Font ResizeThe authors of the proposal, City Council President Ignacio De La Fuente (Glenview-Fruitvale) and councilmembers Desley Brooks (Eastmont-Seminary) and Henry Chang (At-Large), say the proposal will stabilize communities and propel renters into the realm of homeownership by providing a ready stock of less expensive homes, as well as discounts and other incentives to tenants who wish to buy their apartments.
The ordinance would repeal a 1981 ordinance that requires every rental unit converted to a condominium be replaced. Under the new proposal, people wishing to convert their apartments would have the option of paying a fee per unit to the city based on the number of rooms, expected to be about $10,000 to $15,000 per condo.
The city expects to raise about $20 million from the fees for affordable housing programs, including financial assistance to first-time homebuyers.
A revised version of the proposal increases to 10 percent the discounts for renters buying their units and requires building owners to pay up to $15,000 in certain closing costs for those same buyers. It also caps the number of annual conversions at 800.
Brooks said she sees the proposal as one piece — and not the only
"Because conversion rights are so hard to obtain, we have properties that are just hell holes," she said. "There's a property at 77th and Bancroft avenues ... the owner wants to turn that into condos but he can't do it because he can't get conversion rights. Here's a property that can offer some stability, so for me it's worth it to try ... to help people buy homes."
But opponents of the measure warned the change will not increase home buying opportunities for most renters, and in fact may push up rents by reducing the number of available apartments, and push more people out of Oakland. They want more analysis to determine if the goals are realistic.
Joe Brooks, vice president for civic engagement at Oakland-based PolicyLink, said boosting homeownership from 40 percent to 50 percent is a laudable goal, but it would be a mistake to push ahead without more data to identify the social impact.
"Will it help Oakland renters? This really comes down to trying to determine, in a constructive way, who benefits," Brooks said. "It comes down to whether we value the diversity of Oakland — racially, ethnically and economically — because low-income renters are the backbone of our work force."
Even without the city's help, the number of applications to convert apartments to condominiums has skyrocketed the past five years, from eight units in 2000 to 244 units in 2005. Through June 30, there were applications to convert 358 apartment units.
Most of the conversion applications last year involved small buildings containing fewer than five units that are already owned cooperatively by the tenants.
Most of the larger apartment buildings converting to condos now actually received their conversion permits decades ago, but the owners never carried through because the market cooled.
For example, a 63-unit apartment building being converted on Fairmount Avenue above Lake Merritt is the type of housing the proposed ordinance hopes to target. The starting prices ranged from $200,000 for a studio, $275,000 for a one-bedroom, one-bath, and $375,000 for a two-bedroom, two-bathroom unit.
Although Oakland residents bought more than half of the 40 units sold so far, only five tenants in the building have purchased their units, despite being offered a 10-percent discount.
Three teachers and a firefighter purchased condos, and 28 buyers were first-time homeowners, said Stefan Brunnschweiler, who is also helping convert two other buildings on Fairmount and one on El Dorado.
Anny Carson and her husband Robert purchased a two-bedroom, two-bathroom condo on Fairmount for $417,000.
"We looked in San Francisco, but buying as tenants in common (a co-op) was the only thing we could afford," said Carson, a nurse at California Pacific Medical Center in San Francisco. "This is totally more affordable."
Sheri Powers, manager of the Homeownership Assistance Center at the Unity Council, said the changes to the condo conversion ordinance must be bolstered by funding for first-time homebuyers who earn too much to qualify for low-income down-payment assistance through the city and other programs.
She said her counseling agency has helped 50 people earning an average of $48,635 buy homes this past fiscal year. The average purchase price was $329,756, and the average client received $110,603 in down payment assistance from as many as five different sources.
Powers said it is a mistake to rely on simple formulas that equate paying a market rent with being able to afford to buy a home. Conventional lenders will factor debt in determining how much a person can afford to borrow.
"If someone is earning $47,000 a year, they cannot afford more than $1,762 a month on all expenses, excluding groceries and utilities," Powers said. "If you subtract from that taxes, insurance, homeownership association dues (average $272 a month), car payments, student loans and credit cards, that doesn't leave much for mortgage payments."
Plus she said, very few condos are sold for $300,000, with most going for $400,000 or more.
"Near Lake Merritt there are a lot of nice older apartments rented for $1,000 to $1,400 a month," Powers said. "If you take those off the market, where will those people go?"
John Gutierrez, a lawyer who runs a business helping property owners convert their buildings, said the proposed ordinance is not a panacea for homeownership, but it could be a start in the right direction if the home prices are realistic, and there is funding available to help people buy.
"The question is, do you wait, or chip away at something that doesn't completely solve the problems?" Gutierrez said. "While it isn't perfect, it does something."
The Community and Economic Development Committee meets at 4 p.m., 1 Frank Ogawa Plaza, Oakland.
