East Palo Alto City Council
July 18, 2023

This calculation is shown below.

Maximum monthly mortgage payment
$537,000 affordable sales price for 2.5-person Weighted average based on condominium Maximum mortgage amount
Assumed downpayment (5%)
Maximum affordable sales price
This amount is known as the “Affordable Housing Cost” for the purpose of determining the for-sale in-lieu fee amount for FY 2023-24.

VI. Calculation of the Annual Median Sales Price
1) First, utilize information provided by the San Mateo County Association of Realtors to determine the annual median sales price of an attached market rate unit (condominiums) for the most recent completed year and for the two prior years.
2) Utilizing the median sale price for each 12-month period, the Housing Department will calculate the median sale price over the past 36-month period. 3) Below is the current estimate based on sales from calendar years 2020-2022.

8.1.b
Packet Pg. 300 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23 Date of Publication: ________ 5
Median Home Prices
City of East Palo Alto 2020-2022
Year Median Price # Sales
Single Family
2020
2021
2022
Weighted Average
$935,000
$1,021000
$1,062,500
$1,014,000 (rounded to
nearest thousandth)
67 122
90 Condominium
2020
2021
2022
Weighted Average
$826,000
$767,500
$788,000
$792,000 (rounded to
nearest thousandth)
13 16
17 This amount is known as the “Median Sales Price Calculation” for the purpose of determining the for-sale in-lieu fee amount for FY 2023-24.

VII. In Lieu Fee Additional Charges
The Ordinance also allows the Housing Department to collect an administrative fee to account for the estimated costs of administration. This administrative fee may be levied as part of the In-Lieu Fee or as a separate charge. In addition, the In-Lieu Fee can account for the estimated cost of increases in the price of housing and construction between payment and the acquisition of land and construction of affordable units.

At this time, the In-Lieu Fee described in this document does not include an administrative fee in the calculation. However, the In-Lieu Fee amount shown at the beginning of this Chapter will include a 2% increase to account for the delay between payment and construction of affordable dwelling units, as illustrated in Section VIII.

8.1.b
Packet Pg. 301 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23 6 Calculate the For-Sale In-Lieu Fee by subtracting the Maximum Affordable Price (Step V) from Median Sales Price Calculation (Step VI). The In-Lieu Fee shall be collected on twenty percent (20%) of the total dwelling units in the Residential Development.

Median Sales Price Calculation (Section VI): $792,000
-
Affordable Housing Cost (Section V): $537,000
=
Difference: $255,000
+
In-Lieu Fee Additional Charges: $ 0
[Administrative Fee] +
[2% Increase Due to Delay] $5,000
=
In-Lieu fee Per Inclusionary Unit 259,600
Please see the calculation below using an example Residential Development project containing 100 dwelling units:

Total Number of Dwelling Units: 100
X
Multiplied by 25%: .25
=
Units required to pay In-Lieu Fee: 25
X
In-Lieu Fee per Inclusionary Unit: $ 259,600
=
VIII. Calculation of the For-Sale In-Lieu Fee
Date of Publication: ________

8.1.b
Packet Pg. 302 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23 7 In-Lieu Fee for a Residential Development of
100 Dwelling Units:
$ 6,490,000
Date of Publication: ________

8.1.b
Packet Pg. 303 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) 1 Chapter 2B Calculation of In-Lieu Fees – Rental - Section 18.37.080 (B) I. Introduction
The Rental In-Lieu Fee is calculated from the financing gap required to build affordable rental dwelling units using 4% Low Income Housing Tax Credits (LIHTC or tax credits) assuming a blended affordability of 25% of the Inclusionary Units affordable to households at or below 35% AMI (35% AMI), 50% of the Inclusionary Units affordable to households at or below 50% of AMI (very low-income), and the remaining 25% of Inclusionary Units affordable to households at or below 60% AMI (low-income). This reflects the requirement in Section 18.37.050(2).

II. Calculation of the Rental In-Lieu Fee
The City retained David Rosen & Associates to conduct the analysis for the initial calculation of the Rental In-Lieu Fee, beginning in 2020. The multifamily rental prototype used in this calculation is based on historical data from affordable rental multifamily housing prototypes in East Palo Alto and an analysis of 2017-2019 Low Income Housing Tax Credit applications. Further detailed analysis and methodology can be found in Attachment 2C.

During the FY 2021-2022 and FY 2022-2023 updates, the fees were updated using the percentage change in new home prices in the fourth quarter of the previous two years.

Given that the data source for new home prices discontinued, for FY 2023-2024, the City opted to update the fees using the Construction Cost Index (CCI). A summary of the current FY 2023-2024 Rental Housing In-Lieu Fees, updated from the 2020 Rental Housing In-Lieu Fee Calculation, is provided below:

Apartments, Structured Parking
Tax Credit Equity per Dwelling Unit $233,000
Permanent Mortgage Financing per
Dwelling Unit
$182,400
Total Sources per Dwelling Unit $415,400
Development Cost per Dwelling Unit $665,000
Gap for In-Lieu Fee (Blended AMI) $250,000 per unit
2% Increase Due to Delay $5,000 per unit
Baseline In-Lieu Fee for Rental (2020) $255,000 per unit FY 2023-24 Rental Housing In-Lieu Fee Calculation*
December 2020 CCI
December 2022 CCI
Percentage Change
2020 Rental In-Lieu Fee
11,626
13,175
+13.32%
$255,000
FY 2023-2024 Rental In-Lieu
Fee (13.32% increase)
$289,000 per unit
*Figures are rounded in this chart, but not in the actual calculation. Rental In-Lieu Fee rounded to the nearest hundredth.

City of East Palo Alto
Baseline Rental Housing In-Lieu Fee Calculation (2020)* CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23

8.1.b
Packet Pg. 304 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) 2 The full calculation of the baseline Rental In-Lieu Fee and subsequent annual increases are described below.

1. The Total Development Cost is calculated based on the following cost assumptions:

Assumption Amount
Land price $16,335,000
Building Hard Construction Cost
(including prevailing wage and structured
parking)
$73,095,000
Soft Costs (including development impact
fees)
$22,033,500 (30%)
Total Development Cost $111,358,500 ($636,334 per unit)

2. The Affordable Rent calculation is based on the maximum household income at the income levels specified below, adjusted by household size, less utilities:
• 35% AMI [25% of dwelling units]
• 50% AMI [50% of dwelling units]
• 60% AMI [25% of dwelling units]
Utility cost varies by bedroom count and is based on the utilities allowances from the Housing Authority of San Mateo County. The occupancy standard is 1.5 persons per bedroom.

3. Net Operating Income and Supportable Mortgage amount are calculated based on Affordable Gross Rents less the following:

Assumption Amount
Operating Costs $2,365,078
Replacement Reserves $43,750
Vacancy $182,044 (5%)

4. Tax credit equity from 4% tax-exempt bonds is assumed and added to the Permanent Mortgage Amount to calculate the total sources for the project.

Source Amount
Permanent Mortgage $31,925,408
Tax Credit Equity (4%) $40,803,684
Total Sources $72,729,092

5. The gap between the Total Sources and the Total Development Cost is the InLieu Fee.

Total Sources $72,729,092
Total Development Cost (incl.

Developer Fee and Capitalized
Operating Reserves assumption)
$116,490,147
Gap (In-Lieu Amount) $43,761,056 ($250,000 per unit)
CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23

8.1.b
Packet Pg. 305 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) 3 This In-Lieu Fee is effective through FY 2023-24, starting July 18, 2023.

Annual adjustments of the Rental In-Lieu Fee were formerly based on the Northern California Real Estate Construction Report published by the Real Estate Research Council of Southern California at California State Polytechnic University, Pomona. The Rental In-Lieu Fee was adjusted based upon the percentage difference in the current completed year new home prices in San Mateo County from the immediately preceding year as published in the Northern California Real Estate Construction Report. Given that the report and data for new home prices is no longer available, the Construction Cost Index (CCI) is used to calculate the Rental In-Lieu Fee adjustment instead.

The updated calculation for annual adjustment is made as follows:
11,626
13,175
1,549
.1332
December 2021 Construction Cost Index
December 2022 Construction Cost Index
Difference:

Divide the difference by the 2021 figure:

To determine the % difference of the current year
and the preceding year:

Then multiply the current In-Lieu Fee by 100%
plus this percentage:

13.22%
113.22% x $255,000
In-Lieu Fee per Unit: $289,000*
*Figure rounded to nearest hundredth.

III. In-Lieu Fee Additional Charges
The Housing Division may collect an administrative fee to account for the estimated costs of administration. This administrative fee may be levied as part of the In-Lieu Fee or as a separate charge. In addition, the In-Lieu Fee can account for the estimated cost of increases in the price of housing and construction between payment and the acquisition of land and construction of affordable dwelling units.

The In-Lieu Fee described in this document does not currently include an administrative fee in the calculation. However, the In-Lieu Fee amount shown at the beginning of this Chapter includes a 2% increase to account for the delay between payment and construction of affordable dwelling units.

Please see the calculation below using an example Residential Development project of 100 dwelling units:

Rental In-Lieu Fee (FY 2023-24)
Total Number of Dwelling Units:

Multiplied by 25%:

Units Required to Pay In-Lieu Fee:

In-Lieu Fee Per Inclusionary Unit
$289,000
100
X
.25
25 X
$289,000
CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23

8.1.b
Packet Pg. 306 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) 4 In-Lieu Fee for a Residential Development of
100 Dwelling Units:
$7,225,000
CITY OF EAST PALO ALTO INCLUSIONARY HOUSING GUIDELINES – DRAFT 7.18.23

8.1.b
Packet Pg. 307 Attachment: Draft Chapters 2A and 2B (2730 : Inclusionary Housing In-Lieu Fee Update) April 27, 2020
To: Rachel Horst, Patrick Heisinger, Victor Ramirez
From: Nora Lake-Brown
Subject: Inclusionary Housing In Lieu Fee Update
DRA was retained by the City of East Palo to prepare an analysis estimating the in lieu fee associated with potential new requirements under the City’s Inclusionary Housing Ordinance to help inform the City Council’s consideration of the proposed changes. DRA estimates in lieu fees for both rental and owner housing using an analysis of prototypical housing developments appropriate for East Palo Alto, as summarized in the City of East Palo Alto Inclusionary Housing In Lieu Fee Analysis report dated September 19, 2019. This memorandum summarizes DRA’s update of the in lieu fee estimates based on data available through the date of this memo.

The gap calculations are based on the City’s intended use of any in-lieu fees raised.

For the for-sale units, the in-lieu fee is calculated as the difference between affordable prices by income level and the median sales price of single-family detached or condominium units over the past 36 months1. This approximates the gap needed to assist a homebuyer at a target income level to purchase a market-rate home at an affordable housing costs, which is how the City is most likely to use in lieu fees for owner housing. For the rental units, the in lieu fee is calculated from the financing gap required to build affordable rental units using 4% Low Income Housing Tax Credits (LIHTC or tax credits) assuming a blended affordability of 25% of the affordable units at 35% AMI, 50% of affordable units at 50% of AMI, and the remaining 25% of affordable units at 60% AMI. The City anticipates using in lieu fees to assist housing developers in developing affordable rental units as part of a new 4% tax credit-financed projects.

The calculated 2020 In Lieu Fees are summarized on the next page. The tables in Attachment A to this memo detail the updated calculations. 1 Calculated as the weighted average median price for 2017 to 2019 from the San Mateo County Association of Realtors.

8.1.c
Packet Pg. 308 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Rachel Horst, et al.

April 27, 2020

Ownership Housing In Lieu Fee Calculation
City of East Palo Alto
April, 2020
Condominium Type
Affordable Purchase Price for 100% AMI Household $477,000 Market Sales Price
(SMC Association of Realtors 3-Yr Average)
$671,000
Gap for In-Lieu Fee (100% AMI) $194,000 per Unit
$227 per Gross SF
Sources: San Mateo County Association of Realtors, David Rosen & Associates Renter Housing In-Lieu Fees per Affordable Unit and per Square Foot City of East Palo Alto
April, 2020
Apartments,
Structured Parking
Tax Credit Equity Per Unit
Permanent Mortgage Financing Per Unit
Total Sources Per Unit
$233,000
$182,400
$250,000
Development Cost Per Unit $665,000
Gap for In-Lieu Fee (Blended AMI) 2 $250,000
$263 per Gross SF
Source: David Rosen & Associates
2 Fee represents a blended affordability assuming 25% of the affordable units at 35% AMI, 50% of affordable units at 50% of AMI, and the remaining 25% of affordable units at 60% AMI.

8.1.c
Packet Pg. 309 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) East Palo Alto
Affordability Gap and In Lieu Fee Tables
4/27/20
Attachment A

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Packet Pg. 310 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) List of Tables
Table
Number Table Title Table Subheading
Page
No.

Table A-1 Summary of Indicated In Lieu Fees Per Affordable Unit and per Affordable Gross Square Foot by Housing Prototype
A-1
Table A-2 Development Prototypes A-2
Table A-3 Development Cost Assumptions and Budgets A-3
Table A-4 Affordable Sales Price Calculations by Income Level Owner Housing A-4 Table A-5 Median Home Prices 2017 to 2019 A-5
Table A-6 Owner Gap and In Lieu Fee Calculation Condominium A-6 Table A-7 Utility Allowances Rental Housing A-7
Table A-8 Affordable Rent Calculations by Income Level Rental Housing A-8 Table A-9 Rental Net Operating Income and Supportable Mortgage Apartments with Structured Parking
A-9
Table A-10 Rental Gap and In Lieu Fee With 4% Tax Credits Apartments with Structured Parking
A-10

8.1.c
Packet Pg. 311 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-1
Summary of Indicated In Lieu Fees Per Affordable Unit and per Affordable Gross Square Foot by Housing P East Palo Alto Affordability Gap and In Lieu Fee Analysis Condominiums
Apts. w/ Struct.

Pkg
Tenure Owner Rental
Total Residential Units 175 175
Affordable Residential Units 35 35
Site Area (SF) 108,900 108,900
Residential Net SF 149,500 132,900
Total Net SF 149,500 132,900
Building Efficiency Ratio 80% 80%
Residential Gross SF 186,875 166,125
Approximate Building Stories 4 Stories 4 Stories
100% AMI
Per Affordable Housing Unit $193,964 N/A
Per Affordable Housing Gross Square Foot (GSF) $227.12 N/A Blended Affordability (1) $
Per Affordable Housing Unit N/A $250,063
Per Affordable Housing Gross Square Foot (GSF) N/A $263.42 (1) Assumes the following percentage distribution of affordable rental units by % of AMI:
25% of affordable units at 35% AMI; 50% of affordable units at 50% AMI and 25% of affordable units at 60% AMI. Hard costs in renter gap calculation assume payment of prevailing wages. Assumes leverage from 4% Low Income Housing Tax Credits.

Source: DRA.

