Hawai‘i Wants to Help Community Groups Keep Foreclosed Homes in Local Hands

A legislative proposal aims to prevent certain foreclosed homes from being lost to residential investors and second homebuyers by giving community groups more time to place competitive bids.

SB 332 will allow tenants, community land trusts and certain other groups up to 45 days after a public sale to match or beat the best bid for homes in non-judicial foreclosures.

The proposal is a type of “community opportunity to purchase” policy, an anti-displacement tool that is gaining traction around the country as groups look to preserve homes in gentrifying areas. If Hawai‘i’s bill passes, it’ll join at least 13 other jurisdictions that have similar policies.

“In many places, states and cities jump in to support this kind of community acquisition, because they know that by doing so, they’re creating a pool of housing that’s permanently affordable and that’s community controlled,” said Rep. Tina Nakada Grandinetti, who spearheaded the local proposal and introduced the House version of the bill, HB 467.

SB 332 passed its third reading in the House yesterday and now awaits a final vote from the Senate.

Protecting Foreclosed Homes from Speculation

Grandinetti said the bill is intended to help Maui as it recovers from the August 2023 wildfires. A foreclosure moratorium on Maui homes with Federal Housing Administration-insured mortgages expired at the beginning of this year.

Community groups worry that more local families will be pushed out as speculators seek to profit from the disaster. A March 2024 report for the Hawai‘i Land Trust concluded that disaster-fueled real estate speculation can exacerbate land loss, displacement and wealth inequality.

It estimated that as much as 20% of Lahaina’s homes—at least $360 million in value—could be lost to investors in the three years following the fires if no intervention is taken. The report said that expanding community ownership of real estate, such as through community land trusts, can help decelerate or even reverse land loss in Lahaina.

SB 332 is intended to give tenant buyers, prospective owner-occupants, community land trusts, affordable housing nonprofits and local governments an additional opportunity to be competitive bidders in power of sale foreclosures.

Those groups would have 15 days after a public sale to submit written notice of a subsequent bid. In total, these groups would have up to 45 days after a public sale to meet or exceed the highest bid before the sale is finalized.

Sellers of foreclosed homes will also be prohibited from bundling properties at a public sale—a tactic that makes the prices so out of reach for locals that only investors and developers can afford them.

Both the House and Senate bills have received support from dozens of individuals and from groups like Lāhainā Strong, the Lahaina Community Land Trust, the Native Hawaiian Legal Corporation, the Hawai‘i Workers Center and Maui Housing Hui.

The proposal is modeled after a 2020 California law that aims to prevent corporations from taking over foreclosed homes, which occurred during the Great Recession, Grandinetti said.

Reconstruction is underway for some Lahaina homes destroyed in the August 2023 wildfires. | Credit: Overstory

Local housing advocates think an opportunity to purchase policy could help Hawai‘i to preserve more of its affordable housing stock and protect homes from speculation.

Kenna StormoGipson is the executive director of the Hawai‘i Housing Policy Foundation, a nonprofit that has been helping Kaua‘i renters convert the Courtyards at Waipouli into a workforce housing cooperative. She said this type of policy would have been helpful in 2019, when the county declined to purchase the 82-unit Wailua apartment complex upon the expiration of its 10-year affordability restrictions.

If more tenants and surrounding residents knew the county declined to exercise its right of first refusal, then perhaps they could have come together to save the complex back then, she said.

“We need to treat land and housing like a precious resource and the best way to do that is to convert current housing into permanently affordable housing,” she said.

However, she and others agree that Hawai‘i would need to create a robust legal process and adequate financial support for this type of policy to be successful. While Hawai‘i has a growing ecosystem of community land trusts, Grandinetti said there’s more the state can do to build a robust nonprofit community development sector and support tenant organizing movements.

“We need stronger tenant protections to enable tenants to really empower themselves and form things like tenant associations that could turn into co-ops” or work with land trusts, she said. “I think we have so much work to do towards shifting the balance away from profit to the people who actually depend on housing as their home.”

Jordan Hocker leads community education and outreach initiatives for Maui Housing Hui, which organizes renters’ rights trainings and advocates for stronger tenant protections. She said Maui has only started to see more tenant organizing in the last several years because the island’s housing situation has gotten so bad.

Nonetheless, a policy that gives tenants a first right of refusal when properties will be sold would be helpful. She recalls meeting another renter years ago who had lived in a property for 10 years but was moving out because her landlord stopped paying the mortgage. That home ended up going into foreclosure, but the renter later found out that she could have taken over the remaining mortgage.

She said that “because we know there are tons of people out there who want to invest in Hawai‘i real estate,” the state should encourage expanding the model of local tenants, housing co-ops and community land trusts purchasing existing buildings and preserving them as long-term housing.

Empowering D.C. Tenants

Washington, D.C.’s Tenant Opportunity to Purchase Act is the oldest opportunity to purchase policy in the country. Enacted in 1980, its goals were to prevent displacement, preserve affordable housing and encourage tenant organizing.

Between 2006 and 2020, tenant organizations were able to successfully negotiate a rental or ownership outcome for 19,170 units following a TOPA notice. That’s according to a 2023 report commissioned by the Council of the District of Columbia and produced by The Coalition (formerly the Coalition for Nonprofit Housing and Economic Development), a nonprofit that advances equitable community economic development solutions.

