Tenant / Community Opportunity to Purchase

Tenant Opportunity to Purchase (TOPA) policies provide tenants living in multifamily buildings with advance notice that the landlord is planning to sell their building and an opportunity for them to collectively purchase the building. It turns potential eviction and displacement into tenants having the power to shape what happens next in their housing journey –  and can create opportunities for tenants to become homeowners, helping to close racial homeownership and wealth gaps. TOPA is an emerging anti-displacement tool that can be used to preserve affordable rental housing stock, keep housing with community hands, and stabilize Black and Brown communities that have long faced displacement, disinvestment, and exclusion. 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 tenants 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. Clear Timelines for Notice and Acquisition: In order for tenants and other preservation buyers to be prepared to make offers on buildings, a clear and realistic timeline must be established for steps to be taken towards acquisition. Advance notice of sale is one part of the equation, requiring landlords to provide plenty of notice before they put the property on the market. Then, a period during which tenants or preservation buyers state or register their interest in purchasing the property - often referred to as “registration of interest” - must be established. Next, a negotiation period is needed for interested buyers and current owners to finalize a price and other sale terms. Buyers are then given an amount of time to secure financing. Finally, all parties are given a maximum number of days for closing.
    
2. Technical Assistance Across the Spectrum: Necessary technical assistance starts with public education and awareness so that residents understand their rights, resources and opportunities to negotiate future tenure or purchase their home. In addition, funding for tenant organizing is key because organizers help with both getting neighbors organized to the point at which they want to pursue ownership together, and navigating the acquisition process itself. Lastly, legal expertise is required to guide tenants through the complicated landscape of real estate transactions and whatever policy or regulation they are exercising to buy the building. Sometimes, homeownership training is made available to prospective buyers. In other scenarios, non-profit organizations like land banks are necessary partners to initially acquire properties and steward them until development financing is finalized.
    
3. Financing From Beginning to End: Like any development budget, tenant ownership of housing requires financing tools. One of the most important aspects of financing is how quickly it can be mobilized. Real estate transactions move quickly, and fast capital is the best capital because it allows tenants to respond to the rapidly evolving market. The types of financing that buyers need includes: pre-development financing, acquisition loans, rehabilitation or construction loans, and permanent financing. Oftentimes, the buildings that tenants or preservation buyers want to buy are in poor condition due to landlord neglect or a lack of capital improvements. That should be accounted for by offering rehabilitation or construction loans to improve the material conditions of the home. Lastly, loans should be offered with little to no-interest so that residents can keep units affordable.
    
4. Long-Term Support for Building Management and Sustainability: Once buildings are transitioned to tenant or community ownership, a commitment to the complexities of shared ownership and leadership is necessary for long-term success. If a board of member owners is created to manage the property, support may be needed from cooperative housing organizations to facilitate and manage that leadership body. Property management duties, from calculating members’ shared equity to financing capital improvements, may require stewardship support as well.

As an anti-displacement tool, TOPA policies and programs can stabilize households facing displacement pressures and provide an opportunity for long-time residents to stay in their neighborhoods and purchase their homes. Furthermore, TOPA is a way for communities to regain control of their homes and futures while simultaneously combatting the financialization of housing. In Washington, DC — home to the nation's oldest and most comprehensive TOPA program — TOPA has been used to develop or preserve over 16,000 affordable units, giving tens of thousands of tenants a seat at the table in negotiations over the sale of their building. 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 and states can also consider developing Community Opportunity to Purchase Act (COPA) policies 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 and states 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 affordability. 

In addition to PolicyLink tools and resources, see the Partnership for the Bay’s Future, the DC Fiscal Policy Institute, and Local Initiatives Support Corporation (LISC) for more resources related to tenant/community opportunity to purchase policies. Read our piece in Nonprofit Quarterly about how community ownership strategies advance housing justice.

• Elected and appointed city and state officials can champion, pass legislation, and allocate funding for the creation of robust and intentional TOPA/COPA programs.
   
• Tenants are at the frontlines, organizing for expanded tenant rights, leading TOPA campaigns, and developing TOPA policies.
   
• Tenant advocacy groups like UHAB support tenants in becoming cooperative homeowners, from providing co-op shareholder trainings to helping a co-op board create a budget for building maintenance.
   
• Community-based organizations can serve as potential purchasers or partners providing outreach, education, and organizing support to tenants.
   
• Community development corporations (CDC) and community development financial institutions (CDFI) can partner with tenant groups to find pre-development, acquisition, and rehabilitation financing.

The most effective TOPA/COPA policies are developed in partnership with tenants and housing advocates and include dedicated funding and infrastructure to proactively inform tenants about their TOPA/COPA rights, support tenant organizing, and help tenants finance the purchase of buildings.