Owner Rental
Affordability Gap and In Lieu Fee, Owner Housing
Affordability Gap and In Lieu Fee, Renter Housing
East Palo Alto Gap and In Lieu Fee Analysis
April 27, 2020
1 8.1.c
Packet Pg. 312 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-2
Development Prototypes
East Palo Alto Affordability Gap and In Lieu Fee Analysis

Condominiums Apts. w/ Struct. Pkg
Total Housing Unit Count 175 Units 175 Units
Tenure Owner Rental
Existing Zoning
Permitted FAR
Total Site Area (Acre) 2.50 Acres 2.50 Acres
Total Site Area (SF) 108,900 108,900
Density (Units Per Acre) 70 70
Construction Type Podium Podium
Parking Type Structured/UG Structured/UG
Approximate Building Stories 4 Stories 4 Stories
Total Gross Building SF (Excl. Pkg.) 186,875 166,125
FAR Based on Gross SF 1.7 1.5
Net Residential Square Feet 149,500 SF 132,900 SF
Net SF Retail/Community Facility 0 SF 0 SF
Net SF Common Space 0 SF 0 SF
Total Net Building SF 149,500 SF 132,900 SF
Building Efficiency Ratio (%) 80% 80%
Unit Bedroom Count Distribution
Studio/Loft 0% 0%
One Bedroom 23% 40%
Two Bedroom 77% 50%
Three Bedroom 0% 10%
Four Bedroom 0% 0%
Total 100% 100%
Units by BR Count
Studio/Loft 0 0
One Bedroom 40 70
Two Bedroom 135 88
Three Bedroom 0 17
Four Bedroom 0 0
Total Residential Units 175 175
Unit Size (Net SF)
Studio/Loft
One Bedroom 700 SF 650 SF
Two Bedroom 900 SF 800 SF
Three Bedroom 1,100 SF 1,000 SF
Four Bedroom
Average Unit Size 854 SF 759 SF
Parking Ratio (Spaces/Unit)
Studio/Loft 1.00 0.00
One Bedroom 1.00 1.00
Two Bedroom 1.50 1.50
Three Bedroom 2.00 2.00
Four Bedroom 2.00 2.00
Average Spaces/Unit 1.39 1.35
Structured/Underground Parking Spaces 243 Spaces 236 Spaces Tuck-Under Parking Spaces 0 Spaces 0 Spaces
Surface Parking Spaces 0 Spaces 0 Spaces
Total Parking Spaces Provided 243 Spaces 236 Spaces
Gross SF/Parking Space (Incl. Circulation) 300 SF 300 SF Total Gross Parking SF 72,900 SF 70,800 SF
Parking SF Underground/Structured 72,900 SF 70,800 SF
Parking SF Tuck Under 0 SF 0 SF
Parking SF Surface 0 SF 0 SF
Source: DRA.

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April 27, 2020
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Packet Pg. 313 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-3
Development Cost Assumptions and Budgets
East Palo Alto Affordability Gap and In Lieu Fee Analysis 2019
Condominiums Apts. w/ Struct. Pkg
Tenure Owner Rental
Construction Type Podium Podium
Total Residential Units 175 175
Average Unit Size (Net SF) 854 759
Residential Net SF 149,500 132,900
Total Net Building SF 149,500 132,900
Total Gross SF Building Area (Excluding Parking) 186,875 166,125 Total Gross SF Building Area (Including Subt. Parking) 259,775 236,925 Structured/Underground Parking Spaces 243 236
Underground Parking Area (SF) 72,900 70,800
Total Parking Spaces 243 236
Total Parking SF 72,900 70,800
Site Area (SF) 108,900 108,900
Approximate Building Stories 4 4
FAR (Based on Gross SF) 1.37 1.22
Buildable Square Feet 149,500 132,900

ASSUMPTIONS
Development Cost Assumptions
Land Price Per Hsg. Unit $43,560 $93,343
Per Site SF $70 $150
Bldg. Hard Construction Cost Per Net SF (1)
Bldg. Hard Construction Cost (1) Per Net SF $350 $550
Pkg. Costs Incl. In Hard Costs 1=No, 0=Yes 0 0
Underground Parking Construction Per SF Parking Area $0 $0 Hard Cost Contingency % of Hard Costs 0.0% 0.0%
Soft Costs (Incl. Dev. Impact Fees) % of Hard Costs + Cont. 30% 30% Owner Housing Sales Costs % of Gross Sales 5% 5%
Loan to Cost Ratio % of TDC 65% 65%
Equity as a % of TDC 35% 35%
Loan to Value Ratio % of Capitaliz. Value 75% 75%
Debt Coverage Ratio 1.25 1.25
Interest Rate 5.5% 5.5%
Amortization Term Years 30.0 30.0
Capitalization Rate (2)
Return on Cost % of TDC, Incl. Land 12.0% 12.0%
Construction and Sales/Stabilization Period (Months) 36 Months 24 Months

DEVELOPMENT BUDGET
Low Scenario
Land Acquisition $7,623,000 $16,335,000
Construction Hard Costs $52,325,000 $73,095,000
Soft Costs $15,697,500 $21,928,500
___________ ___________
Total Development Costs, Including Land $75,645,500 $111,358,500 TDC Per Gross SF $405 $670
TDC Per Housing Unit $432,260 $636,334
TDC per Net SF Residential Area $506 $838
Total Development Costs, Excluding Land $68,022,500 $95,023,500 TDC per Gross SF $364 $572
TDC Per Housing Unit $388,700 $542,991
TDC per Net SF Residential Area $455 $715
(1) Hard construction costs include parking construction. For renter prototypes, estimated hard costs assume payment of prevailing wages. (2) Based on CBRE "U.S. Cap Rate Survey, Advance Review, H1 2019", July 2019. For San Jose, multifamily infill cap rates are 4.00% to 4.25% for the first half of 2019.

Source: DRA
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April 27, 2020
3 8.1.c
Packet Pg. 314 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-4
Affordable Sales Price Calculations by Income Level
Owner Housing
East Palo Alto Affordability Gap and In Lieu Fee Analysis

Assumptions
2019 Median Income, San Mateo County $143,100
Affordable Mortgage Principal and Interest as a % of Income 30% No. of Bedrooms 1 Bedroom 2 Bedroom 3 Bedroom
Household Size 2.0 Persons 3.0 Persons 4 Persons
Household Size Income Adjust. Factor 80% 90% 100%
Owner Utility Allowance (1) $151 $189 $234
Monthly HOA Fee: Market-Rate Units $200
Monthly Property Insurance $100
Property Tax Rate (2) 1.20%
Mortgage Interest Rate (3) 3.50%
Term (Years) 30
Downpayment (% of Sales Price) 5.00%
Per Unit Affordable Sales Price by Unit Bedroom Count
1 Bedroom 2 Bedroom 3 Bedroom
100% AMI
Annual Gross Income $114,480 $128,790 $143,100
Affordable Monthly Housing Expense $2,862 $3,220 $3,578 Less: Monthly Utility Allowance ($151) ($189) ($234)
Less: HOA/Maintenance Expense ($200) ($200) ($200)
Less: Property Insurance ($100) ($100) ($100)
________ ________ ________
Available for Principal, Interest, Taxes $2,411 $2,731 $3,044 Less: Property Taxes (4) 1.20% $565 $640 $714
Supportable Mortgage $536,918 $608,180 $677,884
Assumed Assessed Value at Sale 95.00% $565,176 $640,189 $713,562 Available for Mortg. Principal and Interest $1,846 $2,091 $2,330 Supportable Mortgage $411,056 $465,613 $518,977
Plus: Downpayment @ 5.00% $21,635 $24,505 $27,315
Affordable Sales Price (Rounded) $432,700 $490,100 $546,300 (1) Assumes electric heating, cooking, water heating, other electric, water and trash collection. (2) Estimated to include property taxes and assessments. (3) Source: Freddie Mac Primary Mortgage Market Survey (PMMS) average weekly rate for March 26, 2020 for a 30-year, fixed (4) Property taxes estimated by multiplying the affordable sales price by the property tax rates.

Source: DRA
East Palo Alto Gap and In Lieu Fee Analysis
April 27, 2020
4 8.1.c
Packet Pg. 315 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-5
Median Home Prices
City of East Palo Alto
2017 to 2019
Year Median Price # of Sales
Single-Family
2017 $839,000 123
2018 $980,000 112
2019 $965,000 91
Weighted Average
Total
$922,613
326
Condominium
2017 $672,000 15
2018 $750,000 4
2019 $637,500 10
Weighted Average/
Total
$670,862
29 Source: San Mateo County Association of Realtors; DRA.

East Palo Alto Gap and In Lieu Fee Analysis
April 27, 2020
5 8.1.c
Packet Pg. 316 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-6
Owner Gap and In Lieu Fee Calculation
Condominium
City of East Palo Alto Affordability Gap Analysis
Income Level No. of BR Unit SF
Maximum
Monthly
Housing
Cost (1)
Affordable
Sales Price
Per Unit (1)
3-Year Trailing
Ave. SingleFamily Median
Home Price (2)
Gap Per
Affordable
Unit
Gap Per
Affordable
Unit SF
% of Total
Units by Unit
Bedroom
Count (3)
70% of AMI 1 700 $2,436 $356,200 $670,862 $314,662 $449.52 23% 80% of AMI 1 700 $2,784 $418,700 $670,862 $252,162 $360.23 23% 90% of AMI 1 700 $3,132 $481,100 $670,862 $189,762 $271.09 23% 100% of AMI 1 700 $2,862 $432,700 $670,862 $238,162 $340.23 23% 120% of AMI 1 700 $3,434 $535,300 $670,862 $135,562 $193.66 23% 70% of AMI 2 900 $2,741 $404,200 $670,862 $266,662 $296.29 77% 80% of AMI 2 900 $3,132 $474,300 $670,862 $196,562 $218.40 77% 90% of AMI 2 900 $3,524 $544,700 $670,862 $126,162 $140.18 77% 100% of AMI 2 900 $3,220 $490,100 $670,862 $180,762 $200.85 77% 120% of AMI 2 900 $3,864 $605,700 $670,862 $65,162 $72.40 77% 70% of AMI
Weighted
Average (1) 854 $2,671 $393,160 $670,862 $277,702 $325.18 100% 80% of AMI
Weighted
Average (1) 854 $3,052 $461,512 $670,862 $209,350 $245.14 100% 90% of AMI
Weighted
Average (1) 854 $3,434 $530,072 $670,862 $140,790 $164.86 100% 100% of AMI
Weighted
Average (1) 854 $3,138 $476,898 $670,862 $193,964 $227.12 100% 120% of AMI
Weighted
Average (1) 854 $3,765 $589,508 $670,862 $81,354 $95.26 100% (1) From Table A-5
(2) Weighted average median condominium sales price for East Palo Alto for 2016, 2017 and 2018. (3) Percent of units by bedroom count for the owner Prototype #1.

Source: DRA.

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6 8.1.c
Packet Pg. 317 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-7
Utility Allowances
East Palo Alto Affordability Gap and In Lieu Fee Analysis

No. of Bedrooms Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Heating
Natural Gas
Electric $14 $17 $21 $26 $31
Cooking
Natural Gas
Electric $6 $7 $10 $13 $16
Water Heating
Natural Gas
Electric $14 $16 $21 $25 $30
Other Electric $18 $22 $32 $45 $58 _____ _____ _____ _____ _____ Assumed Tenant-Paid Utilities, All Electric (1) $52 $62 $84 $109 $135 (1) Assumes electric cooking, heating, water heating, and other electric.

Source: Housing Authority of the County of San Mateo, effective 11/1/2019.

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Packet Pg. 318 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-8
Affordable Rent Calculations by Income Level
Rental Housing
East Palo Alto Affordability Gap and In Lieu Fee Analysis Assumptions
2020 Median Income, San Mateo County $143,100
2020 Adjusted Median Income for Calculating Rents (1) $174,000 Affordable Housing Expense As a % of Income (2) 30%
No. of Bedrooms Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom Household Size 1.0 Persons 1.5 Persons 3.0 Persons 4.5 Persons 6.0 Persons Household Size Income Adjust. Factor 70% 75% 90% 104% 116% Renter Utility Allowance (3) $52 $62 $84 $109 $135
Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom
Per Unit Supportable Mortgage By Income Level
35% of MFI
Annual Income Limit $42,630 $45,675 $54,810 $63,336 $70,644 Affordable Monthly Housing Expense $1,066 $1,142 $1,370 $1,583 $1,766 Less: Monthly Utility Allowance ($52) ($62) ($84) ($109) ($135) Affordable Monthly Rent $1,014 $1,080 $1,286 $1,474 $1,631 50% of Median
Annual Income Limit $60,900 $65,250 $78,300 $90,480 $100,920 Affordable Monthly Housing Expense $1,523 $1,631 $1,958 $2,262 $2,523 Less: Monthly Utility Allowance ($52) ($62) ($84) ($109) ($135) Affordable Monthly Rent $1,471 $1,569 $1,874 $2,153 $2,388 60% of Median
Annual Income Limit $73,080 $78,300 $93,960 $108,576 $121,104 Affordable Monthly Housing Expense $1,827 $1,958 $2,349 $2,714 $3,028 Less: Monthly Utility Allowance ($52) ($62) ($84) ($109) ($135) Affordable Monthly Rent $1,775 $1,896 $2,265 $2,605 $2,893 Summary of Affordable Rents Studio 1 Bedroom 2 Bedroom 3 Bedroom 4 Bedroom 35% of Median $1,014 $1,080 $1,286 $1,474 $1,631
40% of Median $1,166 $1,243 $1,482 $1,701 $1,883
50% of Median $1,471 $1,569 $1,874 $2,153 $2,388
70% of Median $1,775 $1,896 $2,265 $2,605 $2,893
80% of Median $2,384 $2,548 $3,048 $3,510 $3,902
130% of Median $3,907 $4,179 $5,006 $5,772 $6,425
(1) Since the Bay Area is a high housing cost area, income limits for households at 80% of AMI are adjusted upwards from the straight AMI calculations; the effective median income equals $161,400 for a household of four at 100% AMI. (2) Assumes 30% of gross income for rent plus utilities. (3) Assumes tenants pay for electric cooking, heating, water heating and other electric. Based on utility allowances from the Housing Authority of San Mateo County, effective 11/1/2018.

Source: HUD; Housing Authority of San Mateo County; DRA.

