New delay, rewrite for renters' right of first refusal in gentrification zones

By: By Dennis Rodkin

By Dennis Rodkin - Crains Chicago

The aldermanic sponsors of a new anti-gentrification ordinance are calling for a delay until March for their plan to give renters in fast-gentrifying neighborhoods the right to buy their building instead of letting it get sold to outside investors.

The delay, which Ald. Carlos Ramirez-Rosa, 35th, will introduce at a City Council meeting today, comes along with a proposal to insert language into the ordinance with the aim of “continuing to promote homeownership for tenants while at the same time being fair to sellers,” he told Crain’s.

One of the key provisions in an ordinance the Chicago City Council passed in September gives renters in several fast-changing neighborhoods the right of first refusal when their landlord goes to sell the building they live in. Designed to keep affordable housing from being replaced with new, more expensive homes, the ordinance requires the owner to give renters time to make a bid that’s competitive with an outsider’s bid.

The Northwest Side Housing Preservation Ordinance covers parts of Humboldt Park, West Town, Logan Square, Avondale and, although it’s not on the Northwest Side, Pilsen, all areas where gentrification pressure threatens to displace long-time renters. The ordinance creates a pathway for them or community housing trusts to buy and retain affordable housing.

While other sections of the ordinance, including higher demolition fees for multi-unit buildings, went into effect as scheduled on Oct. 9, the Department of Housing delayed enforcement of the right of first refusal, also known as the Tenant Opportunity to Purchase, or TOP, until Nov. 29. Today’s proposal pushes it back another three months.

The sponsors propose three primary changes to the ordinance’s TOP section, all of which Ramirez-Rosa and Erika Villegas, president of the Chicago Association of Realtors, said were developed with input from the real estate industry.

One adds a requirement that tenants who want to buy their building show proof that they can get financing. For a one- to four-unit building, tenants will need to show a mortgage pre-approval letter, and for larger buildings, they’ll need a letter of intent from a lender.

This is “to show that the tenants are operating in good faith,” Ramirez-Rosa said. “There was some fear from the (real estate industry) that you might get tenants who say they want to buy but are really just trying to distract the process.”

The second says tenants who take a pass on trying to buy at the building owner’s initial asking price get a new chance if the price drops 10% or more.

The drop could be either a new published list price or an offer that comes in at least 10% below the asking price, Ramirez-Rosa said. In the latter case, he told Crain’s, the seller would be obligated to tell the tenants about the offer regardless of whether the provided time for them to make a counter-offer has already expired.

Third is a requirement that the TOP plan run for a little less than five years, from March 1, 2025, until Dec. 31, 2029, and the city study its impact during that time before moving forward.

The changes will likely be assigned to a City Council committee today and then come back to the full council for a vote in January, Ramirez-Rosa said.

The real estate association will “continue to monitor the potential impacts and unintended consequences of this ordinance,” Villegas said in prepared comments, but “we value the sponsors’ dedication to housing stability, a priority we share.” Along with being the Chicago Association of Realtors' president, Villegas is a broker at Re/Max in the Village in Oak Park.

“While we do not fully support the ordinance,” Villegas’s statement said, “we appreciate the good-faith negotiations” with the ordinance’s sponsors.

The ordinance passed hurriedly in September and had a short interval of less than a month before going into effect. That caused real estate and building owner groups to complain that they had been left out of a process whose result directly impacts their business.

The proposed March 1 start date gives all sides time to get up to speed on how the TOP plan will work, Ramirez-Rosa said. In particular, the Chicago Association of Realtors wanted to be able to include a lesson in its Feb. 3 Market Outlook meeting for all members, the alder said.

By Dennis Rodkin - Crains Chicago

	The aldermanic sponsors of a new anti-gentrification ordinance are calling for a delay until March for their plan to give renters in fast-gentrifying neighborhoods the right to buy their building instead of letting it get sold to outside investors.

	The delay, which Ald. Carlos Ramirez-Rosa, 35th, will introduce at a City Council meeting today, comes along with a proposal to insert language into the ordinance with the aim of “continuing to promote homeownership for tenants while at the same time being fair to sellers,” he told Crain’s. 

	One of the key provisions in an ordinance the Chicago City Council passed in September gives renters in several fast-changing neighborhoods the right of first refusal when their landlord goes to sell the building they live in. Designed to keep affordable housing from being replaced with new, more expensive homes, the ordinance requires the owner to give renters time to make a bid that’s competitive with an outsider’s bid.

	The Northwest Side Housing Preservation Ordinance covers parts of Humboldt Park, West Town, Logan Square, Avondale and, although it’s not on the Northwest Side, Pilsen, all areas where gentrification pressure threatens to displace long-time renters. The ordinance creates a pathway for them or community housing trusts to buy and retain affordable housing.

	While other sections of the ordinance, including higher demolition fees for multi-unit buildings, went into effect as scheduled on Oct. 9, the Department of Housing delayed enforcement of the right of first refusal, also known as the Tenant Opportunity to Purchase, or TOP, until Nov. 29. Today’s proposal pushes it back another three months.

	The sponsors propose three primary changes to the ordinance’s TOP section, all of which Ramirez-Rosa and Erika Villegas, president of the Chicago Association of Realtors, said were developed with input from the real estate industry.

	One adds a requirement that tenants who want to buy their building show proof that they can get financing. For a one- to four-unit building, tenants will need to show a mortgage pre-approval letter, and for larger buildings, they’ll need a letter of intent from a lender.

	This is “to show that the tenants are operating in good faith,” Ramirez-Rosa said. “There was some fear from the (real estate industry) that you might get tenants who say they want to buy but are really just trying to distract the process.”

	The second says tenants who take a pass on trying to buy at the building owner’s initial asking price get a new chance if the price drops 10% or more.

	The drop could be either a new published list price or an offer that comes in at least 10% below the asking price, Ramirez-Rosa said. In the latter case, he told Crain’s, the seller would be obligated to tell the tenants about the offer regardless of whether the provided time for them to make a counter-offer has already expired.

	Third is a requirement that the TOP plan run for a little less than five years, from March 1, 2025, until Dec. 31, 2029, and the city study its impact during that time before moving forward.

	The changes will likely be assigned to a City Council committee today and then come back to the full council for a vote in January, Ramirez-Rosa said.

	The real estate association will “continue to monitor the potential impacts and unintended consequences of this ordinance,” Villegas said in prepared comments, but “we value the sponsors’ dedication to housing stability, a priority we share.” Along with being the Chicago Association of Realtors' president, Villegas is a broker at Re/Max in the Village in Oak Park.

	“While we do not fully support the ordinance,” Villegas’s statement said, “we appreciate the good-faith negotiations” with the ordinance’s sponsors.

	The ordinance passed hurriedly in September and had a short interval of less than a month before going into effect. That caused real estate and building owner groups to complain that they had been left out of a process whose result directly impacts their business.

	The proposed March 1 start date gives all sides time to get up to speed on how the TOP plan will work, Ramirez-Rosa said. In particular, the Chicago Association of Realtors wanted to be able to include a lesson in its Feb. 3 Market Outlook meeting for all members, the alder said.