Cities and states seeking to implement TOPA/COPA policies must consider a range of related legal and logistical questions.

• Tenant empowerment: TOPA policies 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. Even when TOPA doesn’t result in tenant ownership, it creates a seat at the table for tenants to participate in negotiations over the sale of their building. This can result in winning rent control provisions for tenants, preservation of affordability through low-income housing tax credits, or extending Section 8 contracts to maintain federal subsidies in buildings.  
   
• Preserving affordability: Typical TOPA/COPA programs are reserved for tenants earning at or below 80 percent of the area median income (AMI). TOPA/COPA 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 and states should ensure purchasers through TOPA/COPA can agree to maintain the property as long-term affordable through deed restrictions or requiring the property to enter a community land trust.
   
• Unit and tenant eligibility: Cities and states 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 the availability of rental units and mitigate displacement. Policymakers must also determine the eligibility of potential purchasers, such as tenants at or below 80 percent AMI. Policymakers should offer all tenants the opportunity to purchase by making all rental units eligible for TOPA and 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 interest, 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, policymakers should ensure the third-party purchaser will maintain the property as affordable. Policymakers and tenants can also consider a second right of refusal for municipal governments such as Washington DC's District Opportunity to Purchase.
   
• COPA and 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 and states should dedicate funding to adequately support all aspects of a TOPA/COPA 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/COPA and actualize their rights.
   
• Technical assistance: Cities and states 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 and states should outline enforcement mechanisms and ensure adequate staffing to enforce a TOPA/COPA 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.
   
• Complementary Policies: TOPA/COPA policies are most effective when paired with robust tenant protections, financing, and ownership tools that slow down the real estate transaction process and assist tenants in locating funds. Advance notice of sale policies that require property owners to submit a notice of intent to sell to the city give tenants more time to organize and prepare for a sale. Right of first refusal policies give tenants or non-profit developers the right to match any purchase offer that the property owner accepts on the private market when selling their property. Making acquisition and preservation an eligible use of local housing trust funds is a critical way to ensure tenants or non-profit developers have funds available to buy property in a fast-paced real estate market. Lastly, using the community land trust model as the underlying ownership structure of the acquired land and property is one way to reduce the long-term cost of ownership.

Tenant or community opportunity-to-purchase policies are an emerging solution to preserve affordable housing. Local and state 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, giving 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. Between 2006-2020, TOPA has successfully been used to develop or preserve 16,224 affordable housing units. In addition, tenants in nearly 15,000 housing units were able to leverage TOPA negotiations to advance goals related to renovations, affordability, and homeownership. Under Washington, DC’s TOPA policy, 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. Many of these units are located in gentrifying or gentrified neighborhoods, representing a form of housing stability and ownership that has allowed low- and moderate-income residents to stay in their homes as increased investments in retail, services, schools, and job opportunities come to their neighborhoods. In July 2018, Washington, DC amended its policy to exempt single-family dwellings from TOPA unless the home is occupied by elderly or disabled tenants, meaning the majority of tenants renting single-family homes no longer have the opportunity to purchase their homes.
   

• 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 or more readily available capital. 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 for 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. Since its implementation in 2019, seventeen non-profit developers have successfully joined the list of qualified developers and collectively preserved 300 affordable housing units. One of them, Mission Economic Development Agency (MEDA), has been able to purchase seven buildings. 
   
• In 2020, Chicago passed the Woodlawn Housing Preservation ordinance as a strategy to preserve affordable housing and protect residents of the Woodlawn neighborhood from being displaced by gentrification that has been accelerating in the area. One of the components of the policy is that it creates a right of first refusal pilot program, requiring the owner of a building with 10 or more units to give tenants an exclusive opportunity to make an offer on the property before it is sold. Tenants would have a 90-day period to form a tenant’s association and enter into an agreement with a non-profit affordable housing developer to purchase the building and maintain it as affordable. The Right of First Refusal has not yet been exercised through the program. PolicyLink will continue to monitor progress on this program and provide updates. 
   
• The City of Philadelphia, which is facing the loss of 12,000 affordable units in the next decade, voted to pass the People’s Preservation Package in 2023. The package includes two ordinances: the first ordinance requires the city to create a directory of affordable housing units, funding sources, ownership, and other information that can inform preservation efforts when affordability expires. The second ordinance increases requirements that owners of affordable housing must meet before effecting a change in ownership – ultimately giving tenants, community organizations, and the Philadelphia Housing Authority the right of first refusal so that they may match offers to purchase affordable properties and prevent the loss of affordable homes to the speculative market.