Moms 4 Housing-inspired bill becomes California law

A bill signed into law this week prevents corporations from scooping up too much of California’s valuable housing stock — a shift that could help shape how the state’s housing market weathers the COVID-fueled economic crisis.

Gov. Gavin Newsom signed SB 1079 into law this week — one of several housing protection or production-focused bills to make it off his desk. SB 1079, which was inspired by the Oakland activist group Moms 4 Housing, prevents corporations from snapping up bundles of homes during foreclosure auctions. Instead, it gives tenants and families an opportunity to buy them individually.

With the coronavirus pandemic pushing national mortgage default rates higher than they’ve been in years, the new state law could prove especially impactful.

“SB 1079 sends a clear message to Wall Street: California homes are not yours to gobble up; we won’t tolerate another corporate takeover of housing,” the bill’s author, Sen. Nancy Skinner, D-Berkeley, wrote in a news release. “Under SB 1079, families will have a fair chance at homeownership, and our local governments will have new tools to stop blight.”

Newsom this week also signed AB 3308, which allows school districts to build affordable housing for teachers and school employees on district-owned land, using low-income tax credits. And he signed SB 940, which lets San Jose make zoning changes that allow for more high-density housing in the city’s urban core, while keeping certain open spaces off-limits to development. But he vetoed AB 69, which would have created a state program to help homeowners finance new in-law units.

With the new law targeting corporate investors, the goal is to prevent a repeat of what happened in the aftermath of the Great Recession of 2007-2008 — when millions of families lost their homes to foreclosure, and Wall Street investment firms swooped in and bought groups of homes for rock-bottom prices. The effects can still be felt today. Corporations continue to control tens of billions of dollars in housing nationwide, which has led to fewer residents owning their homes, and more renting.

Today, with unemployment through the roof thanks to pandemic-related shelter-in-place orders, experts worry history could soon repeat itself. More than 8% of mortgages on one to four-unit residential properties were delinquent in the second quarter of 2020 — the highest rate in nine years, according to a national survey by the Mortgage Bankers Association. California generally has been seeing lower rates than many other states, but experts warn that doesn’t mean it’s imune from a potential foreclosure crisis.

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But if delinquencies lead to another wave of foreclosures, under SB 1079, many of those homes may stay in the hands of tenants, families and nonprofits instead of going to corporate investors.

The new law prevents multiple homes from being bundled together in a foreclosure auction and sold to a single buyer. Instead, they must be sold individually. And after the initial bids at a foreclosure auction are received, tenants, families, local governments, affordable housing nonprofits and community land trusts have 45 days to top the highest bid and buy the property.

Those rules apply to all residential properties of between one and four units, and will expire in five years.

Eliminating bundling is a huge step in the right direction, said Leah Simon-Weisberg, legal director for tenants rights organization Alliance of Californians for Community Empowerment (ACCE).

“One of the pieces that’s missing, obviously, is how are we going to fund keeping these properties in the community?” she said. “Because having to match the highest bidder is difficult without funding.”

The new law has drawn support from both sides of the issue. Oakland-based attorney Daniel Bornstein, who represents landlords in tenant disputes, said the no-bundling rule could benefit his clients too.

“Individuals who have a little bit of money can come and play in a way that normally you would not be able to,” he said.

The law also attempts to encourage landlords to use their properties. It allows cities to double the amount they fine owners for abandoned properties deemed a “blight” on the neighborhood — authorizing charges of up to $2,000 per day.

The law, which goes into effect Jan. 1, was inspired by Moms 4 Housing — a group of activists and unhoused or insecurely housed mothers who took over a vacant, investor-owned home on Magnolia Street in West Oakland last year. The group illegally occupied the house for two months before getting evicted by the Alameda County Sheriff’s Office. But the movement garnered national attention and support, and in January, the property owner — Wedgewood — agreed to let a local community land trust buy the property and give it back to the moms and activists.

Moms 4 Housing also inspired Oakland and Berkeley to introduce policies that would give tenants and affordable housing nonprofits first dibs to buy properties that come up for sale. San Francisco already has a similar policy.

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