth of incentives to a seller.

For long-time owners who own their property outright, the City can be a guarantor for seller-financed sales, offering a degree of safety and a long-term income stream for the seller.

Other Non-profit legal service providers, or pro-bono lawyers, can provide free contract services saving the sellers tens, or even hundreds, of thousands of dollars on commissions.

Alternately, The City can pay any broker fees to consummate the deal, also saving the seller $ and keeping the local brokers happy.

Facilitate & promote long-term master leases between NPO’s and property owners, guaranteeing them their current annual operating cash flow plus guaranteed CPI+ X% annual increases. In other words, a NNN lease on the property, in which the NPO can operate as a low-income housing provider during the term of the lease. The City/NPO could put up an appropriate security deposit to ensure that the NPO continues proper maintenance & repairs on the property during the master lease.

Property owners would benefit from a hands-free, stable, reliable & growing income while retaining property ownership benefits of long-term appreciation and tax advantages NPO’s would have more low-income housing units to offer with less taxpayer money being used.

The lease could include a first right of refusal for the first 5-10 years of the master lease, should the owner wish to sell.

And lastly… As thousands of individuals living in the creeks, parks and freeway over/underpasses are facing the most desperate situations in their lives, let’s all acknowledge that desperate times call for desperate measures…

Measure E is bringing in $50M per year. Let’s ask the City Council to pass an emergency measure immediately directing all $50M/year, for the next 2 years, towards emergency housing vouchers.

$50M/year would provide 2,083 desperate individuals with a $2,000/month voucher.
The City could co-sign 2-year, non-renewable leases on the thousands of currently vacant apartments in San Jose under the income non-discrimination ordinance and give these individuals some runway to get back on their feet.

A win-win-win for the homeless, the property owners and the taxpayers who are tired of seeing the suffering due to the lack of results from their confiscated, hard-earned income. Let’s show SJ voters/taxpayers IMMEDIATE RESULTS from Measure E.

For more from Hotop, check out the following articles:

Follow Opportunity Now on Twitter @svopportunity.

Image by Martin LaBar.

Jax Oliver