Tenant/community opportunity to purchase
What is it?
Tenant Opportunity to Purchase (TOPA) policies provide tenants living in multi-family buildings with advance notice that the landlord is planning to sell their building and an opportunity for them to collectively purchase the building. TOPA is an emerging anti-displacement tool that can be used to preserve affordable rental housing stock, empower tenants, and stabilize low-income households. These policies generally require landlords to provide an intent to sell notice to their tenants, along with a timeframe for the tenants to form a tenant association and express interest in purchasing the units, and an additional timeframe for the tenants to secure financing. By providing renters with the right to negotiate and collectively bargain to purchase their buildings, TOPA policies level the playing field in highly speculative markets. Keys to successful TOPA programs include: 1) extending right of first purchase or right of first refusal to tenants so they have an opportunity to match an offer; and 2) requiring purchasers to preserve units as permanently affordable.
As an anti-displacement tool, TOPA can stabilize households facing displacement pressures and provide an opportunity for long-time residents to stay in their neighborhood and purchase their homes. In Washington DC, home to the nation's oldest and most comprehensive TOPA program, tenants organized to preserve close to 1,400 units from 2002 to 2013. TOPA can also be a cost-effective method for cities to preserve their affordable housing stock since preserving existing housing costs less than building new affordable homes.
Cities can also consider developing a Community Opportunity to Purchase Act (COPA) as an alternative or to complement a TOPA policy. COPA allows a qualified nonprofit to make a first offer to purchase a building with low-income tenants if the property owner decides to sell. COPA should be carefully crafted with tenants and nonprofit partners such as community land trusts, limited equity housing cooperatives, and other affordable housing providers. While only a few cities have developed policies that allow for the purchase of unsubsidized housing, a number of cities and states have provisions that allow for the purchase of subsidized affordable housing in order to preserve their affordability.
In addition to the PolicyLink resources listed on the right, see the Council of Community Housing Organizations ,the DC Fiscal Policy Institute, and Local Initiatives Support Corporation (LISC) for more resources related to tenant/community opportunity to purchase policies.
Who implements it?
- Elected and appointed city officials can champion, pass legislation, and allocate funding for the creation of robust and intentional TOPA programs.
- Tenants are at the frontlines, organizing for expanded tenant rights, leading TOPA campaigns, and developing TOPA policies.
- Community-based organizations can serve as potential purchasers or partners providing outreach, education, and organizing support to tenants.
The most effective TOPA policies are developed in partnership with tenants and housing advocates and include dedicated funding and infrastructure to proactively inform tenants about their TOPA rights, support tenant organizing, and help tenants finance the purchase of buildings.
Cities seeking to implement TOPA must consider a range of related legal and logistical questions.
- Tenant empowerment: TOPA can be a tool of empowerment and self-determination for tenants, giving them the ability to participate in the sale of their homes. Opportunity to purchase harnesses tenants' collective power as they form tenants' associations to make decisions about purchasing, what organizations to partner with, and how to secure funding and legal counsel. Upon a tenant purchase, residents have democratic control of their building and can address repairs, maintenance, and renovations as they best see fit. Further, TOPA provides ownership opportunities for lower-income households who would otherwise struggle to purchase homes and levels the playing field for residents to compete in speculative markets.
- Preserving affordability: Typical TOPA policies are reserved for tenants earning at or below 80 percent of the area median income (AMI). TOPA helps preserve affordable housing options for low-income residents. This is particularly important for communities facing displacement pressures and at risk of being priced out of their homes and neighborhoods. Cities should ensure purchasers through TOPA can agree to maintaining property as long-term affordable through deed restrictions or requiring the property to enter a community land trust.
- Unit and tenant eligibility: Cities should consider whether TOPA should apply to subsidized properties to preserve dedicated affordable housing or if it should also apply to unsubsidized properties to preserve rental housing in general. Strong TOPA policies such as that in DC cover both types of properties and help better preserve availability of rental units and mitigate displacement. Cities must also determine eligibility of potential purchasers, such as tenants at or below 80 percent AMI. Cities should offer all tenants opportunity to purchase by making all rental units eligible for TOPA to best mitigate displacement.
