Why More Cities Are Hoping to Give Tenants the Chance to Purchase Their Buildings – Next City
Urban policymakers have spent a lot of energy in the last few years looking for ways to preserve affordable housing in the face of markets that tend to send costs only upward, increasingly out of the reach of low- and middle-income residents. Without massive investments of money, the options are limited. But until recently, Washington, D.C., was the only major city to give tenants a first shot at buying their buildings when the owners put them up for sale. That may be starting to change.
“We’ve seen a lot of property being bought by investors,” says Steve Fletcher, the Ward 3 Council Member in Minneapolis, who sponsored a measure to create a Tenant Opportunity to Purchase Act in the city. “We’ve seen a smaller percentage of property in our city generally being owned by people who live in that property. And I think that we’re looking for ways to create more opportunity for people to own, especially as our housing stock shifts toward more multifamily housing.”
Last fall, the Minneapolis City Council hosted a delegation of officials from D.C. to talk about that city’s Tenant Opportunity to Purchase Act (TOPA), which was adopted in 1980. The law provides tenants of multifamily buildings with the first right to buy their building when their landlords put it up for sale. It has been credited, as Next City previously reported, with preserving thousands of units of affordable housing. It was amended in 2018 to exclude most single-family homes from the process, over concerns about abuses of the policy.
In most cases, landlords will put buildings on the market, get an offer from a third-party buyer, and then present that offer to tenants to see if they can match it, says Blake Biles, an attorney with Arnold & Porter LLC, who has helped D.C. tenants purchase their buildings. Tenants have a certain amount of time to create an association representing at least half of the building’s residents. Then, because the sale price is still market-rate, they usually need to find a third party housing provider, either nonprofit or for-profit, to help finance the deal. It’s crucial at that stage to get “cheap money,” Biles says, usually in the form of government grants or low-interest loans to make the purchase viable. Successfully executing a TOPA purchase requires hard organizing work and financial support, but when it works, it allows tenants to secure steady rents or convert buildings to permanently affordable housing.
“Part of the reason for this TOPA law in the first place was the spate of apartment buildings being converted to condos and co-ops [in the late 1970s],” says Joel Cohn, legislative director for the District of Columbia Office of the Tenant Advocate. “The idea was tenants should be empowered to move from rental into a homeownership situation … Basically, there ought to be empowerment of tenants who’ve lived [in the District] for a long time.”
As housing costs have become more burdensome across the U.S., more cities are hoping to help tenants, particularly low-income tenants, remain in their homes. And Minneapolis is not alone in considering a TOPA law as an option. New York State Sen. Zellnor Myrie is reportedly working on a bill that would give tenants a first right to purchase their buildings and convert them into limited-equity co-ops, a critical supply of affordable housing in New York City. (Myrie did not respond to an interview request.) Lawmakers in Portland have begun talking about creating a tenant opportunity to purchase act there as well. Ditto in Los Angeles, Oakland, and Berkeley, California. Cohn, of the D.C. Office of the Tenant Advocate, says he routinely has conversations with people in far-flung cities like Lawrence, Kansas, about how to craft the best TOPA policy.
In San Francisco last spring, the Board of Supervisors approved a slightly different version of the law, giving nonprofit organizations the first chance to buy certain buildings that go up for sale as a means of preserving apartments for low-income residents in gentrifying neighborhoods. That bill was called COPA, or the Community Opportunity to Purchase Act. Since it went into effect, says Fernando Martí, co-director of the Council of Community Housing Organizations, which pushed for the legislation, around half a dozen transactions have been carried out by local community organizations like the Chinatown Community Development Center and Mission Economic Development Agency. The economic damage caused by the COVID-19 pandemic is raising more fears of displacement for low-income tenants in cities like San Francisco as well, Martí says. After the 2008 recession, private investors bought up a lot of “distressed properties,” and housing advocates are worried that a similar pattern could hold in the aftermath of the pandemic. Laws that give tenants and nonprofits a chance to compete with private investors could be an important tool to stem the tides of eviction, displacement, and gentrification, Martí says. That’s why groups like CCHO are supporting the introduction of a bill that would implement a statewide Right of First Purchase (similar to TOPA) in California.
In Minneapolis, Fletcher says, a team led by LISC Twin Cities is studying how to craft a TOPA policy. One thing they’re trying to sort through is the pros and cons of the transferability of purchase rights to third parties, which is in place in Washington, D.C. That provision helps many tenant organizations complete their purchases by partnering with experienced developers and buyers, but also raises concerns about the potential for abuse. (Lawmakers in Minneapolis have also begun informally discussing what a TOPA-like policy for commercial properties might look like, and whether it could help corridors that were damaged during the civil unrest after George Floyd’s killing to recover, Fletcher says.) Fletcher says that he has been hoping to have a bill ready to introduce this fall. But he says the city is also aware that helping to fund tenant purchases is as important as creating the law that gives them a first chance to offer. And the budgetary damage wrought by COVID-19 could complicate those efforts.
“I think that this policy, we’re all very aware, is really going to be only as effective as what we’re willing to fund for it,” Fletcher says.
Jared Brey is Next City’s housing correspondent, based in Philadelphia. He is a former staff writer at Philadelphia magazine and PlanPhilly, and his work has appeared in Columbia Journalism Review, Landscape Architecture Magazine, U.S. News & World Report, Philadelphia Weekly, and other publications.