Expanding Partnerships
Right of First Refusal
Right of First Refusal Policy
Issues/Opportunities Addressed:
Timeframe for Action: Mid to Long Term
Much of Nashua’s affordable housing stock (whether
deed-restricted or naturally-occurring) are rental housing
units. Over time as housing pressure increases and prices
escalate, there may be a strong desire on the part of
landlords to let affordability requirements lapse and begin
renting at market rates. If the City does not play a
partnership role, these units may come off the inventory of
affordable housing and leave lower-income households
with limited options.
One way the City could play a stronger partnership role in
affordable housing would be to implement a right of first
refusal policy. This type of policy can help preserve the
ongoing affordability of dedicated affordable rental
housing by giving priority consideration to mission-
oriented buyers when the owner of a subsidized rental
property decides to stop participating in a subsidy
program. Second, they can be applied to unsubsidized
rental properties, helping to preserve the availability of
rental units and in some cases facilitate conversion to
dedicated affordable rentals. Eligible buyers may include
tenant associations, nonprofit and for-profit developers,
and/or state or local government agencies. Right of first
refusal policies may give these buyers an exclusive period
within which to make an offer on the property, or the
option to match any offer made by a private buyer.
Nashua Housing Study - 78
This policy is especially effective in strong and/or
growing housing markets where right of first refusal
policies help to preserve rental housing and prevent
the conversion of subsidized rental properties to
another use by enabling their sale to stakeholders
who are committed to long-term affordability.
There can be a wide range of restrictiveness in the
policy depending on how far the City wishes to go.
This can include:
¢ Providing advance notification, during which the
city has a non-exclusive right to identify a buyer,
but seller has no obligation to sell to that party.
¢ Offering a true “right of first refusal,” in which
eligible purchasers are given the option to match
an existing purchase offer.
¢ Establishing a “right to make an offer” that gives
eligible purchasers exclusive rights to make an
offer for a designated period of time; if no offer is
accepted, eligible purchasers are typically then
given the right of first refusal to match any.
subsequent purchase offer that the owner accepts
¢ Preempting private sales and requiring owners to
sell the property at fair market value to a
designated buyer; in this case the price is typically
determined by independent appraisers.
ASSOCIATES INC
The City may want to explore some lighter touches and
early steps such as requiring advance notice of sale for
any rental property which currently has affordability
restrictions or has benefitted from/participated in any
subsidy programs. This provision is already in place for
properties utilizing Low Income Housing Tax Credits
(LIHTC) which gives a right of first refusal to non-profit
organizations if at the end of the compliance period the
owner wishes to sell or convert the property to another
use.
If Nashua’s housing availability and affordability
continue to be a challenge, the City could consider
taking the policy a step further and applying it to all
rental properties which can be a step to help prevent
displacement of residents over time. Clear guidance is
needed on which properties are subject to the policy and
must be communicated effectively to all rental property
owners. In some cases, communities have chosen to
limit the policy to older units as those may have a higher
tendency to offer below-market rents and comprise a
larger share of the community's naturally-occurring
affordable housing stock.
