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Work group reviews right-of-first-refusal tools aimed at preserving affordable rental housing
Summary
Staff presented models from other states for rights of first refusal and right-of-first-offer policies intended to help local governments or designees preserve affordable housing when owners sell or convert subsidized properties. Presenters summarized varying notice periods, assignment rules and enforcement mechanisms.
Jessica Hoff, policy analyst for the Virginia Housing Commission staff, briefed the Local Land Use and Community Living Work Group on how rights of first refusal and related purchase opportunity policies operate in other states and the different statutory choices a legislature can make.
Hoff explained that these statutes typically specify a triggering event (such as a sale or a conversion that would end affordability), a required notice from the owner to the right-holder, a time period in which the right-holder can act, and either a requirement that the owner accept a fair-market offer or an arrangement in which the owner first markets the property and the right-holder must match a third-party offer.
"Local governments may require a longer time frame to assemble financing and can have difficulty competing with market-rate or luxury developers," Hoff said, summarizing the policy rationale for giving localities an exclusive period to respond. She reviewed examples from states including Maryland, Massachusetts, Colorado, Oregon, New Jersey and Michigan and noted differences in scope (some laws apply only to subsidized housing; some extend to naturally occurring affordable housing or tax-foreclosed property).
Hoff highlighted practical design choices: whether the right applies only to dedicated affordable projects or to a broader set of at-risk units; whether the local government can assign its right to a nonprofit or qualified developer; how long the local government has to decide (some localities set short windows of weeks to months; other approaches include multi-year notice periods when affordability is scheduled to lapse); and whether a state enforces violations and levies penalties. She described Maryland counties that maintain lists of approved developers and Colorado’s more recent, time-limited statutory approach to target units losing affordability in a defined period.
Work group members asked about experience in Maryland and Colorado, how fair market value is determined, and whether expedited time frames reduce the chance that a taker will simply be deterred from marketing a property. Hoff said some localities prefer a right of first offer to streamline negotiations instead of waiting for a third-party bid. Several members identified timing windows of 30 to 120 days as commonly used frameworks and noted that shorter windows can reduce uncertainty for sellers.
Ending: Participants asked staff to publish a detailed paper analyzing the state models Hoff summarized and to return with options and drafting considerations the work group could use if it decides to recommend a statutory model to the full commission.