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Packet Pg. 319 Attachment: Chapter 2C DRA Report (2730 : Inclusionary Housing In-Lieu Fee Update) Table A-9
Rental Net Operating Income and Supportable Mortgage
Prototype 4
Apts. w/ Struct. Pkg
East Palo Alto Affordability Gap and In Lieu Fee Analysis No Tax Credits
4% Tax Credits,
Tax Exempt
Bonds No Tax Credits
4% Tax Credits, Tax
Exempt Bonds
Number of Units by Income Level % Units by Income and Unit BR Count 35% AMI 35% AMI 35% AMI
One Bedroom 18 18 25% 25%
Two Bedroom 22 22 25% 25%
Three Bedroom 4 4 25% 25%
40% AMI 40% AMI 40% AMI
One Bedroom 0 0 0% 0%
Two Bedroom 0 0 0% 0%
Three Bedroom 0 0 0% 0%
50% AMI 50% AMI 50% AMI
One Bedroom 35 35 50% 50%
Two Bedroom 43 43 50% 50%
Three Bedroom 9 9 50% 50%
60% AMI 60% AMI 60% AMI
One Bedroom 18 18 25% 25%
Two Bedroom 22 22 25% 25%
Three Bedroom 4 4 25% 25%
Monthly Gross Rents Monthly Rent by Income and BR Count 35% AMI 35% AMI Tax Credit Rents
One Bedroom $19,440 $19,440 One Bedroom $1,080
Two Bedroom $28,292 $28,292 Two Bedroom $1,286
Three Bedroom $5,896 $5,896 Three Bedroom $1,474
50% AMI 50% AMI
One Bedroom $54,915 $54,915 One Bedroom $1,569
Two Bedroom $80,582 $80,582 Two Bedroom $1,874
Three Bedroom $19,377 $19,377 Three Bedroom $2,153
60% AMI 60% AMI
One Bedroom $34,128 $34,128 One Bedroom $1,896
Two Bedroom $49,830 $49,830 Two Bedroom $2,265
Three Bedroom $10,420 $10,420 Three Bedroom $2,605
Annual Gross Rents $3,640,872 $3,640,872
Less: Vacancy ($182,044) ($182,044)
Less: Operating Costs ($1,050,000) ($1,050,000) Total Units: 175 Less: Replacement Reservses ($43,750) ($43,750)
Net Operating Income $2,365,078 $2,365,078 One Bedroom 40% Annual Debt Service $2,056,590 $2,056,590 Two Bedroom 50% Permanent Mortgage Amount $28,585,163 $31,925,408 Three Bedroom 10% Vacancy Rate 5.00% 5.00%
Annual Operating Cost Per Unit $6,000 $6,000
Annual Replace. Reserve/Unit (1) $250 $250
Mortgage Interest Rate 6.00% 5.00%
Debt Coverage Ratio 1.15 1.15
Term (Years) 30 30
Source: DRA
Projections Assumptions
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Rental Gap and In Lieu Fee With 4% Tax Credits
Prototype 4
Apts. w/ Struct. Pkg
East Palo Alto Affordability Gap and In Lieu Fee Analysis No Tax Credits
4% Tax Credits,
Tax Exempt Bonds

SOURCES AND USES
Total Units 175
PERMANENT SOURCES OF FUNDS Acres 2.50
Federal Tax Credit Equity (1) $0 $40,803,684 Unit/Acre 70.00 Permanent Mortgage $28,585,163 $31,925,408 Gross Bldg SF 166,125 Deferred Developer Fee (2) $0 $0
Gap Financing Required $97,026,862 $43,761,056
____________ ____________
TOTAL SOURCES $125,612,025 $116,490,147
Permanent Gap Financing/Unit $554,439 $250,063
Permanent Gap Financing/SF $584.06 $263.42

PERMANENT USES OF FUNDS
Land Acquisition Costs $16,335,000 $16,335,000
Direct Construction Costs $73,095,000 $73,095,000
Soft Costs $21,928,500 $22,033,500
Capitalized Operating Reserve (3) $0 $776,647
Developer Fee/Profit (4) $14,253,525 $4,250,000
____________ ____________
TOTAL COST $125,612,025 $116,490,147
Total Cost Per Unit $717,783 $665,658
Assumptions and Calculations
Tax Credit Basis
Land Acquisition Costs N/A $0 0%
Direct Construction Costs N/A $73,095,000 100%
Soft Costs N/A $9,915,075 45%
Developer Overhead and Profit N/A $4,250,000 100%
____________ ____________
Total Tax Credit Basis N/A $87,260,075 87%
Basis Boost (%) (5) N/A 130%
Total Tax Credit Basis N/A $113,438,098
Tax Credit Rate (Per CTCAC) (6) N/A 3.27%
Annual Tax Credits (7) N/A $3,709,426
Tax Credit Pricing N/A $1.10
Maximum Federal Tax Credit Equity $40,803,684
N/A = not applicable.
(1) Equals annual tax credits multiplied by tax credit pricing multiplied by 10 years. (2) DRA did not estimate the deferred developer fees that could be used to reduce or close the gap. (3) Under California Tax Credit Allocation Committee (CTCAC), minimum reserve pf 3 months operations plus debt service.
(4) For no tax credit scenario, assumes 15% of hard plus soft costs. For 4% tax credits, equals 15% of eligible basis to a maximum of $2.5 M plus $10,000 per unit per CTCAC Regulations. (5) Projects located in a Qualified Census Tract (QCT) or Difficult to Develop Area (DDA) are eligible for a 30% basis boost. East Palo Alto zip code 94303 is a DDA. (6) 2019 tax credit factors from CTCAC.
(7) Equals total tax credit basis multiplied by tax credit rate.

Source: DRA
Assumptions
4% Tax Credits
% of Cost in Basis (Exluding Land)
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EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: July 18, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Benjamin Toney, Partnership for the Bay’s Future Fellow Karen Camacho, Housing & Economic Development Manager
SUBJECT: East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update Recommendation
Provide direction concerning whether and when to return with an ordinance titled “East Palo Alto Opportunity to Purchase Act” (“EPA OPA” or “Ordinance”) and clarify desired Ordinance components.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Promote Housing, Economic and Workforce Development
Executive Summary
This report arises from direction City Council provided March 1, 2022, to continue research on components of EPA OPA, including the Right of First Refusal (“ROFR”). In summary, staff recommends that the Ordinance not include ROFR for single family homes, considering concerns about its potential impact on single-family home prices in East Palo Alto. Staff also recommends that the Ordinance include a clause on 1031 Exchanges that requires Potential Eligible Purchasers to work with parties seeking 1031 Exchanges to facilitate those exchanges and enable the achievement of associated tax benefits. Furthermore, staff seeks Council direction on any other components of a potential Ordinance that should be added, modified or eliminated. For further background information, please follow the Discussion Guide in Attachment 1.

Glossary
Potential Eligible Purchasers – A Tenant, Non-Profit Housing Provider, or the City in cases where OPA applies.

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Rightsholders – A Tenant, Non-Profit Housing Provider, or the City in cases where OPA applies; this term is used when speaking about one of the specific rights that OPA grants.

Right of First Offer – The right to make the first competitive offer to purchase a property.

Right of First Refusal – The right of a Potential Eligible Purchaser to match a ThirdParty Offer.

Third-Party Offer – An offer submitted by a party other than a Rightsholder/Potential Eligible Purchaser.
1031 Exchange – A capital gains tax deferral strategy for investment property transactions which enables investors to defer taxes if certain IRS rules are met.

Background
The City of East Palo Alto (City) is considering an Opportunity to Purchase Act ordinance (“EPA OPA” or “Ordinance”) to combat displacement and promote community stability by providing pathways to homeownership and a mechanism to preserve affordable housing through increasing opportunities for tenants to purchase the homes they live in when landlords decide to sell. As proposed, EPA OPA would give tenants, affordable housing providers, or the City notice and the first opportunity to purchase a residential property when the owner decides to sell.

In October 2018, the City Council set housing preservation (preserving and extending deedrestrictions on 200 units) as a key goal in its 5-year Affordable Housing Strategy. In January 2021, City Council adopted its Council priorities, one of which included advancing the concept of a Tenant or Community Opportunity to Purchase Act (“TOPA/COPA”) and other homeownership opportunities. Since mid-2019, City Council and staff have worked toward these affordable housing goals. The City gained more capacity to pursue these goals by receiving the Partnership for the Bay’s Future (“PBF”) Challenge Grant from 2020-2022 (“Challenge Grant”) and the PBF Breakthrough Grant (“Policy Grant”).

EPA OPA may be helpful in addressing the City’s preservation goals for many reasons.1 Firstly, it has been vetted over multiple years through rigorous and ongoing community engagement including the voices of low-income families, landlords, homeowners and other community members. Second, it is timed in coordination with regional efforts to preserve homes and provide homeownership opportunities for low-income households. For example, in March 2023, the Metropolitan Transportation Commission (MTC) published its draft TransitOriented Communities (TOC) Policy guidelines, which highlight Tenant/Community Opportunity to Purchase policies as an affordable housing preservation approach.2 Third, local and regional organizations are committed to participating as technical assistants, missiondriven developers and community outreach and education specialists to facilitate implementation of EPA OPA if approved.

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Summary of Outreach and Input Process
Between August 2020 and September 2021, the City and community partners conducted outreach and obtained community input that helped design a potential Ordinance. Between October 2021 and March 2022, the City Council held six City Council meetings, five of which were public hearings, and staff held office hours and a community meeting for additional public input. In 2023, the City conducted two additional meetings facilitated by Peninsula Conflict Resolution Center (PCRC), a neutral party that partners with community members to engage and collaborate on complex issues; a Community Forum on May 30, 2023, and a Policy Discussion on June 13, 2023.

A summary of City EPA OPA actions is summarized in Figure 1 below.

Figure 1: EPA OPA Milestones
Date Description
October 2018
City's Affordable Housing Strategy approved with goal of preserving and extending deed-restrictions on 200 units over next five years
June 2019
Council adopted Resolution No. 5128, authorizing the City Manager to submit an application to the Partnership for the Bay’s Future for a Challenge Grant for Housing Protection and Preservation (“Challenge Grant”).1
November 2019 City awarded Challenge Grant. Challenge Grant Fellow began work in February 2020 and continued through January 2022.

January 2021
City Council adopted as one of its Council Priorities, “Advancing the Concept of TOPA/COPA and Other Homeownership
Opportunities.”2
July 2021
Staff provided an update on Challenge Grant progress and received authorization to apply for a Partnership for the Bay’s Future Breakthrough Grant.3
July 2021 –
September 2021
Nine Affinity Group meetings (67 participants) and two Focus Group meetings (19 participants) were conducted to gather community input. Participants consisted of homeowners, tenants, landlords, and real estate agents.

October 2021
Policy & Action City Council item to provide a report on OPA progress and seek direction on development of an ordinance. City staff were directed to bring back a proposed OPA Ordinance for hearing.4
1 See June 4, 2019 staff report: http://eastpaloalto.iqm2.com/Citizens/Detail_Meeting.aspx?ID=1511. 2 See January 23, 2021 special meeting:
http://eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1361&MinutesID=1208&F ileFormat=pdf&Format=Minutes&MediaFileFormat=mpeg4.
3 See July 20, 2021 staff report:
http://eastpaloalto.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=&MeetingID=1420&MediaPosition=95. 624&ID=1813&CssClass=.
4 See October 5, 2021 meeting:
http://eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1427&MinutesID=1288&F ileFormat=pdf&Format=Minutes&MediaFileFormat=mpeg4.

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November 2021
Public hearing for OPA Ordinance. City Council directed staff to hold a community meeting on OPA and return to the next City Council meeting with an updated Ordinance.5
December 2021
Community meeting held via Zoom on December 1, 2021, with 276 participants of which 72 spoke during the public comment portion.6 Staff also hosted virtual office hours for OPA comments and inquiries on December 3 and December 6, 2021.

City Council help a public hearing on December 7, 2021.7 Staff presented on recommended changes to the Ordinance based on City Council direction and community feedback. City Council took over two hours of public comment from 128 speakers and
continued the item to December 22, 2021.

On December 22, 2021,8 staff proposed several amendments to the draft Ordinance first proposed in November 2021. The Ordinance also included edits recognizing the public feedback.

City staff directed to continue the item at the next regular Council meeting in the new year.

January 2022
Staff hosted accessible office hours to receive further community input on January 13 and 14, 2022.

Council held another public hearing on January 25, 2022.9 David Rosen & Associates presented on findings from their analysis on potential impacts of EPA OPA. City Council received further clarification on Qualified Nonprofits and foreclosures. Item continued to March 1, 2022.

March 2022
Public hearing for OPA Ordinance continued on March 1,
2022.10City Council received further clarification on the applicability of the ordinance, staff analysis on the potential impact of the right of first refusal on home prices, and public comment. City Council directed staff to continue to study the Ordinance, and to introduce a revised Ordinance at a later date. The latest version of the Ordinance reviewed by City Council is from the March 1, 2022 City Council public hearing.

March 2023
Affordable Housing Preservation funding conversation on March 21, 2023.11 City Council discussed potential funding sources that would advance affordable housing preservation.
5 See November 15, 2021 meeting:
http://eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1431&Format=Minutes . 6 See December 1, 2021 community meeting recording at: https://vimeo.com/652516489. 7 See December 7, 2021 meeting:
eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1460&Format=Minutes 8 See December 22, 2021 meeting:
eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1464&Format=Minutes 9 See January 25, 2022 meeting:
eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1486&Format=Minutes 10 See March 1, 2022 meeting:
eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1489&Format=Minutes 11 See March 21, 2023 meeting:
eastpaloalto.iqm2.com/Citizens/SplitView.aspx?Mode=Video&MeetingID=1962&Format=Agenda

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May 2023 Community Forum with PCRC (a neutral party) on May 30, 2023.12 June 2023 Policy Discussion with PCRC (a neutral party) on June 13, 2023.13 July 2023 City Council Policy Discussion
City Council Direction at March 1, 2022 Public Hearing
At the last EPA OPA public hearing on March 1, 2022, City Council sought a comparative analysis on the Right of First Refusal’s (“ROFR”) impact on property values, with the potential of eliminating tenants’ right to use ROFR when purchasing a single-family home (“SFH”). For SFHs, ROFR is proposed to be a five-day period that gives a tenant living in the home an opportunity to match a market offer after the owner first rejects the tenant’s initial offer. The ROFR is proposed to be a 20-day period for properties with 2 or more units.

City Council also directed staff to provide an overview of various housing preservation models that could help achieve the affordable homeownership goals under the Ordinance. This overview is provided in Attachment 3. Additionally, across several city council meetings, requests for identifying funding sources to implement the potential policy have encouraged staff’s search for information on local, regional, state, and federal funding sources to close the gap needed for residents to complete a purchase. Staff provided an overview of these opportunities at the March 21, 2023, City Council Meeting. Staff will provide further discussion of housing preservation models that could be implemented under EPA OPA and funding opportunities if/when the Council considers a proposed EPA OPA for adoption.

The purpose of this staff report is to present the research requested and, to seek additional feedback that may help shape a new proposed Ordinance.

Analysis
Summary of Community Feedback – 2023 EPA OPA Engagement Efforts On May 30, 2023, and June 13, 2023, the City and Peninsula Conflict Resolution Center hosted community engagement events to address misinformation and to continue to engage the community for feedback on the potential Ordinance. The community engagement events were also prompted after direction from Council at the March 1, 2022 public hearing to continue to address misinformation before an Ordinance was presented before City Council again. The impact of misinformation was also discussed briefly on March 21, 2023 during a City Council Policy and Action item on Affordable Housing Preservation Funding.

Over 120 attendees showed up in person to the Community Forum and over 110 attended the virtual Policy Discussion. In addition to addressing misinformation, the City sought continued feedback, questions, and suggestions to locate a middle ground that balances the preferences of multiple perspectives within the city and achieves the Council objectives of supporting local homeownership, advancing affordable housing preservation and addressing displacement of long-time residents of East Palo Alto.
12 See link to Community Forum presentation under “Past Meetings” at:
https://www.cityofepa.org/housing/page/east-palo-alto-opportunity-purchase-act-epa-opa-0. 13 See link to Policy Discussion presentation under “Past Meetings” at:
https://www.cityofepa.org/housing/page/east-palo-alto-opportunity-purchase-act-epa-opa-0.

