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Work group reviews ‘right of first refusal’ policies used by other states to preserve affordable housing
Summary
Commission staff summarized statutory models used by several states that give local governments or designees an exclusive opportunity to acquire properties when affordability restrictions expire or owners decide to sell. Maryland, Massachusetts and county programs in Maryland were highlighted as frequently used precedents.
Commission policy staff presented an overview of “right of first refusal” and “right of first offer” mechanisms that states and localities use to preserve or acquire affordable housing when owners sell or when affordability agreements terminate.
Why it matters: Local governments and nonprofits typically need more time and financing flexibility than market buyers to acquire at‑risk affordable housing. A right of first refusal or right of first offer can create an exclusive time window for public or designated buyers to match an owner’s terms or negotiate a purchase so affordability can be preserved.
What staff described: Jessica Hoff summarized variations in statutory design. Most statutes trigger the right when an owner seeks to sell or convert subsidized or income‑restricted housing; many allow a locality to assign the right to a vetted nonprofit or developer so the locality does not have to hold title. Hoff said staff identified 11 states with statutes addressing these purchase opportunities and highlighted Maryland’s statewide statute and local programs in Montgomery and Prince George’s counties. Montgomery County’s program, Hoff said, received 369 notices from 2015 to 2023 and exercised its right 12 times.
Other state approaches: The work group heard that Massachusetts and Colorado have used either right‑of‑first‑offer or right‑of‑first‑refusal to preserve hundreds of units, and that Colorado’s recent law targets a set of units losing affordability through 2030. Hoff also described approaches in New Jersey, Michigan, Texas and Washington and said some states limit the policy to publicly‑funded affordable housing while others include naturally occurring affordable housing or tax‑foreclosed parcels.
Key tradeoffs discussed: Hoff noted academic research on price or market effects is limited; critics argue the rights can introduce delay and transaction costs for sellers. Members asked about timelines; Hoff said statutes vary, with some notice windows as short as two weeks and others as long as 120 days or more; two states mentioned a two‑year notice period tied to planned loss of affordability. Members also asked whether fair market value rules or match‑the‑offer models were preferable; Hoff said models differ and each choice raises legal and administrative tradeoffs.
Next steps: Staff will publish a longer paper and the work group asked staff to provide model statutory language and examples of administrative processes (notice, valuation, assignment to designees) for future discussion.
