TOPA doesn’t always work for small buildings, a housing fight with the National Shrine shows

DC's Tenant Opportunity to Purchase Act (TOPA) is designed to help tenants in multi-family apartment building stay put if their landlord decides to sell the property. So why is TOPA not working for tenants in several buildings put up for sale by the Basilica of the National Shrine in Northeast Washington?

A quick refresher on TOPA: In DC, when a landlord sells a multi-family apartment building, tenants have the right to refuse the sale and purchase the building for the same price. Of course, tenants usually don't have the cash to purchase the building outright, so they often assign their right of refusal to a for- or non-profit developer in exchange for things like buildings repairs and affordable rent (or below market prices, if condo conversion is on the table).

The process starts with a TOPA notice, which alerts tenants that their building has been contracted for sale and that they have the right to refuse the sale. However, these tenants’ experience indicates that TOPA doesn't always work for people living in small apartment buildings, and underlines that we cannot merely rely on TOPA to protect affordable housing in the District.

Tenants fear they may lose their homes

The Basilica of the National Shrine of the Immaculate Conception is a Roman Catholic Church in University Heights. In 2016, Joanne Doyle willed the National Shrine a portfolio of 13 properties. Eight of the properties were small, four-unit apartment buildings; the rest were single-family homes. Most of the properties are located in fast-gentrifying neighborhoods like Brookland and Trinidad in northeast DC.

After the National Shrine took possession of the properties this spring, it transferred them to a holding company. The holding company then contracted to sell the buildings to multiple buyers. In a letter sent to tenants, the National Shrine explained its decision to sell as a legal matter: “As a Roman Catholic Church, the Basilica is not permitted to manage or own rental properties as a trade or business. Accordingly, we are required to sell all donated real estate as soon as practical.”

Of the eight buildings eligible to invoke their TOPA rights (single family homes are exempt from TOPA), only two — 636 Girard Street NE and 1365 Bryant Street NE — have done so. However, residents are having trouble making TOPA work for them and are worried they will lose their homes.

Why are tenants so worried?

Tenants have two fears. First, they fear steep rent hikes. All of the four-unit properties in Doyle’s portfolio are rent controlled. However, the city allows owners of buildings with four or fewer units to apply for an exemption, even if their buildings have been under rent control for decades.

Until 10 years ago, property values in Brookland and Trinidad were at or below city averages. This meant that a landlord like Doyle could cover her expenses and make a profit with monthly rents of $700 or $800 per one-bedroom unit. The new landlords paid much higher prices for these properties — most of the four-unit apartment buildings sold for over a half a million dollars.

To cover their new mortgages and make needed repairs, new landlords need to charge much higher rents than Doyle did. Tenants worry that instead of holding the property for years, the new landlords will do a quick flip, and either convert the building into condos or tear them down to sell to a developer.

Second, tenants fear they will not be able to find a comparably priced apartment if they have to leave. They are right to worry. Between 2002 and 2015 the District lost half of its affordable housing (defined as apartments renting for less than $800 a month).

The numbers are no better for people who want to buy affordable housing. According to a new study by the DC Policy Center, there are just under 2,000 starter homes in the district that are affordable for people making 80% of the Area Median Income (AMI). The number is just over 500 for people making 60% or less of the area median income.

These numbers are sobering when put into context: there are currently 51,000 families in the District that make 80% or less of AMI and 41,500 who make 60% or less of AMI.

The tenants in 636 Girard Street NE and 1364 Bryant Street NE are now trying to save their homes through other means. They’ve asked the National Shrine to cancel the contracts, held protests, and reached out to legislators. So far, their efforts have been to no avail.

So why isn’t TOPA working for these tenants?

I’ve studied TOPA for many years, and my first question when I heard about these buildings was simple: Why aren’t the tenants invoking their TOPA rights? Per DC Law, landlords are required to alert tenants when they have contracted to sell a multi-family apartment dwelling. There are numerous organizations in the city who help tenants invoke their TOPA rights.

To find out the answer to my question, I contacted Yasmina Mrabet, who works with Justice First and LinkUp, organizations that helps tenants fight landlord disinvestment, displacement, and gentrification. Mrabet told me that it’s not clear how diligent the National Shrine was in distributing TOPA notices to tenants.

Tenants in one of the buildings found the TOPA notices in the stairwell. Others can’t remember if they received a TOPA notice or not. One building’s tenants say they never received the notice. Other tenants, spread across the four buildings, said they received TOPA notices but did not know what they meant.

Although the city legally requires tenants to receive a TOPA notice, the office in charge of overseeing the TOPA process does not track whether letters are received. When tenants discover they did not receive a TOPA notice, it’s often too late to refuse a sale (the city statute only gives tenants in small buildings — four units or fewer — 22 days to notify the city of their intent to purchase).

To find redress, tenants have to either hire a lawyer or find pro-bono counsel. Legal redress can take years and is often unsuccessful, and even successful cases do not restore the initial right of refusal.

TOPA economics don't work out for small buildings

Another issue is that the buildings in question are too small for tenants to attract the assistance of a third party developer (each building has only four apartments). Tenants who successfully invoke their TOPA rights often work with a third party developer. However, working with developers usually requires some give and take.

The developer offers improvements, like a new roof and electrical upgrades, in exchange for the ability to sell or rent some units at market rate. That bargain, which underpins many successful TOPA processes, does not tend to work in small buildings because the profit margins are usually too low. If the finances do work out for a potential developers, it's usually because they buy tenants out and then convert the building to luxury condos or rentals.

The same economics affect non-profit developers, which are committed to keeping families in place. As Heather Benno, who lives in 636 Girard Street NE, explained: “As a practical matter, no nonprofits were willing to work with us.”

Tenants also couldn’t turn to the District’s Housing Production Trust Fund (HPTF) for help. Despite the fact that the HPTF is funded at over $100 million a year (more than most other cities in the US with similar funds), the funds still are stretched thin and its administrators almost never give money to small buildings. In the midst of a severe housing shortage, the city reasons that it needs to spend its money where it can get the biggest bang for the buck — that often means allocating money to big buildings. Heather Beno described her building’s attempt to get city assistance to convert to a limited equity co-op as “impossible.”

Given the difficulty tenants are having using TOPA to stay put, Justice First has taken the approach that the National Shrine is a religious organization and should act accordingly. Mrabet argues that by selling these buildings, the church is participating in gentrification rather than helping the poor.

What should the city do?

The experience of the tenants in the National Shrine properties should also spark a wider conversation about affordable housing. The city often pats itself on the back for having the most tenant-friendly laws in the country. While that may be true, the numbers from the DC Policy Center study excerpted above demonstrate clearly that these laws have not allowed DC to escape an affordability crisis.

Far from it.

Even in buildings where tenants invoked their TOPA rights, the number of affordable units often declines. Buyouts, voluntary agreements, and other arrangements that tenants have to strike with for-profit developers protect in-situ tenants, but not the wider tenant class.

If the city really wants to tackle its affordability crisis, more and greater direct interventions are necessary. The city could start by providing more direct help for small buildings who want to use TOPA.