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Major takeaways from these events include: interest in the details of how the policy is expected to function, transaction timelines, and opportunities for funding and financing; concerns about misinformation; major concerns about the effect on property values; and strong resistance among homeowners and real estate agents against the Right of First Refusal for Single Family Homes. More details about the community input are included in the PCRC Report in Attachment 2.

Research Summary
1- Right of First Refusal (ROFR)
1A - ROFR for Single Family Homes (SFHs)
Figure 1: Timeline and Process for ROFR (SFHs)
ROFR reshapes the conventional selling process by entitling a local Rightsholder to match a market offer a property owner selling their property (“Seller”) is considering accepting. The EPA OPA process for SFHs that was last considered by the City Council provides tenants, affordable housing providers, or City (also referred to as “Potential Eligible Purchasers” or “Purchasers”) with a 30-day period to signal interest in purchasing a property, and a 30-day period to make an offer (also referred to as “First Offer”). This aligns with the existing 60-day noticing requirement under CA Civil Code 1946.1 for properties with tenants that are on a month-to-month lease (CA Civil Code 1946.1 does not delay sellers from marketing a home for sale, it requires that landlords provide tenants a 60-day notice before terminating a lease and requiring a tenant to move).

As shown in Figure 1, Rightsholders/Potential Eligible Purchasers would have 30 days from being notified that the property will be for sale to inform the Seller of their interest to buy the property. If interested in purchasing the property, Rightsholders would have an additional 30 days from the date of expressing interest to make a purchase offer. The Seller could either accept or reject the Rightsholder’s offer. If the Seller rejects the Rightsholder’s offer, the Seller could market the property for sale. Note that the Seller can receive as many offers as the

9.1 Packet Pg. 327
market would provide. If the Seller accepts an offer from the open market (also referred to as “Third-Party Offer” or “accepted offer”) after rejecting a Rightsholder’s offer, the Rightsholder could have the ROFR; that is, the right to match the Third-Party Offer. If a Third-Party Offer is higher than 115% of the amount offered by the Rightsholder, the Rightsholder would not have ROFR.

For a single-family home, if the Third-Party Offer is less than or equal to 115% of the amount offered by the Rightsholder, the Rightsholder would have 5 days from the date the Seller accepted the Third-Party Offer to match the price and terms of the accepted offer to exercise the ROFR. The Seller would receive the same purchase price and terms of the offer they accepted; however, the Rightsholder would be the purchaser instead of the Third-Party.

Concern about the impact of ROFR on property values prompted City Council to request further research. Homeowners and real estate agents have expressed concerns that other jurisdictions have not applied OPA onto single-family homes because of potential negative effects on home prices.3 As of yet, no estimated effect of ROFR on home prices has been identified. In jurisdictions where OPA has been approved with a ROFR clause, property values continue to trend in positive directions (see Figures 1 and 2 below), which may be a result of several market conditions that impact home prices, as explained in the David Rosen and Associates Report.4 Property values in jurisdictions that have passed OPA ordinances with ROFR clauses (including Washington DC which originally included single family homes) demonstrate continued property value growth after adoption and implementation. In addition to other market factors, this pattern may also be influenced by funding and financing support that bolsters the demand of rights-holding Purchasers.

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Figure 2: Housing Price Index in Washington, DC
& Metropolitan Washington Area (1995-2017)
Source: D.C. Policy Center Report.14 Note that year 1995 begins at Index 100. 14 See Yesim Sayin Taylor, “Taking Stock of the District’s Housing Stock,” D.C. Policy Center, March 2018, available at: https://www.dcpolicycenter.org/wp-content/uploads/2018/03/DC-Policy-CenterHousing-Report.final_.March25.pdf.

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Figure 3: Average Sales Price Per Unit in San Francisco for Properties Subject to COPA (3- and 4-plexes) vs. Properties not Subject to COPA (duplexes), 2019-2023 Community members have expressed concern that ROFR may reduce demand among some buyers who are sensitive to the perceived risk of their offer not being the final offer accepted, or who find the OPA procedural requirements unfavorable.6 The analysis under Section 1C below describes the Ordinance amendments the City Council has made to mitigate these concerns.
1B - Other Policies’ Mitigation of ROFR/Property Value Relationship Typically, OPA policies mitigate concerns about the impact of ROFR on property values by constraining the universe of qualifying properties, prioritizing the Right of First Offer, or by adjusting the timelines and terms of the exercise of ROFR.

Among 11 national examples listed in the Opportunity to Purchase report by the Coalition for Non-Profit Housing and Economic Development (CNHED) and Local Initiatives Support Corporation (LISC) Twin Cities,7 nine jurisdictions include and two omit ROFR. The City of San Jose recently rejected a non-ROFR COPA policy to prioritize addressing visible homelessness.

Active policies or proposals elsewhere in the Bay Area include San Francisco, Oakland, and Berkeley. Mountain View8 and South San Francisco9 have also recently discussed exploratory processes for Opportunity to Purchase, but policy language discussing ROFR is not yet available.

Comparing timelines for Right of First Refusal, national examples vary in the time window allotted for exercising the right by applicability. A summary of the ROFR timelines is illustrated in Figure 4 below.

Figure 4: Right of First Refusal Execution Timeline
Jurisdiction Baltimore DC DC Montgomery
County, MD
Takoma
Park, MD

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Property Type (SFH) (SFH)15 (2+ units) (4+ units) (SFH) ROFR
Window 30 Day 15 Day 15 Day 60-90 Day
50-200
Day
Jurisdiction San
Francisco
Chicago Prince
George's
County

EPA OPA EPA OPA
Property Type (3+ units) (10+ units) (20+ units) (2+ units) (SFH) ROFR
Window 5 Day 90 Day 60 Day 20 Day 5 Day
1C - Existing Mitigation Strategies in EPA OPA
EPA OPA attempts to mitigate concerns about a ROFR effect on SFH properties through multiple policy mechanisms.
1) Firstly, it dramatically reduces the universe of qualifying properties through multiple exemptions for both property type and transfer type. See the exemptions list in the Discussion Guide.
2) EPA OPA also restricts the timeline of ROFR execution for SFHs to a five-day window to ensure that contending Potential Eligible Purchasers accelerate the purchase process if and when they select to exercise ROFR.
3) Council also responded to ROFR concerns with a cap on when ROFR applies. ROFR only triggers if the accepted Third-Party Offer is less than or equal to 115% of the Potential Eligible Purchaser’s highest rejected First Offer – competing third parties can circumvent ROFR by augmenting their offer and outcompeting the Rightsholder.

City Council Considerations for ROFR
Council and Staff originally included the Right of First Refusal for the public purpose of supporting local homeownership and addressing displacement, by giving local Potential Eligible Purchasers a tiebreaker advantage for offers that they can match. ROFR functions under the premise that a Seller, when faced with two offers of substantially equal prices and terms, may be open to a tiebreaker advantage to support the public benefits of local homeownership, housing stability, and anti-displacement.

Community feedback emphasizing the concern that ROFR can impact property values returned in both recent sessions of community feedback. Considering that there remains a genuine concern regarding the effect of ROFR on home prices that staff cannot invalidate staff recommends that the Council removes the Right of First Refusal from a potential EPA OPA.

Additional Research and Analysis for City Council Feedback Property Tax Revenue
15 DC’s TOPA ordinance allows the Right of First Refusal for Single Family Homes for elderly tenants or tenants with disabilities.

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In the past, City Council has expressed concerns in potentially losing property tax revenue when residential properties are purchased and preserved through EPA OPA by qualified nonprofit organizations under, for example, the welfare exemption.16 Attachment 1 provides an overview of the David Rosen & Associates’ findings on the impact of a potential EPA OPA on property tax revenue. Upon further research, staff found the following:
1) Property tax revenue decrease is likely to be marginal. The total volume of properties that could be purchased under EPA OPA would likely represent nominal percentage of the city’s total potential property taxes. Moreover, not every property purchased under EPA OPA would qualify for property tax exemption (e.g., ownership properties that house owner occupants cannot qualify for welfare tax exemption) and funding availability limits the number of welfare tax exemption transactions that can be expected annually. 2) For properties that transact through the EPA OPA process and qualify for a welfare tax exemption, the City may evaluate any property tax change against resources coming into the City as both an investment into anti-displacement objectives and investment into rehabilitation of the housing stock. For example, a project that captures subsidy or preservation financing resources to preserve low-income units is a public benefit and investment for the City. As an example case study, one property in East Palo Alto (see Attachment 1) on the list of substandard housing reported in the City of East Palo Alto’s 2023-2031 Housing Element had an estimated valuation of approximately $965,000 with a Countywide Tax Rate of 1% and approximately $9,650 due in property taxes in Fiscal Year 2022-2023. These property tax funds would be distributed to multiple agencies17 including San Mateo County and Ravenswood City School District (RCSD), and the City would receive approximately 16%, or $1,544.

If the City received support for affordable preservation (e.g. Foreclosure Intervention Housing Preservation Program or FIHPP financing, which offers up to $500,000 for multifamily and $600,000 for single family acquisition and rehabilitation18) to purchase the property and the property qualified for a welfare tax exemption, the tax exemption trade off may be worthwhile to the City. In this example, the City would lose $1,544 per year in General Fund property taxes, which can be worthwhile if the community could receive for example $300,000 (lower than the maximum) in external financing support that can enable rehabilitation of property and stabilization of households. Considering the entire $9,650 in property taxes lost by all recipients (County, RCSD, etc.) in this example, it would take many years for the community to receive the equivalent of the example $300,000 value of financing in property taxes. It should be noted that the number of transactions where this situation occurs will be influenced by the volume of funding and financing that is available.
16 Owners of properties which serve a charitable purpose can apply for a welfare tax exemption, which can be a key component of maintaining financial feasibility for affordable units. 17 https://www.smcgov.org/tax/where-do-my-taxes-go
18 See “Foreclosure Intervention Housing Preservation Program Final Guidelines,” California Department of Housing and Community Development, January 4, 2023, pg 32, available at:
https://www.hcd.ca.gov/sites/default/files/docs/grants-and-funding/2022-Foreclosure-InterventionHousing-Preservation-Program-Final-Guidelines.pdf.

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1031 Exchanges
Community members have raised concerns about the potential impact EPA OPA may have on 1031 Exchanges, a tax break when real estate is sold. Staff looked further into this concern, and found that the current EPA OPA timeframes in some case may and in some cases may not conflict with 1031 Exchanges for the following reasons:
1) 1031 Exchange time limits are measured from when the property to be sold (“relinquished property”) closes. If an owner of an EPA OPA-applicable property wishes to conduct a 1031 Exchange, the 45-day time window in which they must designate a replacement property, and the total 180-day period during which they must complete the purchase of said property to qualify, both begin upon closing of relinquished property.
2) If a Third-Party Purchaser wishes to conduct a 1031 Exchange by selling one investment property and purchasing another investment property for which EPA OPA applies, listing and marketing begin once the EPA OPA Seller has rejected the offer(s) from Potential Eligible Purchaser(s). Thus, 1031 Exchange purchasers will be able to view marketed properties once the Right of First Offer has been applied. For sales of relinquished properties which correspond with the closure of Right of First Offer, 1031 Exchange procedures should be minimally impacted because the nomination timeline corresponds with the beginning of marketing.
3) A property that is not listed and marketed for up to 60 days due to EPA OPA could potentially miss out on potential offers from buyers looking to conduct a 1031 Exchange if those buyers don’t know about the property and therefore don’t designate the property as a potential 1031 exchange property within the 45-day window which is required. However, in cases where Potential Eligible Purchasers waive the Statement of Interest by day 15 after notification, the Seller is released from EPA OPA requirements and could list and market the property with little delay.

Figure 5: EPA OPA Timeframes as of March 1, 2022 Ordinance 1 unit 2-3 unit 4 unit
Statement of Interest 15-30 Day 15-30 Day 15-30 Day
First Offer 30 Day 60 Day 90 Day
First Refusal Match 5 Day 20 Day 20 Day
Closing 30 Day 90 Day 120 Day
To reduce further concerns regarding 1031 Exchanges, staff recommend adopting language in the Ordinance similar to the San Francisco COPA’s language that explicitly require involved parties to the maximum extent possible to work to enable smooth processes for 1031 Exchanges so as to minimize disruption. The following is language adapted from San Francisco’s COPA:
“Any Potential Eligible Purchaser that Purchases a Residential Building under the

9.1 Packet Pg. 333
right of first offer set forth in Section 14.26.090 shall, to the maximum extent permitted by law and otherwise feasible, be obliged to work with the Seller in good faith to facilitate an exchange of real property of the kind described in 26 US. C. § 1031, for the purpose of facilitating the Seller's realization of any federal tax benefits available under that section of the Internal Revenue Code.” In addition, City Council may direct staff to, in coordination with community partners, develop a “1031 Exchange Best Practices for EPA OPA” implementation toolkit and educational packet for various audiences including Purchasers, Sellers, and Third-Party Purchasers to ensure that EPA OPA processes run as smoothly as possible.

Recommendations and Request for City Council Feedback
Staff is seeking City Council direction to further revise the March 1, 2022 draft Ordinance, to start developing implementation toolkits, and to conduct outreach and education that is centered on key implementation components.
• Staff Recommendations: Policy –
Considering feedback from community engagement, further changes to the OPA Policy, including removal of the Right of First Refusal for single-family home timelines, may be useful in responding to community concerns while fulfilling the City’s commitment to the Affordable Housing Strategy and local homeownership goals. Other changes include adding a clause regarding 1031 Exchanges, and any additional changes Council may wish to include. Please see Figure 6 below for a summary of changes that have been made to the EPA OPA Policy between October 2021 – March 2022. Please also see Figure 7 for an overview of what the new EPA OPA timelines would look like if ROFR is eliminated per staff's recommendation, compared to the March 1, 2022 Ordinance timelines in Figure 5 above.

Figure 6: Draft EPA OPA Ordinance Revisions
between October 2021 – March 2022*
Affordability Affordability limit to include Low-Income Households for future vacancies added to Section 14.26.120.B
Affordability Affordability requirements factor when public funds support purchase
Applicability/
Exemptions
Exemptions added: Owner-occupied 1–3-unit properties
regardless of ADUs, properties owned by East Palo Alto
residents, Family Transfers (including nieces and nephews), Foreclosures due to state law, Health Emergencies
Other Eliminate appraisal process for both SFH and multifamily properties
Enforcement Increase contract purchase deposit from 1% to 3% Implementation Council, not City Manager, certifies and re-certifies Qualified Non-Profits
Implementation Owners, in addition to buyers, can pursue legal action to enforce ordinance

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Implementation City Council, not City Manager, approves Administrative Guidelines
ROFR Clarified that ROFR is triggered by Seller’s intent or attempt to accept a Third-Party Offer, as differentiated from receipt of an offer
ROFR Create 15% ROFR cap19
Timelines Timelines reduced overall to 90 days (SFH) to 280 days (Larger Multifamily)
Timelines Statement of Interest Period reduced to from 30 days to 15 days, with contingent 15 additional days if applicable.

