Oakland City Council passes ordinance to prevent real estate speculation
The Oakland City Council recently passed a local ordinance that would require all purchases of non-owner occupied properties to register their transactions directly with the city of Oakland, according to The Post News Group. The ordinance was passed with the intention of protecting the houses for sale in Oakland from being purchased by absentee property owners. This group of property owners have been accused of scooping up properties in bulk at bargain prices and failing to maintain or renovating them, depressing the real estate market and creating an unsightly and unwanted stain on local communities.
"In addition to creating transparency and accountability for these speculators and private investors, we also believe that this will be yet another step toward improving the health and habitability of Oakland's long-ailing housing stock," Shirley Burnell, a member of the Alliance of Californians for Community Empowerment (ACCE), told the news source.
The ordinance was largely championed by organizations such as ACCE and the Urban Strategies Council, as well as individual officials like Councilmember Desley Brooks, the news source notes. A large number of previously foreclosed homes had been purchased by outside speculators and private investment companies. This resulted in a diminished supply of available houses for sale to prospective homeowners, as well as an unrealistically depressed real estate market.
The impact of foreclosed homes being purchased in bulk in low-income neighborhoods has been largely debated in the industry for some time, according to KALW. Carolina Reid, of the Federal Reserve Bank of San Francisco, has done a substantial amount of research on the issue. She notes that the worst-case scenario of investor-owned previously-foreclosed properties could have a severely deleterious impact on the local real estate market. Vacant or poorly-maintained homes can attract crime and drugs, resulting in bad resale value and a stained community reputation. However, there are also opportunities to be had in this kind of market.
"In the best case scenario, which is what I prefer to think about, we see this as an opportunity to purchase some of these homes under the Neighborhood Stabilization Program and really renovate them for affordable home ownership opportunities, so that we get families back in those neighborhoods, living in those homes," Reid told the news source.
The Neighborhood Stabilization Program (NSP) is a federal program that is similar in intention to the aforementioned local ordinance passed by the Oakland City Council. According to the news source, the NSP sends federal money to local governments to buy and renovate foreclosed homes. The primary difference between the NSP and the local ordinance in Oakland is that the federal government expects homes purchased under the NSP to be well maintained and be a positive development to the real estate market. The idea is that once the homes have been purchased and renovated, they can be resold at a fair market price to a family looking for a home, instead of a speculator looking for a long-term business investment.
The long-term impact of the ordinance in Oakland remains to be seen. While the move was seen as necessary to stem what had been a quickly exacerbating problem - one company recently purchased over 170 properties in West Oakland alone, the news source reports - there are obstacles. The news source notes that an exemption excluding all properties purchased through non-foreclosure short sales could weaken the impact of the ordinance. Nevertheless, potential homeowners looking in Oakland should be mindful of these local regulations.