- Timing and notice provisions: TOPA should provide an adequate timeframe for tenants to organize and form an association, make an informed decision, secure funding, and put an offer together. Timing and notification periods should include ample notice of intent to sell to tenants and should outline timeframes for notification, statements of interests, negotiations, and time for residents to secure financing and financial assistance if needed. All notices should be provided in writing and typical notice periods range between several months to several years.
- Second right of refusal: If tenants choose to forgo their TOPA rights, they should have the opportunity to assign their TOPA rights to a qualified affordable housing provider, community land trust, or other nonprofit. To preserve affordability, cities should ensure the third-party purchaser will maintain the property as affordable. Cities and tenant can also consider second right of refusal for municipal governments such as Washington DC's District Opportunity to Purchase.
- COPA versus TOPA: While these policies are related, they differ in important ways. With TOPA, tenants are empowered to negotiate directly in the sale of their building or can choose to assign that right to another entity, while with COPA, that ability is given to a list of qualified nonprofits. Which policy is better will depend on policy goals, market conditions, capacity of local housing nonprofits, availability of funding and financing, and capacity for tenant organizing and education.
- Adequate funding: Cities should dedicate funding to adequately support all aspects of a TOPA program to ensure its success. This should include funding for tenant outreach, education, technical assistance, enforcement, and a fund to assist tenant or community purchases such as a housing trust fund.
- Outreach and education: In addition to ample notification periods, tenants need substantial information, outreach, and resources to make decisions about TOPA and actualize their rights.
- Technical assistance: Cities should provide robust funding to offer adequate technical assistance, including legal counsel and representation. Washington DC's TOPA program funds support staff at community organizations to support tenants in exercising their TOPA rights. Residents often need support post-purchase and cities must continue providing strong technical assistance to help them succeed as first-time homeowners.
- Enforcement: Cities should outline enforcement mechanisms and ensure adequate staffing to enforce a TOPA policy effectively. The policy should also give tenants a legal recourse outside of the municipality, such as third-party enforcement, to strengthen enforcement and provide residents with greater recourse options.
Where is it working?
Tenant or community opportunity-to-purchase policies are an emerging solution to preserve affordable housing. Local governments across the country are exploring how to tailor these policies, in conjunction with other strategies to build community wealth and prevent displacement.
- TOPA was first enacted in Washington, DC in 1980 and is the nation's oldest and most comprehensive policy. Under the District's Tenant Opportunity to Purchase Act, tenants have the right of first refusal which gives them the opportunity to match any other offer the landlord is considering. While there are several cities with similar programs that only apply to subsidized housing, Washington DC's TOPA applies to private rental housing as well. From 2002 to 2013, DC's TOPA helped preserve close to 1,400 affordable housing units and keep thousands of long-time, low-income residents in their home. Tenants can purchase units individually, turning units into condos, or collectively if they form a tenant association and in partnership with a developer. Additionally, the District can acquire housing through the District Opportunity to Purchase Act (DOPA) to preserve affordable housing and address at-risk housing in need of serious repairs. The District Department of Housing and Community Development has limited funding available for loans to help tenants purchase their buildings. Since TOPA's implementation, hundreds of tenants have organized to purchase their units or buildings.
- In San Francisco, the Community Opportunity to Purchase Act (COPA) gives nonprofits a first right of purchase, allowing landlords to sell at market rate to nonprofits. Due to San Francisco's inflated property costs, tenants would have little feasibility to secure enough funding to purchase a property on their own through a TOPA policy. Nonprofits could purchase housing but struggle to compete with private purchasers ready to pay in cash. COPA addresses this challenge by requiring landlords to notify affordable housing nonprofits from a qualified list when their building goes on sale. The landlord may reject the nonprofit's offer only after the nonprofit has had a chance to match the private buyer's offer. The policy also includes a financial incentive to property owners to sell to nonprofits by exempting sites valued at five million or more from paying a portion of the local property transfer tax. Nonprofits that purchase a building through COPA will be required to maintain rents at affordable levels. COPA builds upon the city's Small Sites Program which gives loans to nonprofits to purchase and preserve affordable housing for existing tenants.