Timelines Allow for further shortening of timelines with consent from both parties when there is only one Potential Eligible Purchaser Timelines ROFR timeline reduced to 5 days for SFH; to 20 days for QNP or City purchase
Timelines Potential Eligible Purchasers must submit timely letter of interest in order to submit First Offer; ROFR only applies in cases where First Offer is submitted accordingly
*Note that to-date, the latest draft EPA OPA Ordinance City Council has considered is the March 1, 2022 version.

Figure 7 provides an overview of potential EPA OPA timelines if City Council goes with staff's recommended removal of the ROFR for single-family homes.

Figure 7: EPA OPA Timeframes with Staff's Recommended Ordinance Amendments
1 unit 2-3 unit 4 unit
Statement of Interest 15-30 Day 15-30 Day 15-30 Day
First Offer 30 Day 60 Day 90 Day
First Refusal Match Not Applicable 20 Day 20 Day
Closing 30 Day 90 Day 120 Day
Next Steps
If Council wishes to move forward with exploring a COPA and/or TOPA ordinance, staff will return to Council with an updated draft Ordinance as well as proposed administrative guidelines, and an implementation plan that outlines funding, community education, and marketing strategies that the City will implement if the Ordinance is adopted.

As a reminder, the Administrative Guidelines will contain an outline of how EPA OPA works in practice, address “gray areas” for scenarios not explicitly referenced in the ordinance, set threshold criteria to fulfill the ordinance’s intent, and promote program uptake. Key topics of the Administrative Guidelines include qualification of nonprofits, transfer exemption procedures, assignment of rights procedures, noticing and disclosure requirements, prohibited conduct, 19 When a Seller Rejects First Offer(s) and lists to market conventionally, ROFR will apply to any accepted Third-Party offer less than or equal to 115% of the highest rejected First Offer. In this way, ROFR applies to a limited set, and Sellers can avoid ROFR when Buyers make exorbitant offers.

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and more.

Fiscal Impact
There is no fiscal impact associated with this staff report. If adopted, there will be costs related to the implementation of an EPA OPA ordinance. As discussed above, the City’s award of a Partnership for the Bay’s Future Breakthrough Grant partially mitigates that cost by adding dedicated staff capacity from the Policy Grant Fellow, who will support with the mechanisms associated with potential implementation.

Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo County Library located at 2415 University Avenue, East Palo Alto.

Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.

Attachments

1. Discussion Guide

2. PCRC Report

3. Affordable Housing Preservation Models

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Discussion Guide
What is “TOPA/COPA/OPA” and Why is City Council Considering It? An Opportunity to Purchase Act (“OPA”) policy gives tenants, affordable housing providers (also referred to as “Qualified Nonprofits”), or jurisdictions the first opportunity to purchase a residential building or assign their right to purchase to another entity when the owner decides to sell.

Tenant Opportunity to Purchase (TOPA): “TOPA” is usually used to refer to the tenants’ right to purchase a single-family home or residential property when the owner is ready to sell
Community Opportunity to Purchase: “COPA” is usually used to refer to the affordable housing providers’ or in some cases, jurisdictions’ opportunity to purchase apartments or residential property when the owner decides to sell.

East Palo Alto Opportunity to Purchase Act (EPA OPA): The draft policy under consideration (as of March 1, 2022), which has both TOPA and COPA components, is referred to as the East Palo Alto Opportunity to Purchase or “EPA OPA”.

What does EPA OPA do? In East Palo Alto, an EPA OPA can create pathways for tenants to become first-time homeowners and facilitate democratic residential ownership or affordable rental opportunities. It can also create a mechanism for residential properties, including those that are not currently in the City’s below market rate (“BMR”) program or subject to rent stabilization, to become permanently affordable.

An EPA OPA on its own cannot correct for all the shortcomings of existing housing policy and the housing market. However, some of its key features directly address the issues discussed above.

Why is EPA OPA important? EPA OPA seeks to address displacement while adding to the housing stock overall with TOPA for tenant households likely to purchase as well as COPA for tenant households not likely to purchase. New construction of affordable housing, and new housing in general, is important to the City’s housing objectives.

However, because of construction timelines, delays in Tax Credit Allocation, and the extended application geography for constructed units as required under AFFH guidelines, affordable units added through construction may not be sufficient to keep households stable in EPA while the city attempts to grow.

For transactions where tenants purchase, becoming homeowners can help stabilize households and put them on a path to building wealth. For households unlikely to purchase, Affordable Preservation can help address displacement by keeping units affordable, which over time can make it easier for households to save for a home purchase in the future.

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Packet Pg. 337 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) EPA OPA has also been designed to cover portions of the housing stock not currently covered by EPA policies for tenant protection – especially Single Family Homes currently being rented but not covered by the Rent Stabilization Ordinance.

OPA Policy Components: While OPA policies differ across jurisdictions, they have the same basic framework. This includes:
• Notice of Intent to Sell
• Statement of Interest
• Right of First Offer
• Right of First Refusal
• Extended Timelines
a. Notice of Intent to Sell: The Seller of a rental property must provide potential eligible purchasers (i.e. tenants, mission-driven affordable housing providers, or jurisdictions, also referred to as “Potential Eligible Purchasers”) notice of their intent to sell prior to listing or otherwise marketing the rental property for sale (“Notice of Intent to Sell”). The Notice of Intent to Sell must be provided a few days prior to marketing the rental property (“Notice Period”). It must be sent to the Potential Eligible Purchasers via certified mail and/or e-mail, and/or posted at conspicuous locations at the rental property. The Notice of Intent to Sell must contain, among other things, the following:
• Statement that the Seller intends to sell the rental property; • A list of units by address and the rent due for each unit; • Instructions for submitting a Statement of Interest;
• Under a TOPA policy, a statement describing the rights of the tenants and deadlines to exercising those rights.
b. Statement of Interest: Prior to the expiration of the Notice Period set in the ordinance, the Potential Eligible Purchaser may deliver a statement of interest to the Seller of the rental property (“Statement of Interest”) via mail and/or email. The Statement of Interest notifies the Seller of the Potential Eligible Purchasers interest in exercising the Right of First Offer and/or Right of First Refusal. It also notifies the Seller if the Potential Eligible Purchaser is seeking to assign their Right of First Refusal to another Potential Eligible Purchaser.
c. Right of First Offer: The Potential Eligible Purchaser that submits a Statement of Interest has a right to make an offer to purchase the rental property prior to its listing or marketing. The Potential Eligible Purchaser may deliver an offer to purchase the property at any time prior to the expiration of the Notice Period. The Seller may accept or reject any offer received from the Potential Eligible Purchaser(s). There are preferences set for which Potential Eligible Purchaser’s offer should be considered first. Upon (1) rejection of all offers to purchase made, (2) the expiration of the Notice Period, or (3) the failure to close the transaction within the time period set forth in the Ordinance, the Seller may list and market for sale the rental property

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Packet Pg. 338 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) and may solicit and conditionally accept offers from a Third-Party Purchaser, subject to the Ordinance’s Right of First Refusal requirements. d. Right of First Refusal: Any Potential Eligible Purchaser that submits a valid Statement of Interest may exercise a right to match a Third Party’s offer. To exercise its Right of First Refusal, the Potential Eligible Purchaser must accept all the same terms and conditions of the Third Party’s offer within the time period specified by the Ordinance (within 5 days for single-family homes). If the Potential Eligible Purchaser wishes to match, the Seller must proceed to sell the rental property to the Potential Eligible Purchaser, and the Potential Eligible Purchaser will be obligated to purchase.
e. Extended Timelines: Each OPA policy has extended timelines for each stage of the process, giving Potential Eligible Purchasers reasonable time to organize, educate, express interest, submit an offer, secure financing, and to close, while also considering the Seller’s needs. If the Potential Eligible Purchasers do not exercise their rights within these timelines, the Owner may proceed to sell on the open market. OPA policies extend the timelines to level the playing field for the tenants, qualified nonprofits, and/or jurisdictions who want to purchase property and keep it in the community.

EPA OPA Terminology
• ROFR: Right of First Refusal
• SFHs: Single-family homes
• Third Party Offer/“Qualifying Market Offer”/“Accepted Offer”: An offer made by a purchasing party which is not a rightsholder.
• Potential Eligible Purchasers or Purchasers: Tenants living in the residential building about to be sold, affordable housing providers who are qualified based on specific criteria, or the City may be eligible to make a First Offer under EPA OPA, and are therefore referred to as “Potential Eligible Purchasers” or “Purchasers.”
• First Offer: Offer made by a Potential Eligible Purchaser during the Right of First Offer Period after a Statement of Interest is submitted. • Seller: A property owner who is not exempt from OPA based on specific criteria, and who is initiating the process to sell their property.

Changes to Housing Preservation Landscape
Since the last City Council discussion on March 1, 2022, there have been a few major developments in the housing preservation landscape. Firstly the market has cooled down substantially, transaction times have extended to take longer than they had been earlier in the year, and demand may not sustain at the levels that it held in Spring/Summer of 2022. A cooler market offers an opportunity to help first time homebuyers complete their first purchases while competition is less intense. Secondly,

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Packet Pg. 339 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) the Affordable Housing Preservation funding landscape has further developed, and regional and state resources for affordable housing preservation expected to come online in 2023 position EPA to compete for those resources. Demonstrating political and economic commitment, in the forms of the recently approved Gross Receipts Tax and an approved Opportunity to Purchase Act, can make EPA a competitive applicant for those resources. Additionally, efforts to bring a Grants Coordinator to support the Housing Department can help ensure that applications for funding are submitted as early and as often as possible.

Preservation as a vehicle to add affordable units to the housing stock is likely to be critically important in coming years. Currently, the City is at a disadvantage because it has been designated as “low” or “moderate-resourced,” making it less competitive than other cities in receiving funding for new affordable housing development. The City has signed on to an appeal letter to challenge that characterization on the grounds that EPA is in fact an area with high resources despite historic underinvestment; but until that decision is reversed it does likely encumber affordable housing production to some degree. Preservation of affordable housing through acquisition and rehabilitation offers a distinct tool to renovate housing stock and decelerate blight, add affordable units to the system, and enable tenant residents of EPA to become homeowners. Staff recommend using the EPA OPA to leverage current and forthcoming affordable housing preservation resources from state and regional agencies.

Partnership for the Bay’s Future
PBF is a collaborative effort working to advance racial and economic equity in communities throughout the Bay Area. PBF works to produce and preserve affordable housing and support protections for renters. Because the housing affordability crisis requires comprehensive, multi-pronged solutions, PBF pairs policies with investment to change the systems and policies that have put the Bay Area beyond the reach of too many individuals and families. On the policy side, PBF’s Policy Grants provide local governments and community partners with much-needed capacity and expertise to implement grassroots equity-centered affordable housing policies. This process ensures those usually excluded from the policy process are at the center of efforts for change.

Breakthrough Grant: On February 1, 2022, the City of East Palo Alto was announced as one of 11 Partnership for the Bay’s Future 2022-2024 Policy Grant recipients, with the primary goal of assisting the City in implementing EPA OPA if adopted. The PBF Policy Grant Fellow, Benjamin Toney, joined the City in June 2022 to add staffing capacity to complete the grant scope in a two-year timeframe. The community partners assisting to complete the grant scope include: Community Legal Services in East Palo Alto (CLSEPA), East Palo Alto Community Alliance Neighborhood Development Organization (EPACANDO), Youth United for Community Acton (YUCA), and Preserving Affordable Housing Assets Longterm, Inc. (PAHALI).

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Packet Pg. 340 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Exemptions (taken from March 1, 2022 draft Ordinance)

14.26.040 Exemptions
A. Exempt Residential Property. Residential Property not subject to the requirements of this chapter:

1. Owner-Occupied Single-Family Dwellings, including those with an Accessory Dwelling Unit(s) (inclusive of any Junior Accessory Dwelling Unit) when the Owner has occupied the Single-Family Dwelling or the ADU as the Owner’s Principal Residence for at least one (1) year or more.

2. Non-Owner-Occupied Residential Property owned by an East Palo Alto resident, when the Owner has occupied a Residential Property within East Palo Alto as the Owner’s Principal Residence for at least one (1) year or more. This exemption shall not apply to any Residential Property owned by:
a. A real estate investment trust, as defined in Section 856 of the Internal Revenue Code;
b. A corporation; or
c. A limited liability company in which at least one member is a corporation.

3. Owner-Occupied Condominiums when the Owner has occupied the Condominium as the Owner’s Principal Residence for at least one (1) year or more.

4. Any Owner-Occupied Duplex with or without any Accessory Dwelling Unit(s) (inclusive of any Junior Accessory Dwelling Unit) when the Owner has occupied any Dwelling Unit on the property as the Owner’s Principal Residence for at least one (1) year or more.

5. Any Owner-Occupied Triplex with or without any Accessory Dwelling Unit(s) (inclusive of any Junior Accessory Dwelling Unit) when the Owner has occupied any Dwelling Unit on the property as the Owner’s Principal Residence for at least one (1) year or more.

6. Residential Property owned by the local, state, or federal government.

7. Residential Property subject to resale price control under Chapter 18.37 of East Palo Alto’s Municipal Code.

8. Residential Property owned by and operated as a hospital, convent, monastery, extended care facility, convalescent home, or dormitories owned by educational institutions.

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Packet Pg. 341 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) B. Exempt Transfers. Transfers of Residential Property not subject to the requirements of this chapter:

1. An inter vivos transfer, whether or not for consideration, between spouses, domestic partners, parents and children, siblings, and/or grandparents and grandchildren.

2. A transfer for consideration by a decedent’s estate if the consideration arising from the transfer will pass from the decedent’s estate to, or solely for the benefit of, charity.

3. A transfer of legal title or an interest in an entity holding legal title to a Residential Property pursuant to a bona fide deed of trust or mortgage, and thereafter any transfer by foreclosure sale or deed in lieu of foreclosure pursuant to a bona fide deed of trust or mortgage. This exemption does not supersede any rights to purchase afforded to Potential Eligible Purchasers under California Civil Code Sections 2924(f)-(h), 2924(m)-(n), or 2929.3.

4. A transfer of bare legal title into a revocable trust, without actual consideration for the transfer, where one or more transferors is a current beneficiary of the trust.

5. A transfer by devise, descent, or operation of the law upon the death of a natural person.

6. A transfer pursuant to court order or court-approved settlement.

7. Any transfer to a public agency, including but not limited to a transfer by eminent domain or under threat of eminent domain.

8. Any transfer of a fractional interest in a Residential Property that is less than fifty percent (50%) of an undivided interest in the Residential Property.

9. Any transfer in which the transferee receives a low-income housing credit pursuant to 28 U.S.C. § 42.

10. A transfer of a Residential Property with no more than four (4) Dwelling Units made for the purpose of either: (a) paying for imminently necessary health care expenses of an Owner of the Residential Property, or (b) an emergency circumstance placing the Owner in financial hardship and at imminent risk of foreclosure or bankruptcy and the Owner has occupied the Residential Property as the Owner’s Principal Residence during the prior year. For purposes of this subsection only, “Owner” shall be limited to a natural person having an undivided interest in the Residential Property of at least fifty percent (50%). An Owner may claim this Exempt Transfer within one (1) year of having vacated the Residential Property where the Owner demonstrates the existence of the conditions set forth in this subsection.

