A new law in California will restrict anyone selling foreclosed homes from bundling them at auction for sale to a single buyer.
In addition, the law paves the way for tenants, families, local governments, affordable housing nonprofits, and community land trusts to beat the best auction bid to purchase the foreclosed land. Under the new rule, these entities will receive a 45-day head start, or “first dibs” on said property, according to a report in the Daily Bulletin.
The bill, approved early this week by Gov. Gavin Newsom, “is designed to keep corporations from snapping up homes and letting some fall into disrepair as they did during the Great Recession,” the paper reported.
A report by Reveal suggests that the enactment “seeks to prevent a repeat of history.” And there is evidence, the organization reports, that it won’t work.
The bill’s author, Democratic state Sen. Nancy Skinner of Berkeley, told Reveal that the preemptive timing is key. ‘We were late to the party’ during the Great Recession,” she told Reveal’s Aaron Glantz, who wrote a book on a related topic. “By the time legislation passed, ‘the vast majority of homes had already been foreclosed on.'”
But solutions that would have worked in 2008 might not work as well this time around, Glantz wrote.
“The vast majority of homeowners will continue to have equity,” Mark Calabria, director of the FHFA, told Glantz in March. “Even struggling homeowners will more likely sell their homes through regular avenues than face a foreclosure auction,” Calabria told Reveal.
Further, a member of the National Community Stabilization Trust told Glantz, “the ban on bulk auctions misunderstands how Wall Street landlords bought homes last time. Even though speculators often acquired dozens of homes at a single auction, they did so by buying the homes individually.”
Writes Glantz, “Battle lines have been drawn on the new law, with community groups on one side and the real estate industry and California Chamber of Commerce on the other.
His detailed report can be found on the Reveal website.