Affordable Homeownership Alliance

1. HomeOwnership is the largest single source of household wealth in the US (HUD)

3. HomeOwnership is the top goal for 350,000 SF tenants living in 220,000 households

4. At current rates of 200-400 per year, it will take 550-1100 years for these 220,000 tenant households to achieve homeownership. Is it fair to make anyone wait that long?

There were over 5000 rental units sold last year at an average price of $ 156,000. HOPE makes it legal for each tenant to buy their unit from their owner. If you want to buy the apartment in which you live, and the owner is willing, why not? Why is it illegal?

HOPE Proposal: On a limited basis (1% of housing stock per year), the city would subdivide a building, if a certain percentage of tenants in the building choose to buy, and negotiate with the owner for a voluntary and mutually acceptable price for their unit. The price would typically be below the market-price as a condo, but higher than its value as a rental. Tenants choosing not to buy would continue to rent, with recorded protections against OMI + Ellis evictions and Costa-Hawkins rent-increases, using lifetime leases that have worked in existing SF ordinances for the last 20 years. HOPE reduces evictions! Existing Federal zero and low downpayment loans and co-signers make financing possible. Buyers get tax deductions. Moderate, limited and low income families, and the elderly and disabled will qualify for mortgage loan assistance from new HOPE-generated funds.

Moderate income working families are being forced to leave San Francisco when they seek the security and economic benefits of homeownership. Homeownership marks the great divide between the haves and the have-nots. Lack of homeownership opportunity in SF creates a group stuck in the paycheck-to-paycheck poverty trap. Have-nots are stuck in rent-slavery, and have lost hope of ever being able to afford to be homeowners.

AFFORDABILITY: In the year 2000, over 5,000 San Francisco rental units were sold for an average of $ 156,000 each (statistics from Old Republic Title Company, details available). Under HOPE, owners would also be able to sell these units to the individual tenants who live in them, instead of being required to sell “in bulk”, and only to other investors. As a condominium, each unit qualifies for affordable zero and low downpayment loans; such mortgage loans are readily available through Federal programs for condominiums, but not for purchases of co-ops, TICs or entire buildings. The before-tax monthly payment for a $ 156K unit is $ 1325/mo, and the after-tax cost is $ 775/mo. This is affordable even to those earning just 50% of SF median household income, and includes most working families. HOPE would allow and encourage property-ownership for all SF tenants who want it, and thereby help democratize property ownership. The practice of subdividing apartment buildings for the benefit of tenants is widely used in Europe.

EVICTIONS: All non-buying tenants in buildings subdivided under the HOPE program automatically get lifetime leases, with iron-clad written protections from the state Ellis Act and owner-move-in evictions, and from rent increases exceeding the guidelines established by the Rent Board. This significant benefit provides security to non-buying tenants in HOPE-subdivided buildings.

FINANCIAL ASSISTANCE: The HOPE program will result in a number of purchase and sale transactions, which will produce increased transfer tax and property tax revenues, solely attributable to HOPE subdivisions. These monies, along with other fees, will go to an “affordability fund”, and help pay for mortgage and downpayment assistance to tens of thousands of low, limited and moderate income households, with preference for the elderly and disabled, to accomplish the homeownership that they could never otherwise afford.

PROFIT: Tenants who buy their units may resell them later for profit. Tenants will typically be able to buy their units at a price significantly lower than the condo market-price, but probably higher than the value of the unit as a rental. The lower the rent amount the tenant currently pays, the lower the price for which they could probably buy the unit. To discourage speculation, some fees (paid to the “affordability fund”) are imposed on tenants who immediately resell the units for a capital gain within a short time after purchase.

QUALIFYING % FOR SUBDIVISION: To qualify for a HOPE subdivision, a minimum of 40% of occupants in a 2-6 unit building, 33% of occupants in a 7-12 unit building, and 25% of occupants in a 13 unit or larger building must choose to buy the unit they occupy, and enter into an agreement with the owner to buy that unit, on terms that they freely and voluntarily negotiate.

WAITING PERIOD and RESIDENCY REQUIREMENTS: Occupants of a building become eligible to be part of the qualifying percentage for subdivision only after they have continuously resided at the building for a minimum 2 year period prior to the application. Buildings where there has been an owner-move-in eviction cannot apply under HOPE until at least 5 years have elapsed between an OMI, and the application for subdivision. This is significantly longer than the 3 year “good-faith” period required by the OMI laws. In buildings where there has been an Ellis Act eviction, the waiting period is 10 years.

LIFETIME LEASES: Tenants who do not initially buy their apartments automatically get lifetime leases. Lifetime leases have been in use for the last 20 years, to protect seniors in buildings where a regular condo-lottery subdivision has taken place. They have held up legally, and been successful. Some critics claim that HOPE lifetime leases can be overturned by court challenges based on Costa-Hawkins, and will result in unlimited rent increases and evictions. This is SIMPLY NOT TRUE. HOPE lifetime leases are enforceable, and protect against Ellis, OMI and Costa-Hawkins. Many experienced real estate attorneys have confirmed this fact, and there is a written legal opinion verifying it, available for review. The McGoldrick McTIC legislation also uses lifetime leases.

CHOICE IN HOUSING: Some critics insist, for ideological reasons, that tenants should not be given either a choice or an opportunity to be homeowners. We believe in making this choice, an integral part of the American dream, freely available. HOPE makes homeownership a real and affordable choice for San Francisco tenants, as it is in the rest of the USA. Those who prefer to rent are free to do so. Why do the critics oppose this free and voluntary choice for tenants? How are tenants benefited by being condemned to lifelong rent-slavery?

HOUSING STOCK: HOPE does not change the number of housing units in SF. We simply propose to democratize the ownership of SF housing units, by giving tenants an opportunity to become homeowners. Under HOPE, the same person would continue to live in the same unit, but instead of one investor owning many units, there would be many homeowners, each owning and living in their own unit. HOPE allows existing tenants to become owners of the units they already occupy, thus accomplishing homeownership without causing displacement or eviction. Down the road, there will be fewer tenants in rent-controlled apartments, because they will all be owners of their own condominiums, having exchanged the security of rent control for the superior security of homeownership.

INCREASED STABILITY AND SECURITY: The city as a whole benefits with increased homeownership: stability increases, families are not forced to leave the City to achieve homeownership, and neighbors everywhere have a greater stake in the community.

OWNERS and TENANTS BOTH BENEFIT FROM HOPE: Some ideologues have a problem with solutions which are WIN-WIN, and where owners and tenants cooperate for mutual benefit. We believe that one should try to craft solutions where everyone comes out ahead, instead of always requiring a disfavored group to suffer, in order to benefit a favored group.

TENANT-ORGANIZATIONS: Some tenant organizations fear that when there are many tenants who have become homeowners, they will no longer need or want protection from evictions and rent increases, because “Homeownership Is The Ultimate Form Of Rent Control”. Consequently, there might be less demand for tenant-organizations' services, and perhaps less funding for them.