Tenants at the Garden Towers in Mount Pleasant used TOPA to keep their building rental. Image from Google Maps.
DC has a law that lets tenants buy their building if their landlord wants to sell it. Under the law, the Tenant Opportunity to Purchase Act (TOPA), tenants can work out a deal directly with their landlord, or more commonly, they can refuse a contracted sale the landlord arranges with a third party and purchase the building instead for the same price. Although TOPA is a right to buy statute, the right to collectively decide what happens with their building gives tenants a very powerful seat at the table.
As I noted in an earlier post, when my landlord signed a contract in 2001 to sell my apartment complex to the National Cathedral, I wound up owning my unit because my fellow tenants and I asserted our TOPA rights. Per the TOPA statute, we formed a tenants’ association, refused the initial sale, and purchased the building instead (for the same price) with the help of a developer. Although my tenants’ association decided to convert our building to condominium, many tenants’ associations choose to keep their buildings rental. In this post, I’ll explain how TOPA has become a tool for tenants who want to keep renting.
The importance of renting
Right-to-buy programs are often touted as mechanisms to free low income people from dependency on unscrupulous landlords and/or government subsidies. When Margaret Thatcher privatized British public housing in 1980, for example, she declared that it would give tenants the “independence that comes with ownership.”
Of course, owning a home isn’t for everyone. Some people don’t want to own a home. Others can’t afford to. People who work minimum wage jobs usually don’t make enough money to afford a mortgage, let alone save for a down payment, and few banks will lend to them anyway.
TOPA gives tenants bargaining power
TOPA helps tenants stay put as tenants (rather than as owners) by giving them bargaining power. To understand how bargaining works in the TOPA process it helps to start with a simple fact—most tenants’ associations can’t afford to buy their buildings on their own. They don’t have bank accounts or established credit that would allow them to get a loan. Given these realities, the TOPA statute formally allows tenants’ associations to assign or sell their right of first refusal to a third party who can help with financing. Tenants’ associations can work with for- or non-profit developers. Low income tenants’ associations and members are also eligible to receive financial assistance from the city.
To be sure, dependence on developers does have its downsides. For-profit developers, for example, usually insist on the right to offer tenants buyouts—a sum of money given to a tenant to relinquish rights to her unit. In buildings converting to condo, developers can then sell these units at market rates. In buildings remaining rental, they can require tenants to sign a voluntary agreement (VA), one of several petitions landlords can submit to the city for permission to increase rents above existing caps. Once a VA is executed, they can raise rents to market rate.
However, with open space for development at a minimum in DC, and property values at record highs, developers are also eager to work with tenants in order to get access to property in gentrifying neighborhoods. This means that tenants are in a position to bargain for things they want before agreeing to assign their right of first refusal to a developer.
Of importance here, tenants can require that developers agree to keep their properties as rental accommodations. They can also refuse to work with developers who demand that tenants sign a voluntary agreement as a condition of partnership.
The city does not collect data on TOPA outcomes, so we don’t know which outcome is most common—converting to market rate condominium or co-op, converting to limited equity co-op, or remaining rental. However, TOPA experts usually agree that condo conversion was more common before 2008, when borrowing was easy and risk was someone else’s problem.
After the recession, tenants had more trouble getting loans and developers had more difficulty finding eligible buyers. As a result, remaining rental often became the de facto choice of both tenants and third party financers after 2008.
Of course, tenants’ and developers interests don’t always overlap. In these cases TOPA means tenants don’t have to be saddled with a given developer. They can choose the developer that best meets their needs. And today, the need to stay put with affordable rents is more important than ever. Indeed, median rent in the city is now well over two thousand dollars a month ($2,415). The number of affordable apartments has also declined precipitously in the last decade. The DC Fiscal Policy Institute found, for example, that the number of “low cost” rental units in the city declined nearly 40% between 2002 and 2013. In this environment, tenants’ ability to use a right-to-buy statute to keep their buildings rental (and with rent control intact) is no mean feat. It is, indeed, extraordinary.
TOPA rights are collective rights
A key part of the TOPA statute is the so called right of first refusal. It’s what gives tenants leverage in a situation where they normally have none. The right is not an individual right, however. When an apartment building is contracted for sale, only a registered tenants’ association—not an individual tenant or a small group of them—can refuse a sale. Registered tenants’ associations are also required to demonstrate that they represent at least a majority of eligible residents. In a similar fashion, if a tenants’ association wants to convert a rental property to condominium through TOPA, it may only do so with the consent, by vote, of a majority of tenants.
Making the right of first refusal a collective right is vital for ensuring that the interests of vulnerable tenants are considered during the process. In fact, it makes it more difficult for a small group of tenants to hijack the process for their own interests if those interests aren’t in line with the wider tenant body.
A hypothetical scenario explains why. Let’s say a landlord decides to sell a mid-rise apartment building near Fort Totten where the tenants fall into three, roughly equal-sized socioeconomic groups—low income residents with government housing vouchers, young professionals, and undocumented immigrant families. If an individual tenant or a small group of tenants could invoke the right first refusal, the young professionals could band together to buy the building, convert to condominium, and then kick out the tenants who couldn’t or didn’t want to buy their units.
Under TOPA’s collective rules, however, a tenants’ association would have a hard time operating on behalf of a small group of tenants. It couldn’t form a tenants’ association with only one-third of building residents, for example. Nor could it convert to condominium with a similar fraction of support.
In recent years dozens of tenants associations have used TOPA to keep their buildings rental, such as Garden Towers in
Mount Pleasant Columbia Heights. I cover Garden Tower’s experience and several others in my new book, The Politics of Staying Put.
Although TOPA allows tenants to stay put as renters, developers have continued to use VAs during TOPA cases to circumvent rent control protections. In my next post I’ll make any argument for why we should eliminate VAs from TOPA process.