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Packet Pg. 342 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Estimates of Qualifying Transactions for Periods 2007-2011, 2017-2021 Per the David Rosen & Associates Report (2022, page 6): An average of 28 absenteeowned single-family homes and 4 absentee-owned condos sold per year, which equals the average sales rate for all absentee-owned single-family homes and condos in the City between 2017 and 2021 based on analysis of parcel-specific data from Property Radar. This is an increase from the rate of 8 absentee-owned homes and 4 condos sold per year during the 2007 to 2011 period. Using total absentee-owned units overestimates the result because non-owner occupied units owned by East Palo Alto residents are exempt from the OPA.

Potential Funding Sources for EPA OPA
Figure 2: Funding Sources for EPA OPA
Funding Source Funding Type Eligible Uses Max Financial Assistance
Golden State
Acquisition Fund
Below market debt Acquisition $13,950,000
Foreclosure
Intervention Housing
Preservation Program
(FIHPP)
Grants, debt Predevelopment,
acquisition,
rehabilitation, temporary
relocation. operating
subsidy
$500,000 per unit
Project Homekey Grants Acquisition,
rehabilitation, of eligible
dwelling types and
operating support
Varies
HOME Investment
Partnerships Program
Varies Acquisition,
rehabilitation
Varies
Community
Development Block
Grant (CDBG)
Grant Acquisition,
rehabilitation
Affordable Housing
Fund
Below market debt Predevelopment,
acquisition, rehabilitation
$100,000 per unit or the
amount needed for
project financial
feasibility
Community Housing
Fund
Below market debt Variety of loan products;
predevelopment through
permanent financing
$15,000,000
Supportive and
Transitional Housing
Varies Acquisition,
Predevelopment,
Construction, MiniPermanent
$6,000,000 with larger
loan size sizes
evaluated on a case-bycase basis
Affordability
Preservation and
Production
Varies Acquisition,
Predevelopment,
$6,000,000 with larger
loan size sizes

9.1.a
Packet Pg. 343 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Construction,
Rehabilitation
evaluated on a case-bycase basis
Workforce Housing Varies Acquisition,
Predevelopment,
Construction
$7,500,000 with larger
loan size sizes
evaluated on a case-bycase basis
Enterprise-Level Line
of Credit
Varies Revolving Line of credit
for acquisition,
predevelopment,
working capital allowed
with acquisition or
predevelopment
$6,000,000
Bay Area TransitOriented Affordable
Housing (TOAH) Fund:

Predevelopment Loan
Below market debt Predevelopment costs
for acquisition of Eligible
Properties
$750,000
Bay Area TransitOriented Affordable
Housing (TOAH) Fund:

Acquisition Loan
Below market debt Acquisition $10,000,000
Community
Development Financial
Institutions (CDFI's)
Varies Varies by program;
predevelopment,
acquisition, bridge
financing, some limited
permanent financing.

Varies
Regional Early Access
Planning 2.0
Below market debt Acquisition $250,000 per unit
List of OPA and Preservation Implementation Experts
The following is a list of practitioners and experts who were interviewed by the PBF Policy Fellow and shared about best practices on OPA and preservation implementation.
• Richard Hurlburt – IMPACT (Realtor/Broker facilitating COPA transactions) • Fernando Marti – Council of Community Housing Organizations (Policy Design) • Keith Cooley - San Francisco Community Land Trust (COPA purchaser) • Somaya Abdelgany - Preservation Program Coordinator at Bay Area Housing Finance Authority (Preservation Funding)
• Caroline McCormack – Former Preservation Program Director Enterprise Community Partners (Preservation Funding and Implementation) • Geeta Rao Current Preservation Program Director Enterprise Community Partners (Technical Assistance)
• Jose Garcia, Preservation Program Manager at Mission Economic Development Agency (Project Identification and Tenant Education)

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Packet Pg. 344 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Local Community Partners are also involved in the South Bay Preservation Lab – a convening of housing affordability, anti-displacement, cooperative ownership and mission driven developer organizations sharing information, best practices, and resources to strategically deploy affordable housing preservation tools.

The California Community Land Trust Network, which provides strategic and technical support for mission driven development and cooperative housing, can also offer training and best practice resources.

EPACANDO has received a grant and placement in Enterprise Community Partners’ Preservation Next Academy, a program to provide capacity building and implementation expertise for organizations to support acquisition/rehabilitation preservation. Further research has also revealed preservation best practices from government agencies, financial intermediaries, and expert practitioners.

Property Tax Revenue/Welfare Tax Exemption Discussion
Welfare Tax Exemption: In California, the Welfare Tax Exemption is available for property of organizations that are organized and operated exclusively for qualifying charitable, hospital, religious or scientific purposes. Charitable causes may include the provision of low-income rental housing. The organization must submit a claim form and be approved for the Welfare Tax Exemption.1
David Rosen & Associates Findings on Property Tax Revenue: The David Rosen & Associates consulting firm investigated trends in the local and regional real estate market, finding the following regarding property tax revenue:
a) The residential market in East Palo Alto has seen significant housing price appreciation in recent years, particularly since the Great Recession, with a 261% increase in single family home sales prices from 2012-2021. A lack of housing supply and continued growth of the Bay Area economy drive housing sales prices and rents in East Palo Alto, and these trends are expected to continue.2 b) The potential property tax revenue decrease associated with the purchase of (nonexempt) single-family homes and condominiums by nonprofits in a “worst case” scenario is estimated at $67 million, or 1.8% of the City’s total assessed valuation, over 5 years. However, this “worst case” calculation assumes that all non-exempt single family dwellings in East Palo Alto are sold to nonprofits and that all of those units are exempt from all property taxes as qualifying low-income rental units. This 1 See “Welfare Exemption for Low Income Rental Housing and Supplemental Clearance Certificate Requirements for Limited Partnerships,” California State Board of Equalization, available at:
https://www.boe.ca.gov/proptaxes/welfarelowinc.htm. 2 See Page 3 (Packet Page 58), David Rosen & Associates Report:
http://eastpaloalto.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=1422&Inline=True

9.1.a
Packet Pg. 345 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) expectation is unreasonable because the scale of subsidy which would be required to facilitate that scale of purchase is unlikely to be available.3 c) The total subsidy required to purchase and make affordable (at 80% AMI or below) all non-exempt single-family dwellings and condominiums in East Palo Alto sold over the next five years is estimated to be $97 million to create owner housing and $115 million to create renter housing. Lowering the income targeting to 50% AMI increases the subsidy required to $131 million to create affordable owner housing and $145 million to create affordable renter housing. It is likely that only fractions of these amounts will be available, limiting the number of transactions per year.4 d) Reduction in property tax revenue due to subsidized purchases of qualified singlefamily homes is offset by an increase in assessed valuation in the City from the resale of existing owner-occupied units, estimated at $138 million over the next five years from the point of study, in addition to $560 million to $800 million over the next five years estimated from the City’s pipeline of market-rate units. In summary, the expected property tax impact of EPA OPA is slim,5 and may be evaluated net of funding and financing resources brought to the City as well as the efficacy of antidisplacement. 3 See Page 6-7 (Packet Page 61-62), David Rosen & Associates Report:
http://eastpaloalto.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=1422&Inline=True 4 See Pages 6-8 (Packet Page 61-63), David Rosen & Associates Report:
http://eastpaloalto.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=1422&Inline=True. Per-unit costs at 50% 80%, and 120% AMI are summarized in Table 4. 5 See Pages 6-8 (Packet Page 61-63), David Rosen & Associates Report:
http://eastpaloalto.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=1422&Inline=True. Per-unit costs at 50% 80%, and 120% AMI are summarized in Table 4.

9.1.a
Packet Pg. 346 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Welfare Tax Exemption Sample Case Study
1031 Exchanges
1031 Exchanges allow for deferment of capital gains and related federal income tax liability and only apply to the sale of an investment property and replacement purchase of another like-kind investment property of equal or greater value.

9.1.a
Packet Pg. 347 Attachment: Discussion Guide (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) EPA-OPA Facilitation Summary Report
Summary of PCRC Role:

Benjamin Toney, with Partnership for the Bay’s Future, and Karen Camacho, with Community & Economic Development Department (Housing Division), reached out to PCRC to explore facilitation services for a community meeting in late May. In the initial inquiry form, Benjamin stated that he is a Housing Policy Fellow supporting the City of East Palo Alto and multiple community-based organizations working on affordable housing and homeownership. Benjamin also mentioned that misinformation had obstructed the ability to discuss the facts and details of the policy with the public. Benjamin also acknowledged the urgency and short time frame regarding this request. The request was for PCRC to facilitate this in-person meeting. Anthony Thomas, PCRC Manager of Community Services, met with Benjamin and Karen to further discuss the details of the requested service.

From this conversation, PCRC recommended the following services:
● An initial two-hour facilitated Community Forum supported by PCRC. Tuesday, May 30, 6-8 pm at Cooley Landing (2100 Bay Road, East Palo Alto) o Community Agreements, Acknowledgment of misinformation and feelings ▪ Stating the intention to get folks at least on the same page about the facts o Present the background (what is the policy; what are the policy objectives and goals; quick policy facts and details; name intent of meeting) o Listening session: understand the policy
o Discuss ways in which misinformation can be dealt with if it happens again o Clarify next steps
● A two-hour facilitated Policy Discussion supported by PCRC. Tuesday, June 13, 6-8 pm at Cooley Landing (2100 Bay Road, East Palo Alto)
o Clarify the history of the policy and City process
o Implementation of next steps
o Community Feedback
Throughout the process, PCRC made the following recommendations that were executed by the City Staff:
● Focus on connecting with community members
● Speak clearly with minimal jargon or acronyms
● Show empathy when possible
● Be sure to speak “To” not “At” the community members
● Don’t persuade, just aim to teach/inform
● Ask clarifying questions, restate, and summarize
● Avoid small print in your slide show presentation
● When presenting, watch your pace, take your time and check for understanding ● Find opportunities for connection with Community Members ● For safety reasons and accessibility, the second meeting should be virtual ● Time must be carved out during the second meeting to respond to Community Member clarifying questions

9.1.b
Packet Pg. 348 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) East Bay Community Forum Questions
/ Comments/ Concerns:

May 30, 2023

9.1.b
Packet Pg. 349 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 350 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 351 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 352 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 353 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 354 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 355 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 356 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 357 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)

9.1.b
Packet Pg. 358 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) East Bay Community Forum Questions / Comments / Concerns May 30, 2023
Communication:

How were EPA members notified about these two meetings? Who is Dinan( blast email person)?
What in the future remedies to avoid this kind of no / lack of communication? No Link to the actual draft OPA Ordinance on the site.

Misinformation:

Concerned about misinformation that’s circulating around and how does the city plan to address that? Research Related Questions:

The results of the research just show the Pros of the policies and what about the cons? Want to see the math behind this process before, during and after? What city has used this policy and how did that workout? Want to know the case studies of this policy.

Has the city contributed to the economic analysis and impact of the policy? Need more data that shows research on similar situation cities like single family homes ? Why did the city choose single-family houses over multifamily housing? Want to see a demonstrated approach that this policy works.

Funding:

Who is funding this OPA program?
What is the cost of this policy?
How is the city allocating the funds? ( BUILDING MORE HOUSING) (down payment assistance, OPA, ADU.JADU Loans)
Policy Clarifications:

Need summarization on the difference between OPA and the usual Market approach.

Any tax advantage if selling for below market price.

Is there any opportunity for the absent homeowner to return to the home for a period of time & avoid the opa restrictions?
Define Residency of the homeowner?
After purchase, who maintains and pays the property tax if the tenant isn't the total owner? Does a resident homeowner have to wait for 15 days for right of refusal? Clarification on owner occupied vs Absentee landlord.

RoFR -explanation of the single resident ownership - steps for seller

9.1.b
Packet Pg. 359 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Language change - Homeowners that live in homes ( owner occupied ) for some period of time (10 years) could rent out their home for up to 10 years without any restrictions under OPA.

Explain Tiebreaker?
Why can't a tenant make an offer w/o opa?
How does OPA not impact the fair market as buyers are driven away? What is the criteria for a tenant to be granted the opportunity to purchase through OPA? - Tenant Qualification? ROFR Process not clear- need explanation
Can I move from an owner occupied home ( for medical or financial reasons) for some time and not fall under the OPA?
How does OPA protect the seller's rights to initiate a sale? Define the Price?
What does Local ownership mean?
If a home Is purchased by a Non-profit, how does that affect the tax revenue for the city? Who will be affected by this policy? Single family houses or Multi family houses? What are the 8 exemptions?
What qualifies homeowners to be exempt from Opa?
What is the penalty of the person who sells the property outside the OPA? When a tenant buys the property from the owner through OPA, does the tenant also sell the house through OPA? Tenant owned but if NP assists with the payment or down- who is on title? Does the policy affect homeowners who are residents wanting to sell? Is the city planning on including frequent reviews and community reports on OPA? How does the city consider the negative impact on the homeowners if OPA is passed? Are there alternatives considered to directly help tenants instead of hurting the sale price for owners Is the city considering applying OPA only to multi family units rather than all types of units? Does OPA favor current renters but not future generations of renters? Why would you make home owners exempt from OPA and make landlords subject to OPA? What are the impacts of the policy?
What Is the definition of affordable housing?
How will this affect the homeowner who owns townhouses/condos? What if more than one home is owned? And these were homes that were inherited. What protections do people get from this policy?
What qualifies for local ownership exemption?
What qualifies for medicine and financial exemption?
How will the non profits be selected?
What are the incentives for homeowners?

9.1.b
Packet Pg. 360 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) What solution will be in place from the organizations to support repairs for new OPA owners ? Who is responsible for Property taxes or maintenance?
What happened after OPA? Who owns the house and the responsibilities with it? How will OPA help tenants ?
Explain the right of refusal and its timeline?
If a non profit or tenant makes a below market offer, does the owner have the right to refuse the offer and go to the open market?
Does the system allow owners to put in the market and get bids and then reach out to the renters? Market Price:

Any Limitation on the house usage that can reduce the market value? How is the home purchased at market price considered appropriate? How can I live in it? How does the policy affect the property value?
Is there a loss of tax revenues?
Why is the City confident about tax revenue from this policy? How does ROFR not depreciate the market value?
How is market value established?
Why can't non-profits pay market rate?
How does the city determine the market rate or market price? Need to understand the sale & ROFR? The policy language " the right to define the price that makes an offer acceptable" is not appropriate and needs more clarification
Buyers will refuse to buy if there are any restrictions on the future market price? How to deal with that? Will the city or non-profit buy at market price without influence or interference? Doesn't this policy affect the property value of the owner occupied homes too ? How is opa planning to protect the value of the home?
selling at market price is variable as the multiple bids will change the market sell price? Other Concerns:

Can this policy be put on the ballot for the homeowners to vote? What other affordable housing does EPA have?
What is the %of people that rent Vs. homeowners within EPA? Slide 9 needs more clarity?
Timeline:

Would like to see the entire process be shortened to 90 days max? Why can't notifications of parties happen simultaneously ? Why one after the other? How long does nonprofit have to make an offer?
What is the escrow period? Is the deposit non-refundable?