About 770 of those units were purchased as tenant-sponsored cooperatives; for the rest, tenants assigned their rights to incoming owners who kept the units as rentals. TOPA also enabled affordability to be added or preserved for 16,224 units.

The Latino Economic Development Center (LEDC) is one of several organizations that helps guide tenants through the TOPA process. Part of that includes connecting tenants groups with attorneys and facilitating meetings between tenants and potential buyers. Walda Yon, director of housing counseling, said tenants often negotiate for rent protections and building improvements, and the most popular outcome for the tenant groups LEDC works with has been to keep their buildings as rentals by assigning their rights to a landlord of their choice.

LEDC tries to reach out to tenants as soon as it sees seller notices to help ensure that they know their TOPA rights, but it isn’t always able to because of its own limited resources, Yon said. Sellers and sometimes interested buyers offer tenants $15,000, $20,000 or $25,000 to get them to move out because the building is more valuable empty. Such buyouts have become more common over the last several years.

Another challenge is that tenants of buildings with five or more units only have 45 days after receiving notice of their landlord’s intention to sell to organize, form a tenant organization, register their interest in exercising their TOPA rights with the district and their landlord. They then generally have 120 days to determine whether they want to keep the property as a rental or convert it into a cooperative or condo, determine the costs of any needed renovations, and raise money for a deposit. The tenant organization then has another 120 days to secure financing and complete the purchase.

Awad Bilal, who has been a tenant organizer at LEDC for the last few years, said TOPA is often criticized because people think the process takes too long and only leads to buyouts. But he said it’s a powerful mechanism for giving tenants power they otherwise wouldn’t have to choose who will be their next landlord and what will happen with their homes.

“It’s an opportunity for tenants of all ilk, of all backgrounds, to not just come together as one, but to make really incredible decisions democratically about where they live,” he said. “And being able to put that in the hands of the people who live there is so imperative to preservation and to what makes communities diverse and special, and it really takes into account the people who live there, as opposed to unnamed future demographics of what developers might be interested in.”

Community/tenant opportunity to purchase policies are an anti-displacement tool that is gaining traction around the country as groups look to preserve homes in gentrifying areas. | Credit: Aaron Yoshino

Slowing San Francisco’s Fast-Moving Housing Market

San Francisco enacted its Community Opportunity to Purchase Act in 2019. The policy gives qualified nonprofits—groups with experience acquiring and managing affordable housing in the city—five days to provide written notice to a seller that they are interested in a property.

The seller is then required to provide the nonprofit with information on the building’s current tenants, and the nonprofit has 25 days to put in an offer. If the offer is accepted, the nonprofit has 60 days to conduct their due diligence and secure financing. Nonprofits must maintain the acquired property as permanently rent-restricted affordable housing.

Mission Economic Development Agency (MEDA) acquires, preserves and builds affordable housing largely in the city’s Mission District. Karoleen Feng, its chief real estate officer, said the city’s COPA does not always result in properties being acquired by qualified nonprofits. In fact, MEDA doesn’t respond to 95% of the COPA notices it receives.

From when the policy was enacted in 2019 through 2024, the city of San Francisco received about 680 declarations from sellers who attested that they complied with COPA, wrote Anne Stanley, communications manager of the San Francisco Mayor’s Office of Housing and Community Development, in an email. Nineteen properties were acquired by qualified nonprofits.

Thirteen of those properties were acquired by MEDA. Feng said COPA was needed to help nonprofits like hers know that affordable rentals were being listed in San Francisco’s fast-moving market and encourage more realtors to take them seriously.

COPA was meant to complement existing financial assistance for nonprofits to preserve affordable apartment buildings. The San Francisco Housing Accelerator Fund (HAF) launched in 2017 as a public-private partnership and provides fast, flexible capital to help nonprofits to acquire buildings. Those acquisitions also often require rehabilitations because many are older buildings.

Caroline McCormack, vice president of lending and policy at HAF, said after the building is done with its rehabilitation and more stabilized in its operations, HAF’s loan is often paid off with funding from the city’s Small Sites Program. According to Stanley, the average per-unit subsidy the Small Sites Program provided through 2024 was about $351,000 per unit.

“Because of the high acquisition cost, the high rehab costs, having a complementary program to be paired with COPA is a key piece of this,” McCormack said.

San Francisco and MEDA also help the city’s nonprofits build their capacity to preserve affordable homes. Under its Small Sites Program, the city awarded $5.5 million in capacity-building grants to eight organizations in 2020 and 2022, according to Stanley. MEDA has also been providing mentorship to other city nonprofits.

Expanding Interest in Community Opportunity to Purchase

In Hawai‘i, Grandinetti plans to continue looking at how opportunity to purchase policies can help preserve other types of Hawai‘i homes. Another one of her bills, HB 1473, would have given tenants, community land trusts, families, local governments and affordable housing nonprofits 45 days to match or beat the best offer to purchase certain subsidized affordable housing projects. The bill died before it could get a committee hearing.

In addition to Hawai‘i, Los Angeles, Fresno, East Palo Alto and Berkeley in California; Somerville, Massachusetts; and New York State are considering opportunity to purchase policies.

“I think more and more people are wanting to return to what we’ve always known, which is that we can take care of each other, and community ownership is a very powerful and scalable way to do that,” Hoang of Policy Link said. “So I think people see it as a very effective tool to fight against the corporatization and financialization of our entire communities.”