Real Estate Propaganda, 2019

You have read my earlier blog about how to recognize propaganda, right? Local real estate lobbying is full of propaganda this year. Homeowners in Somerville, MA are getting letters about changes that the City Council are making regarding affordable housing shortage in Somerville. Many of these have half-truths and outright lies about how these changes work.

Therefore, I am finding myself repeating how the real estate process would work in relation to these accepted, and proposed, changes.

Right of First Refusal:

Tenants now have the “right of first refusal” in the accepted condo conversion ordinance in Somerville (and other places).

If an owner is selling their two-family house after applying to convert it into two or more condos, the tenant has the right to match the best offer that the seller can get on the open market.

Owners may sell their houses, under all conditions, for as much money as the market will bear.

Tenants’ rights under the Condo Conversion Ordinance:

When a property goes on the market as a two-family house, there is no change in anything about the marketing of that house. No tenant displacement costs. No conversion costs. No tenants’ right of first refusal (at this time).

Owners who want to convert their multifamily house into multiple condos have additional costs because of the condo ordinance: There are application fees and tenant relocation fees ($7-10,000).

Multifamily house before renovation
Multifamily house before renovation

However, the lion’s share of expense for condo conversion is renovation. The redevelopment of the property to bring it to sales-worthy level as a condo may be $100,000 or more in updated kitchens, bathrooms, electrical, other renovation.

Condo conversion is very profitable for businesses that have crews who do redevelopment full time. They can work on house after house.

It is less profitable for the owner who do one project – on their own house. That owner needs to hire a crew, or a general contractor to bring the apartments up to the standards of a “hot” salable condo.

One Year Notice to Tenants:

Fun fact: Newton has a one-year mandatory notice to tenants for conversion of multifamily housing into condos. They have had one for a long time. They enforced it. Everyone can see how Newton two-family housing prices are just in the toilet (yes, very sarcastic here)!

Transfer taxes:

Transfer taxes are a one-time fee that accompanies the registration of a deed of sale. It is a way to generate revenue for a municipality through real property sales. People who buy and sell a house a few times in their life will pay it a few times in their lives. These fees offset other ways that a municipality gets revenue, like taxing residential and business property every year. The general public benefits from the shifting of the cost of affordable housing onto people who are doing a regular business in real estate development.

This week, I got daily email blasts regarding a legislative action. The owner-centered real estate lobby* wants their members to fight any fees attached to sales of properties.  Boston wants to add a transfer fee to sales in the city in order to support the building of affordable housing.

The primary argument is that it will hurt sales prices for real estate; that has not been proven. Their secondary argument is that Boston has other measures to combat the affordability crisis. They fail to mention that they also sent email blasts to their membership urging them to oppose those measures as well – and claimed it would hurt sales in Boston.


*As you know I belong to that big real estate guild, R– ®, but I hold my primary allegiance to consumer-oriented organizations like the National Association of Exclusive Buyer’s Agents and the Massachusetts Association of Buyer’s Agents.



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