The Somerville Condo Conversion Ordinance has been improved
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By Will Mbah
Candidate for Somerville City Councilor at Large
At the end of July the City Council approved a series of amendments to the Condominium Conversion Ordinance, which are designed both to conform to a recent court decision and strengthen the protections for tenants, facing displacement.
These actions are a further detailing of provisions that I and my council colleagues first adopted in 2019. I am, therefore, looking today at how the condo conversion process has been moving forward. Does it appear to be fulfilling its purposes of tenant protection?
The court ruling on the ordinance
The specific sections of the ordinance that the court has ruled improper have authorized the city to claim a second priority right to purchase any unit, proposed for conversion, if the leasehold tenant chooses not exercise his/her first right of refusal. The court has upheld the tenant’s priority right to buy, but ruled that the city cannot claim the same right.
When we adopted this provision in 2019, we saw the city right to purchase as a way for the city to acquire the unit, impose an affordable housing deed restriction on it and then transfer it to an NGO to re-sell or re-lease to a low-income household.
In practical terms, the loss of this city purchase provision does not appear to be significant. The city has not attempted to buy any units since 2019. The ordinance has provided only a 120 day time period, which is insufficient for the city to claim the right, find funding, organize the purchase, and line up an NGO to receive the unit. Realistically, the city has other powers, such as urban renewal and the affordable housing trust, which allow it buy housing units of any types for transfer into affordable programs.
The improved details of tenant protection
Two of the changes in procedure that are now in the law are clarifications of the protections for elderly, disabled and low-income tenants, who face displacement by condo conversion. The ordinance has always required that these tenants be given (i) a longer period of time to relocate – up to five years; (ii) a higher compensation payment of $10,000, rather than the $6,000 due to any tenant; and (iii) the landlord’s active assistance in finding a new apartment. But in some cases, landlords have contested the proofs of eligibility of tenants in these categories. To insure that the decision of the Condo Conversion Board is accurate in every case, the amended law now directs the Board to refer any application involving these tenants to the ADA Administrator, who will verify the status of the tenants.
A second clarification involves the exemption from protection of a non-rent paying occupant of a unit. These units have been treated as vacant units – which can convert without waiting a year and without providing tenant compensation. The intent was to recognize a roommate, long-term guest or temporary caretaker, whom the landlord has been allowing to live rent-free.
Council members have been concerned that this exemption might be granted incorrectly for a unit with a tenant, who has been withholding rent in a dispute with the landlord. The state housing law specifically allows for rent to be held in escrow in certain disputes. This situation should not be used to give an advantage to a landlord, who has applied to the Condo Board – in essence it would allow the conversion of units to be a retaliatory action against legitimate rent-striking tenants. New language in the ordinance makes clear that such lawful rent strikers would not lose protections under this “non-rent paying” category.
How have the condo conversion procedures been working overall?
The Condominium Conversion Board began in 1985 and up through 2019, it gave conversion permits for some 200-300 units per year. The high point was reached in FY2019 with 312 unit conversions approved. After we imposed the stronger protections and more careful procedures, the number of approved units dropped to 199 in FY2020 and fell further as COVID disrupted the real estate market. Post-COVID the volume of cases and approvals has returned to a level of 164 units approved in FY2022 and 142 units in FY2023.
More significant in the numbers after 2019, there has been a shift in the balance of the categories of (i) units with rent-paying tenants compared with (ii) owner-occupied and long-vacant units. In 2019, over 90% of the units approved for conversion had existing tenants, who left or bought their units after the year-long process. In FY 2020 this category of tenanted units has dropped to about 66%. If some landlords with tenants have been discouraged from pursuing conversion or they are waiting until tenants voluntarily leave before they bring the units forward for conversion as already-vacant units.
It must be kept in mind that these figures from the Condo Conversion Board do not represent the total growth of condos in the city. Some newly built buildings are being marketed as condo’s from the start – they do not come before the board.
Finally, one trend that is likely to change the calculations is the jump in real estate interest rates, which has occurred since January 2023. Mortgage rates have climbed to about 7% from under 5% last year. As a result, market prices of condos and their profitability for landlords appear to be declining. Regional market reports indicate sluggish sales and Boston has measured a drop in its numbers of conversion applications.
In Somerville, the longer term trend is not yet clear because there remain a large number of cases, filed last year, still in the pipeline at the Condo Conversion Board.
If you want to learn more or support my campaign, please visit my website at willmbah.com.