9.1.b
Packet Pg. 361 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) I need more clarity on the timeline of the entire process For a landlord, is the 30 day notice required?
A compilation of names, timestamp, and questions/comments from the June 13 meeting submitted via the Google Form.

Timestamp
Full Name |
Nombre
Completo Please share your clarifying question. | Por favor comparta su pregunta. 6/13/2023
18:21:58 Victor Chou
Where can I find the information about who proposed this OPA and who was the sponsor in the city council of this proposal?
6/13/2023
18:22:41 Victor Chou
When a non-profit sells the house, does the tenant have first refusal right and notification prior?
6/13/2023
18:23:57 Gina Wolf I was late. Sorry. Is this program different from the one last summer? 6/13/2023
18:24:54 TVines Please define a tenant given that multiple people live in rentals. 6/13/2023
18:25:00 Gina Wolf Will this presentation be available after tonight? 6/13/2023
18:26:44 Zaineb
Why OPA and not simply invest in building new affordable housing? Any ordinance like OPA will impact housing prices by lowering comps and decreasing demand, as buyers and investors will prefer a free market.
6/13/2023
18:29:07
Elena
Kogan
When do I have to give tenants the opportunity to buy? IN the beginning of the 60 days notice, or after it?
6/13/2023
18:32:43
Gail
Wilkerson
Authorities that will be going through the process: how are they chosen and WHY Them and NOT anyone else? Why are others excluded in the process? Is this Arm's length?
6/13/2023
18:33:16 Randy
What happens if a single family home owner leaves their house for study or work or to care for a relative and then they will be absentee owners even if that’s the only house they own and will be impacted by OPA, delaying the sale and impacting the price. have such cases been taken into consideration?
6/13/2023
18:33:28
Anna
Romanovsk
aia
As mentioned, the City wanted to make informed decisions. City wants to adopt OPA for SFH. Can you share the data/research from the US that prove that OPA was a successful tool for anti-displacement? It appears that there is no proof of this. If so, why does the City choose to implement OPA for single family homes in the first place? 6/13/2023
18:34:31
Tracey
Ramirez
What if the tenant is the reason the homeowner is forced to sell. Will the homeowner still be mandated to follow these guidelines and have to offer the property to the current tenant
6/13/2023
18:35:16
Dionis
Papavramidi
s
Why not let the tenant go through the usual process without keeping a 60 days delay for the seller?

9.1.b
Packet Pg. 362 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) 6/13/2023
18:35:18 Gina Wolf Is it still up to 120 days to get the financing to buy the property? 6/13/2023
18:36:40
Gail
Wilkerson
Why was it chosen that you use this COLD distant from the public? Why can't you handle RUDE people with lots of passion? You could have the Police standing by and to have them ousted. This cold presentation is NOT helpful. All you sound like are WORDS.
6/13/2023
18:38:15
Jeannie
Llewellyn
How much is available from the city for funds to tenants to buy a property? What criteria does the city use for qualifying a tenants buyer? 6/13/2023
18:39:13 TVines No proof of exemption is needed?
6/13/2023
18:39:38 Yi Yuan
So if as owner, I can reject offers that my tenant or non profit organization makes to me, then what is the point of notifying them to purchase first? why can't they just do it in the open market? What is the point of OPA then?
6/13/2023
18:40:29
Xiaoguang
Chen What does you mean by "Local" when marking house
6/13/2023
18:40:35
Brenda
Erwin
By allowing nonprofits to purchase SFHs and create unprecedented BMR SFHs how do you ensure you're not artificially decreasing property values here in EPA? 6/13/2023
18:40:46 Max Kiang
Other than the benefit to renters, do you have any analysis on the impact to the sellers/owners?
6/13/2023
18:40:47
Elena
Kogan If my house is rented room by room, to multiple people, whom do I give a notice to? 6/13/2023
18:41:04
Jeannie
Llewellyn How much would OPA cost to run? Where will those funds come from? 6/13/2023
18:41:54 Sean Ripley
Regarding exemptions: what percentage of EPA homes do you expect to be exempt from OPA's requirements?
6/13/2023
18:42:24
Jeannie
Llewellyn
Why would I need to justify selling my place (medical, family, etc.)? In the open market, I don't need to explain anything.
6/13/2023
18:43:23 Tracey
why isn't the tenant going through the market process without the City deadlines being imposed on the homeowner
6/13/2023
18:44:57
Borys
Senyk
Large cities dropped single family homes from their OPA. How will EPA prevent the abuses that caused this and how will our small city manage this, as other cities with larger resources could not?
6/13/2023
18:45:18
Sabrina
Ellis
Will OPA bring down the price of the home so it can be purchased by the tenant or can the owner sell at the price they choose to the tenant or whomever? 6/13/2023
18:45:31 Tracey What is the benefit to homeowners
6/13/2023
18:46:11 Erica Prado Why is the City focused on Single Family Homes? 6/13/2023
18:46:23
Federico
Andrade
Why Is the funding from Chan-Zuckerberg requiring only EPA to implement OPA in San Mateo County? It seems like other cities like Redwood City, San Mateo, etc are not spending resources on this type of ordinance. This looks like those corporations are

9.1.b
Packet Pg. 363 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) trying to keep and legalize yet more redlining.
6/13/2023
18:47:20
Tracey
Ramirez
Selling my home using this process will cause me delays and cumbersome red tape. If the city is supporting the tenants there should be a process just for the tenants.

Homeowners should be forced into this process.
6/13/2023
18:48:15
Varsha
Likhite

1. What are the criteria for tenants to qualify for OPA? Number of years at the house or Income levels. 2. How will low income tenants finance repairs needed for a number of older EPA homes.
6/13/2023
18:48:37 Tracey
Medical exemption should should not need personal details The HIPAA restrictions should apply
6/13/2023
18:48:47
Jeannie
Llewellyn What's in it for a seller to say they need exemption from OPA? 6/13/2023
18:50:05 Martin What is the penalty for tenants/non-profits for a bad-faith offer? 6/13/2023
18:50:34
Anna
Romanovsk
aia
Looks like OPA objective narrative shifted focus to making properties more accessible to nonprofits by lowering property prices.

First, nothing is holding non-profits from buying on the open market. I know at least 2 houses nearby that are on the market for several weeks. What prevents non-profits from buying those houses?
Second,
Looks like OPA is marketed by the City now as a tool for lowering home prices in EPA and not the tool to prevent displacement.

It contradicts the previous reassurance from the city that house prices will not be lowered due to OPA.

Can you explain this contradiction? To me it looks like now the city knows that it wants to adopt OPA to lower the home prices. If so, can the city need to communicate it to the home owners? Many homeowners will not adopt OPA if the city will be transparent on OPA objectives.
6/13/2023
18:50:38 Anna
Does the tenant have any responsibility if he/she provides a letter of intent and after 30 days is unable to buy?
6/13/2023
18:51:20
Xiaoguang
Chen
Not Sure why you don't answer my question. Let me re-submit and elaborate. One of you mentioned the OPA requires the owner to first advertise in the LOCAL market first before the open market. Here: how is the LOCAL market defined: East Palo Alto only? or San Francisco Bay AREA. How does this even work ? when you have MLS, Redfin and Zillow marketing.
6/13/2023
18:52:04
Jeannie
Llewellyn
Regarding if a NP helps a tenant buy a property - who is on title? Who pays the property tax? Who handles the maintenance and repairs, modification? Who will take the income tax filing benefits from deductions of the repairs, etc.? 6/13/2023
18:53:16
Jeannie
Llewellyn Please show the Case Study for 2+ units timeline 6/13/2023
18:55:04
Jeannie
LlewellyN
Since the CA law requires owners to give notice for 60 days, owners of rental properties already have to fill out estoppel notices to tenants anyway without the benefit of OPA. What or WHO would OPA REALLY benefit and how?
6/13/2023 Stewart Can you please SEQUENCE the OPA steps to purchase a home? I thought it was First

9.1.b
Packet Pg. 364 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) 18:55:44 Hyland 30 days a) within the 30 days a 5-day notification of interest to purchase, Second 30 days a) right to match or better a counter offer?
6/13/2023
18:56:41 Gerry Kwok
How much does it cost to set up & run OPA ?
Where does this $ come from ?
6/13/2023
18:58:14
Vanessa
Smith
If the tenant does not submit a statement of interest within 60 days, what happens? If the homeowner goes with the tenants offer, but does not close in 30-days, what happens?
6/13/2023
19:00:38
Farshad
Momeny
How long would you need to find out if the plan is working or not? And what does it take to reverse if things are not working as expected. What would it consider a failed plan? How do we know?
6/13/2023
19:01:13 Maya Brusil Contingency
6/13/2023
19:01:16
Jeannie
Llewellyn
With so many exemption possibilities (8), what specific properties would definitely NOT be exempt?
6/13/2023
19:02:39
Michael
Mashack You all are clarifying the questions!
6/13/2023
19:03:23
Borys
Senyk
In the case of COPA, if an organization acquires a single family home at market price, that is likely higher than the previous purchase price. The current rent is likely based on the lower price. Will the acquiring organization absorb the higher cost to maintain the current rent? Or perhaps there is another way to prevent displacement in such a scenario? Additionally the building may need repairs and/or improvements. 6/13/2023
19:03:50 Emily
What has the impact been of the DC model of OPA? Do you expect the same or similar impact in EPA? What learnings will EPA be taking from the DC model? 6/13/2023
19:03:56 Kelly Witt
Palo mobile estates should be exempt from city or non profit ownership; as the condo conversion states the goal is for the ownership of the manufactured home/condo land plot to be resident owned.
6/13/2023
19:04:30 Yi Yuan
My house has been rented to multiple single persons (not a family) since day one, and they never show interest in buying the house together. Do I still need to ask them and wait for 30 days?
6/13/2023
19:07:31 Emily What financial gain do you anticipate EPA will benefit from as a result of OPA? 6/13/2023
19:07:42
Elena
Kogan If I live in the house and rent out one room, does OPA apply to me? 6/13/2023
19:08:08
Anna
Romanovsk
aia
How does the OPA policy handle cases where savvy tenants may take advantage of elderly homeowners that are not aware of their home current value? 6/13/2023
19:09:10
Jeannie
Llewellyn
It seems that OPA assumes all tenants must move but if they are in a multi-unit property, this doesn't make sense (60 days before tenant needs to move as stated in the slide)
6/13/2023
19:11:12 John Cooley
How does the ROFR process ensure that a statement of interest isn’t transferred from the initial entity I.e. tenant to other third party entities?

9.1.b
Packet Pg. 365 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) 6/13/2023
19:17:32 Jeannie Ll
All the scenarios seem to point out that OPA really doesn't have much effect. All ROFR is an option already in place. What exactly does OPA offer besides the obviously prior statement Benjamin made? Where does any Non-Profit come in? 6/13/2023
19:20:31 Jeannie L
When ROFR is exercised, what if the 3rd party is also a new home buyer? What if the 3rd party is all cash vs the ROFR?
6/13/2023
19:21:17 Emily
Are buyers able to pursue other homes during this process, or is this process limited to one property at a time?
6/13/2023
19:22:21 Emily
Are there any safeguards in place to prevent third-party buyers from submitting an offer they know a local buyer wouldn't be able to reasonably match during the 5-day tiebreaker period?
6/13/2023
19:22:46 Zaineb
How do you stop tenants from purposely taking advantage of OPA without real desire or financial capability to place an offer? Is there a non-refundable deposit just like any buyer making an offer in the open market? Such abuses have been reported in DC 6/13/2023
19:23:08
Gautam
Chandhoke
Buying any item is about presentation. The same is true for the house as well. Why would you make the interested parties hold me hostage? I would rather have everyone one out make renovations and maximize my return. Why are you taking away my rights?
6/13/2023
19:23:17
Grace
Popple
An offer doesn't just contain a price. It also contains things like loan contingencies, inspection contingencies, closing timelines, perhaps rentbacks. Does the "local purchaser" need to match the other offer conditions or just the price? 6/13/2023
19:23:34
Xenia
Hernandez
So if both the third party buyer and local buyer make the same offer is the landlord obligated to choose the local buyer or can they still choose the third party buyer? 6/13/2023
19:24:08
Dr. Maria
Cruz
Why are we discussing this again when the majority of EPA disagrees with this policy that the City council is pushing. NO ON OPA!!! This is not the solution to low income housing.
6/13/2023
19:24:11
Grace
Popple
If the City is unable to set up and read an automated alert about a sale in the City through Zillow or Redfin, why do we think they will be able to handle the incoming messages about OPA notifications?
6/13/2023
19:25:28 Zaineb
How do you ensure that tenants don't take advantage of OPA and just submit notices without any intention to purchase? Non-refundable deposit in one way. Such abuses have been widely reported in DC where similar ordinance was issued. Due to those abuses, single homes were later exempt in DC.
6/13/2023
19:25:30
Gautam
Chandhoke
What happens if I put the house on the market? Go through the whole process but then decide not to sell (or close).
6/13/2023
19:25:47 Qing Xing
In the case of the same offer price 1.1 million, what if the 3rd party offer is Non-contingent while the local offer has contingencies? price is not the only thing for the seller to decide on an offer.
6/13/2023
19:28:15
Yogesh
Patel Is there a limit on how many houses a non profit can own? 6/13/2023
19:28:31 Stewart
Please use this example to give concrete examples of resources & education that will enable tenants to take advantage of the OPA opportunity if passed.

9.1.b
Packet Pg. 366 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) 6/13/2023
19:30:39 Sean Ripley
Regarding the various scenarios: With multiple offers, percentages, and tie-breakers, it seems like there would need to be oversight or observation of each sale - are the real-estate agents responsible for proving compliance? Is city staff or an authorized non-profit reviewing sales? Who makes sure these steps are being followed? And what happens when a local buyer believes the home has been wrongfully sold to a third-party?
6/13/2023
19:31:01
Gautam
Chandhoke
You are talking about all these processes to be implemented like OPA. Please allow me to point out that the meeting ID printed and published on the notice board of the city building today is not working. Why should the residents trust you to do these things? 6/13/2023
19:32:20
Sergey
Romanovsk
y
What is the supporting research behind the decision to introduce OPA? What is the expected advantage for tenants? What is the expected loss for homeowners? 6/13/2023
19:36:47
Gautam
Chandhoke
Instead of OPA why not come out with the process where the homeowner is required to only inform the renter and other parties of the sale. Once put in the MLS they all can compete and if they can they will get the property.
6/13/2023
19:38:42 Emily Are new-build homes on a parcel of land owned by an EPA resident exempt? 6/13/2023
19:47:05
Gautam
Chandhoke
Assuming the tenant receives the property under OPA. After getting the property, they put it back in the market. Assuming they had been living for over a year as renters, now they will have the option to make repairs and upgrades and sell at a higher price. So now the city is making the original owner loose whereas making the renter gain. Is that the idea?
6/13/2023
19:50:00 Elena How is market price determined?
6/13/2023
19:58:01 Gerry
If the OPA policy ensures the seller gets the best price that the market can offer, how does the OPA policy help the tenant to be competitive? If the OPA policy can indeed be competitive, why not just help the tenant to buy a house on the open market instead of creating a new policy that the city has to administer?
6/13/2023
19:58:11 TVines
Does the tenant have RoFr if they have not complied with the T&Cs of their lease such house is in disrepair, delinquent in paying rent.
6/13/2023
20:01:16 Elena Why not exempt all single family homes from OPA, just like in San Francisco? 6/13/2023
20:05:33 Chris Matt
Is it obvious that the Opportunity to Purchase Act is a misguided piece of legislation that undermines the principles of free markets, personal property rights, and economic efficiency? It restricts the ability of property owners to sell their assets freely, introduces unnecessary complexities and delays, and fails to address the underlying issues affecting housing affordability. Furthermore, it would cause house provider to be more selective, which would inevitably make it harder for tenants to find a place to live in EPA.Instead of burdening property owners and distorting market dynamics, policymakers should focus on promoting policies that encourage investment, remove barriers to housing supply, and foster healthy competition, ensuring a vibrant and accessible real estate market for all.
6/13/2023
21:35:12 Vivian May
What benefit does including SFH provide? Do we have evidence that won't prevent developers from building more homes?

