On November 14, 2006, the Community Economic Development Agency (CEDA) Committee will hear a proposal from Councilmembers Brooks, De La Fuente and Chang to radically change Oakland’s condominium conversion laws. Currently, city law limits condo conversion in certain areas of the city (impact areas) including Adams Point. The current law requires that for any conversion, replacement rental units must be created.

The motivation for the proposed change is purported to be an effort to change the imbalance in owners vs. renters in Oakland. Currently about 40 percent of our residents are owners and 60 percent are renters, which is the reverse of the national average. The question is whether the proposed changes would have the desired affect in helping our current renters to become owners or would it push out our current renters and accommodate new Oakland residents who would buy the converted units.

The proposal has a requirement of a per-room fee to be placed into an Affordable Housing Trust Fund as an alternative to the requirement of replacement rental units. However, the fee does not cover the cost of creating a replacement unit. Tenants 62 and older could remain renters in their occupied unit. Existing tenants would have first right of refusal and a small discount on their unit. Buildings in the currently described impact area would be subject to conversion without creating new units, but the per-room fee in impact areas would be higher than other areas. The annual cap on conversions in the proposal is 1500 units. The proposal doesn’t require many improvements to the property prior to conversion except for sound. This leaves many potential buyers with the additional potential cost of fire and seismic safety expenses. In fact some of the most seismically dangerous units are multi-unit “soft-story” structures where the first floor is typically open-bay parking with little structural integrity (side and back wall only) and the housing units are directly above the parking.

Oakland has a diverse population but many of our residents are very low income. The average household income in District 3 (owners and renters) is about $40,000 a year. Compare this to the average in District 4 which is $80,000/year. The 2000 census showed that Oakland had 88,301 renter households with an average median income of $29,278 per year. An affordable unit for these households would be approximately $175–185,000 per year. The average sales price of a condo (from conversion) on the current market is between $350,000 and $400,000. The CEDA staff report states that “the affordability gap would be partially filled with the city’s first-time homebuyer program or state assistance, but a significant gap would remain.”

The policy-change proponents have not asked for an economic impact study to be sure we know all the ramifications of such a drastic change. This is an interesting contrast to their insistence that the council yet again study inclusionary zoning before we implement it, despite that policy being studied for 8 years by councilmember Brunner and myself.

This item was heard in the Planning Commission, where several tenants told commissioners that they would not be able to afford to buy their units. Two years ago when Councilmember Brooks brought some real estate investors to meet with me proposing to change condo-conversion laws in my district, they claimed that tenants would not feel a difference and that their monthly mortgage payments would be the same as their monthly rent. When I asked for the actual numbers and compared them to my constituents’ rent, there was a huge difference and that didn’t even cover the down payment requirements. There are currently many “products” available to layer on debt for the new homeowner, helping them get into ownership with less of an upfront down payment. Such debt heaped upon a low-income person does not stabilize them or the neighborhood at all. In fact, it can lead them into a far worse situation with no money for first and last months’ rent if they lose their newly purchased condo. Another tangential but significant impact of this change is that if a converted unit is purchased for rental rather than owner occupation, none of the Just Cause Eviction laws that covered the building prior to conversion would remain in affect.

The votes are not clear on this proposal, but the fact that it is being pushed for review prior to the mayoral change in January suggests that the current mayor might be willing to break a tie to pass this hurriedly. A similar attempt to change condo laws in Berkeley, Measure I, was placed on the ballot for voters to weigh in. It was defeated by a wide margin. If passage seems imminent in Oakland, some potential modifications of the proposal could include:

  • cutting the maximum annual conversions from 1500 per year to 50 to see what kind of impacts occur;
  • require the converter to track removed tenants who cannot afford to buy their units, to see if and where they find replacement housing;
  • charging a larger per-room fee for conversion that will really cover the cost of a replacement unit;
  • providing a bigger discount to existing renters who want to buy; and
  • requiring a relocation package that will really cover the costs of a renter who has to find another rental unit.

I encourage people with concerns about this drastic policy change to contact Councilmembers Brooks, De La Fuente, and Chang and/or come and speak at the CEDA committee meeting at 4 p.m., November 14. The full council hearing on the item could be as soon as December 5. Please check with my office 238-7003 or the city clerk for any schedule changes.

Brooks: dbrooks@oaklandnet.com; 238-7006
Chang: cityochang@oaklandnet.com; 238-7008
De La Fuente: idelafuente@oaklandnet.com; 238-7005

For more information: