Housing Dept's proposed COPA program costly, unworkable government power grab, critics say
San Jose's activist Housing Department is promoting COPA (Community Opportunity to Purchase Act), an extremist city intrusion into the local housing market that would disadvantage small property owners and systemically privilege the non-profit housing organizations that the Housing Dept funnels so much money to. The program has been roundly rejected by local business as an onerous and awkward corruption of market forces, as public comment at an October 25 public meeting revealed. Edited versions of comments and letters from that meeting are below.
{Editors' note: Here's a quick summary of how the COPA process would work in San Jose:
* Seller of rental property must notify non-profit housing concerns of intent to sell before placing property on the market;
* If non-profit is interested, the seller must give the non-profit the first right to make an offer and the seller may NOT place property on the market during that time;
* If seller turns down the offer, then the seller can place the property on the open market;
* If the seller receives an acceptable offer, the seller MUST go back to non-profit and give them the opportunity to match the price;
* If non-profit matches the price, then the non-profit has the right to purchase the property for that price; but the timeline doesn’t have to match; non-profit still has several months to obtain financing;
* The negotiations end without the original potential buyer being able to counter-offer.}
On onerous, corrupting timing delays:
COPA unfairly gives favorable treatment to non profit organizations that are primarily funded by the city itself. It seems unnecessary since the non profit can just act like a regular buyer. This method also undermines fair market value of assets.
If the non profit has a right of first refusal, the owner’s agent must inform all potential buyers; Who wants to work on a property that someone else can step in and take away from you?
Owners should be able to decide when they wish to place their property on the market, because timing is important. If you force an owner to wait before he even puts it on the market so tenants and a possible non profit buyer can decide whether there is desire and ability to purchase--and then take the right of first refusal coupled with a long closing period--it's outrageous, if not workable.
1. Even before the COVID-19 eviction moratoriums, San Jose had the lowest eviction rate of any major metro area in the U.S, followed by San Francisco.
2. Most rental housing is already covered by San Jose's TPO, with the notable exception of federal programs (Section 8) and certain NPOs.
3. The properties most likely to be affected by COPA are older properties, which are already covered by San Jose's ARO, again with the exception of federal programs and certain NPOs.
4. COPA would essentially transfer rent-controlled properties (distressed by eviction moratoriums) from small property owners to larger NPOs at discounted rates. Once in the hands of NPOs, these properties would generally be exempt from the prior TPO and ARO renter protections.
5. The stated goals of COPA would be better met through the speedy disbursement of COVID-19 rental assistance funds, and local resident preferences for subsidized housing.
On the Housing Department's power grab:
COPA/TOPA appears to be an overly complicated, extra costly, extremely lengthy, intensive sales process riddled with extra regulation, pitfalls and additional paperwork and oversight that will have to managed by the San Jose Housing Department with more personnel and scarce city resources. A smaller housing provider would probably have to hire a consultant at additional cost just to get through it all correctly and even then there could be mis-steps, penalties, fees, extra costs, missed opportunities, market fluctuation and mistakes along the way due to all the requirements that could come with serious financial consequences and little to no incentives to complete a sale properly to a housing non-profit or tenants in the end.
On Intrusion:
The right of first refusal is a demand. It restricts the owners ability to get the best price via listing, to get cash offers, and to execute timing required for 1031 exchange. If I know nonprofit organizations there is no incentive to move transaction quickly since the delay cost is all on the seller and not on the buyer. The demand for right of first refusal, without any agreement to do so is political bullying.
On non profits' financial insecurity:
I oppose this because non-profits by definition are dependent on charitable support, which is notoriously unstable. I think the concept of housing affordability is not the only goal, but one that myriad non-profits would be needed to perform educational, medical, job-seeking, job-training, child-caring, leader training, food supplement would be on the agenda. The view is that people are homeless or low income, because of a certain lack of the above qualities or opportunities. I think that this polyglot of service organizations will raise the cost of QNP management.
A balanced analysis of COPA laws can be found here.
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