Tenants in compliance with their lease and a one-year current history of on-time rental payments would have an option to purchase the property if a bona fide offer from an absentee purchaser, at the same cash equivalent terms, subject to contingencies.
Tenants' Right of First Refusal
(Right to Match)
The mechanism for the Right of First Refusal can be an Option payable by the tenant at the start of a new lease term. It can also be a blanket regulation from the City or County that requires tenants be notified of the impending sale and sellers and their brokers must present the terms and purchase resources to existing tenants to assist in their decision.
There could be a bonus paid to the tenant if they were not given an opportunity to match the sale. It could also be a minimal penalty such as a note on title that the tenant was not presented with the chance to match.
The idea is to move the tenant to the front of the line for opportunities to invest in their own neighborhood.
Absentee ownership of housing in Milwaukee is a scourge. It extracts income out of the city and moves it to the suburbs, out of state or even out of the country where it is no longer available to build wealth in the impacted areas. My proposal is that in tenant-occupied properties, where there is a potential sale to an absentee owner, the tenants should have a Right of First Refusal to purchase the property at the same terms as the out-of-area purchaser, otherwise known as a "Right to Match."
My plan would stipulate that tenants would only have this right if they are in full compliance with a lease and they have at least one year of on-time rental payments. They would have a limited time to match, 30 days or so, and if they are unable to meet the criteria or uninterested in purchase, the deal to the absentee buyer goes through. It gives the tenant a clear window to buy and resources can be directed by local municipalities and non-profits during the 30 day period to buttress the financing and subsidize repairs, etc.
A Tenants' Right of First Refusal is a market-based solution to Central-city poverty. Home ownership can help alleviate income inequality and build wealth when we have programs that allow local residents to invest in their own neighborhoods.
Lenders have a chance now to work with local customers for financing that would otherwise have likely gone to out-of-area lenders, vulture funds or cash deals. Incentives can be devised to make these deals more profitable for the lenders.
Real Estate Brokers and Agents:
Local real estate brokers will have front of mind that the existing tenants have additional rights and should be the first in line to purchase the homes they already live in. They can and should forego some commission to provide incentives to the tenant to assist in the purchase. Real estate brokerage community can address past discrimination efforts (block-busting, red-lining, steering, lack of fair housing compliance) by supporting local ownership.
Housing advocacy groups can leverage their resources to prepare these potential home owners for purchase early on in the transaction. The additional income that flows into the local community with tenant purchasers can be used to build local businesses to assist in rehabilitating the older housing stock.
One of the best ways to boost income in a local community is to allow local residents to invest their income in their own neighborhoods, not have it siphoned off and sent out of the local market. Communities can do this by replacing absentee owners with local owners giving residents a equal chance to purchase.