9.1.b
Packet Pg. 367 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) A compilation of names and questions/comments
from the June 13 meeting submitted via housing inbox.

Full Name |
Nombre
Completo Please share your clarifying question. | Por favor comparta su pregunta.

Alice
Do you have any real-world data as to how many tenants would be interested in/able to purchase the home they are living in (in EPA)? Have you done a survey? Borys Senyk
Large cities dropped single family homes from their OPA. How will EPA prevent the abuses that caused this and how will our small city manage this, as other cities with larger resources could not? Is there any specific evidence that tenants in single family homes were recently displaced due to being uninformed or otherwise excluded from the sales process? In the case of COPA, if an organization acquires a single family home at market price, that is likely higher than the previous purchase price. The current rent is likely based on the lower price. Will the acquiring organization absorb the higher cost to maintain the current rent? Or perhaps there is another way to prevent displacement in such a scenario? Additionally the building may need repairs and/or improvements
Carol
Cunningham Please explain why ROFR is problematic.

Chris Moore
In Scenario 2, What happens if there is not an agreement on the sale price - I can go to market? Also, with the initial 30 day wait period, can the team explain how it will impact 1031 transactions with buyers that want to make 1031 transfers? Chris Moore
The issue is not with the seller regarding 1031 exchanges. The issue is with the buyer that wants to make a 1031 exchange in the EPA market. It's very common that a potential buyer is doing a 1031 exchange from a sale they already made. They may only have 30 days left to select a property to purchase to fit with the 1031 guidelines. THe OPA process prevents the seller from guaranteeing that they can sell the property to the 1031 buyer. Therefore, this program will eliminate the 1031 exchange market in EPA. Has a study been performed on the number of 1031 exchanges that are done in EPA?
Court Skinner What is the probability of someone owning 8 homes if SOPA passes? Court Skinner How do the timelines proposed compare to those in the open market? Court Skinner What is the probability of someone owning 8 homes if SOPA passes? Court Skinner What will be the impact on a homeowner who flouts OPA? Court Skinner
If OPA becomes law in EPA will it not have an impact on all homeowners including the legacy folks. It may be difficult to determine. Were there any other approaches to making more homes available to tenants to purchase other than this incredibly complex approach that will inevitably have a negative impact?
Gail Wilkerson
What stops discrimination against one Demographic as opposed to the sellers chosen? Do you answer questions at all about this?
Gina I believe the 120 days is for a single family home.? Gina
Is the time still 120 days for people to get financing? Does the owner have to wait 6-months or can they refuse?

9.1.b
Packet Pg. 368 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Gina
If a single family home owner refuses the initial OPA offer, and a private party makes an offer, how long does the private party have to wait to find out if the city will match it? Do I have this right?
Gina
In past policies, if an owner decides to market to a regular market, and an offer is made, the city then has a chance to match that private offer. Is that true? Gina How many days does the local buyer have to close if he matches in the 5-day window? Grace
Has the City considered setting up a *voluntary* notification system where owners can CHOOSE to inform the city, nonprofits, and tenants, about a sale, as a first step instead of mandating it? Why is mandating necessary here?
Jane Yao
What if you are a resident of EPA and you also have a SFH rental, does the city give exemption for the sale of the rental property ?
Jeannie
Llewellyn
Why do we need OPA? Why can't the EPA housing department help first time home buyers directly without interfering with the seller? Tenants already CAN buy from the seller - especially if they already have a good relationship. OPA just adds another layer of WORK for all for the sale of a property. If OPA is targeting a specific group / owner that REALLY needs to sell through OPA, why include all SFHs, duplexes, triplexes, etc.? Make OPA voluntary and give incentives to encourage people to participate. It would answer the question: "What's in it for me?" Joshua
Johnson
Why does the policy treat owners who live outside of the city differently than owners who live in the city?
Joshua
Johnson Does the policy contain a Right of First Offer, a Right of First Refusal, or both? Mark Dinan Why is the city including SFH in the ordinance when other ordinances only apply to apartments? Mark Dinan What will the impact of lower OPA sale prices have on comps used in mortgage qualification? Anonymous
What about families that have purchased multiple homes within the city and live in the city can they put their children's, and grandchildren's on the title of the other properties to be exempt from this? ( please don't say my name thanks)
Martin
What is the penalty for the bad faith offer from a tenant/non-profit with the intent of delaying the sale not for actually buying the property?
Martin
Can you give an example when a low income tenant can afford home ownership using TOPA? The average selling price for SFH in EPA is $1M. Consider how much downpayment, how much his/her emi would be and how much he/she resell the property. Whether those costs less than the average rent in EPA.

Martin
SF dont have OPA/COPA for single family homes and why are we bringing it up to justify copa here. DC for good reason exempted from their disaster COPA/TOPA policy and no other city has COPA/OPA in their city. Basically, EPA will be the first city and why are we comparing other cities when they don't have COPA/OPA for SFH.

Maya Brusil How will tenants decide what price to put an offer for? Maya Brusil What if the appraisal came lower than the offer price from a non-profit? Ofelia Bello
Can you talk a bit about how enforcement of this policy might be implemented? Would violations by property owners be mostly complaint-driven by the tenant? Even absent an OPA policy, I know of landlords who currently put their homes up for sale and don’t provide tenants a 60 day

9.1.b
Packet Pg. 369 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) notice. Thank you!
Petra Shen
How OPA helps tenants to buy houses? The answer that the city is going to help tenants with information does not help tenants to buy property unless the city provides financing. But OPA does not talk about financing. Then why do tenants need OPA to buy property? Petra Shen
If California law already requires you to notify tenants about the sale, why does the city need to duplicate it?
Q Smith
If possible:

Give a down to earth example of how this can benefit community legacy families where the elders are afraid OPA will make them lose their homes or the City or Non-Profits are trying to steal from the families. Please continue to give examples of family emergencies ( medical concerns - declining health concerns) of family members where homes are the wealth of the family.

Q Smith
How long does this program / ordinance stay in effect? Does, at the current time in the future, City Council have the power to change the ordinance or will this ordinance be changed by an election process (community)?
Q Smith How will the Non-Profits be selected?
Q Smith
Please restate “Who” has the authority to change the ordinance and how long it may stay in effect?
Rashit

1. Tenants already have 60 days to submit their offer first (California law) - why do you need opa for this?

2. Why cannot tenants come to the city seeking funds now? If this is an issue, you need to work on this mechanism, not opa.

3. Regarding the 1031 exchange, the answer is not satisfactory. Please get professionals to answer.

Rhona
Who are the third parties? Or investor(s) or Non profit parties? If the tenant can't purchase the property and the investor makes the purchase will the tenants rent be affordable? What’s in place to make sure?
Stewart
Hyland
fyi, in my question setup I provided examples 30-days, tenant must express interest...This was not transmitted in Anthony's question and not spoken to by Benjamin. If I submit another question I hope the details of my question will be relayed faithfully and not edited.

Stewart
Hyland
What are some of the resources that are currently available for first-time home buyers? So that we know if OPA has a pragmatic effect.

Taptango Why are nieces and nephews not exempt? Why does OPA not see nieces and nephews as family? Taptango
Can you share why the earlier version of the city’s OPA allows for a city-trained appraiser to set sales price?
Taptango
Can there be an exemption for 1031 exchange? If not, why? Many seniors are very concerned about 1031 exchange because after selling a place, there’s a limited amount of time to identify a new place to exchange into and unfortunately the OPA timelines significantly harm residents by impeding the 1031 exchange process.

Because of this, can there be an exemption for 1031 exchange? Taptango What is the number of city staff required to implement OPA?

9.1.b
Packet Pg. 370 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Wei Li
How will this help tenants if they can't offer market price and the house goes to the market anyway?
Vee S
The QR code to the form says that it’s deactivated.

If the tenant does not submit a letter of interest to purchase the home within the 60 days, what happens? If the tenant does not close in 30 days, what happens? A compilation of questions that were answered live:

Regarding exemptions: what percentage of EPA homes do you expect to be exempt from OPA's requirements? Why would I need to justify selling my place (medical, family, etc.)? In the open market, I don't need to explain anything.

Is the time still 120 days for people to get financing? Does the owner have to wait 6-months or can they refuse? In Scenario 2, What happens if there is not an agreement on the sale price - I can go to market? Also, with the initial 30 day wait period, can the team explain how it will impact 1031 transactions with buyers that want to make 1031 transfers?
Can you please SEQUENCE the OPA steps to purchase a home? I thought it was First 30 days a) within the 30 days a 5-day notification of interest to purchase, Second 30 days a) right to match or better a counter offer? Can you share why the earlier version of the city’s OPA allows for a city-trained appraiser to set sales price? If the tenant does not submit a statement of interest within 60 days, what happens? If the homeowner goes with the tenants offer, but does not close in 30-days, what happens? In the case of COPA, if an organization acquires a single family home at market price, that is likely higher than the previous purchase price. The current rent is likely based on the lower price. Will the acquiring organization absorb the higher cost to maintain the current rent? Or perhaps there is another way to prevent displacement in such a scenario? Additionally the building may need repairs and/or improvements.

If possible:

Give a down to earth example of how this can benefit community legacy families where the elders are afraid OPA will make them lose their homes or the City or Non-Profits are trying to steal from the families. Please continue to give examples of family emergencies ( medical concerns - declining health concerns) of family members where homes are the wealth of the family.

How will tenants come up with the price for the offer>? How long will the City consider exemption?
If I live in the house and rent out one room, does OPA apply to me? If my house is rented room by room, to multiple people, whom do I give a notice to? What is the probability of someone owning 8 homes if SOPA passes? What is the penalty for the bad faith offer from a tenant/non-profit with the intent of delaying the sale not for actually buying the property?
What if you are a resident of EPA and you also have a SFH rental, does the city give exemption for the sale of the rental property ?

9.1.b
Packet Pg. 371 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Has the City considered setting up a *voluntary* notification system where owners can CHOOSE to inform the city, nonprofits, and tenants, about a sale, as a first step instead of mandating it? Why is mandating necessary here? How does the ROFR process ensure that a statement of interest isn’t transferred from the initial entity I.e. tenant to other third party entities?
Are there any safeguards in place to prevent third-party buyers from submitting an offer they know a local buyer wouldn't be able to reasonably match during the 5-day tiebreaker period? In the case of the same offer price 1.1 million, what if the 3rd party offer is non-contingent while the local offer has contingencies? price is not the only thing for the seller to decide on an offer.

Please use this example to give concrete examples of resources & education that will enable tenants to take advantage of the OPA opportunity if passed.

Are new-build homes on a parcel of land owned by an EPA resident exempt? So if both the third party buyer and local buyer make the same offer is the landlord obligated to choose the local buyer or can they still choose the third party buyer?
Can you talk a bit about how enforcement of this policy might be implemented? Would violations by property owners be mostly complaint-driven by the tenant? Even absent an OPA policy, I know of landlords who currently put their homes up for sale and don’t provide tenants a 60 day notice. Thank you! What happens if I put the house on the market? Go through the whole process but then decide not to sell (or close).

Why is the city including SFH in the ordinance when other ordinances only apply to apartments?

9.1.b
Packet Pg. 372 Attachment: PCRC Report (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update) Affordable Housing Preservation Models
Summary
While much of the strategy to address the housing crisis hinges on production, preservation through acquisition and rehabilitation is also an important piece of the puzzle for many reasons. Acquisition and rehab can make units affordable, once purchased at market value, on a cheaper per unit basis than new construction.1 Structural impediments, like the bottlenecking of Federal Tax Credit resources and the CA State deprioritization of “Low-Resource Areas” reduce the ability of many geographies to compete for affordable housing production. Preservation can expand the number of affordable units in locations where production is not feasible.

The following are a few housing preservation models that may be considered:

A. Community Land Trusts: Community Land Trusts (“CLTs”) function by dividing ownership of land and buildings, holding the land in trust to eliminate its vulnerability to land speculation while dividing ownership of buildings among resident-owners who steward the property over the duration of their tenure living there. They keep housing affordable during hot markets, and keep maintenance consistent during down markets.

B. Limited Equity Cooperatives: Limited Equity Cooperatives (“LECs”) pursue a similar price stabilization objective and function by pooling resources among coowners and sharing the responsibility and equity that develop from use and management of the property over time. A resale formula determines the limits on the price of sale that keep the units affordable over time, and also determines the equity that participants accumulate.

C. OPA: Opportunity to Purchase functions by granting tenants or mission-driven nonprofits the right of first offer and right of first refusal to purchase a property at the market price when it is offered for sale. When the purchase is made through the support of government funds, or when a purchase is made by a missiondriven organization, the affordability requirements can be structured into either the deed, the lease, or other enforceable documents. Various affordability preservation frameworks can be combined – for example, a Community Land Trust lease is already an optional feature for affordability preservation under the EPA OPA (see Section 14.26.120.E.2 of March 1, 2022 draft Ordinance).2 1 See James Yelen, “Preserving Affordability, Preventing Displacement,” Enterprise, 2020, available at:
https://www.enterprisecommunity.org/sites/default/files/2021-07/preserving-affordability-preventingdisplacement.pdf. 2 Section 14.26.120.E.2 of the draft March 1, 2022 Ordinance states: Permanent affordability standards shall remain in force in perpetuity or for no less than ninety-nine (99) years and be renewable. The standards shall be evidenced by one of the following:

1. A restrictive covenant placed on the deed to the Residential Property that runs with the land and is enforceable by the City against the purchasers and their successors;

2. A Community Land Trust lease, which is a ninety-nine (99)-year renewable land lease with affordability and Owner-occupancy restrictions; or

3. Affordability covenants in land leases or other recorded documents which run with the land and are enforceable.

9.1.c
Packet Pg. 373 Attachment: Affordable Housing Preservation Models (2737 : East Palo Alto Opportunity to Purchase Act ("EPA OPA") Update)