San Francisco apartment building by Bernard Spragg. NZ licensed under Creative Commons.

For more than 30 years, DC’s Tenant Opportunity to Purchase Act (TOPA) was a one-of-a-kind legislation in the US that allowed residents to stay in place at prices that they can afford.

But that changed in 2019 when San Francisco’s Board of Supervisors passed its own right-to-buy statute, known as the Community Opportunity to Purchase Act (COPA).

While TOPA and COPA have similar goals, the policies vary in terms of who can refuse a sale and what outcomes they can pursue.

A brief primer on DC’s TOPA statute

TOPA was passed in 1980 as part of the Rental Housing Conversion and Sale Act. Per the statute, when a landlord wants to sell a multi-family residential property, they must give tenants the right to refuse the sale and purchase the building instead. Tenants usually do this with the help of a developer (for- or non-profit) and can choose to keep the building rental or convert it to a condominium, or co-op (market or limited equity).

The process begins with a TOPA notice — a letter landlords are required to send all residents notifying them that their building is up for sale (or has already been contracted for sale). After receiving the notice, tenants can request information about the building, including a current list of tenants and vacant units, floor plans, annual operating and utility expenses, and capital expenditures. If tenants are interested in refusing the sale, they have 45 days to form a tenants’ association (if one doesn’t exist) and submit a statement of interest and application for registration. They then have 120 days to secure financing to purchase the property at the initial offer amount.

Since very few tenants’ associations can afford to buy a building outright, most solicit proposals from third-party developers. To strike a deal, developers usually offer tenants upgrades (new roofs and boilers) and amenities (rooftop decks, keyless entry) in exchange for empty units they can sell or rent at market rates. To guarantee empty units, developers may also offer buyouts — payments given to tenants in exchange for relinquishing rights to their units. Some buyouts in recent years have gone above $40,000 per unit.

Once tenants strike a deal, they assign their right of first refusal to their selected developer, who then purchases the property in lieu of another buyer.

TOPA’s (sometimes) unmet goals

The initial TOPA statute lists six goals. The first was to discourage the displacement of tenants and the second was to preserve affordable rental housing for low-income residents. The remaining four goals expand on the first two (e.g. providing extra protection for the elderly). Many tenant advocates believe TOPA doesn’t meet these goals as frequently as it should, pointing to several factors.

One factor is insufficient funding. Many low-income tenants rely on programs funded by DCs’ Housing Production Trust Fund to make TOPA feasible. These programs provide tenants’ associations with low-interest loans to cover acquisition costs, legal assistance, and earnest money deposits. They also provide mortgage assistance for renters interested in buying their units. Despite historic investments in the fund during Mayor Muriel Bowser’s administration, increasing costs related to construction and land means the actual number of units saved going forward may be lower than in past years.

Another factor is that the TOPA statute does not include a strong mechanism for ensuring affordability over the long term. DC only restricts resale and rent increases for tenants who receive city assistance as part of a TOPA process. Many tenants going through TOPA don’t get help from city programs.

A final factor is the use of voluntary agreements (VA) during the TOPA process. A VA is one of five exceptions built into DC’s rent control statute. This exception allows a landlord to raise rents above the yearly cap of 70% if tenants agree to it in writing. In normal circumstances, it is nearly impossible to convince tenants to sign a voluntary agreement. But, in some TOPA processes, developers tie the provision of upgrades and amenities to tenants’ willingness to sign one. Though tenants are usually able to guarantee their own rents will not go up beyond existing caps, they allow developers to enact steep rent hikes on vacant and bought-out units.

What San Francisco’s COPA statute entails

When the San Francisco Board of Supervisors was contemplating a TOPA-style statute, it looked to DC for inspiration. Ultimately, San Francisco’s statute differs from TOPA in terms of who can refuse a sale and the outcomes for the buildings and residents.

Unlike TOPA, San Francisco tenants do not have the right to refuse a sale during a COPA process. Instead, COPA gives Qualified Non-profit Organizations (QNP) both the right of first offer and the right of first refusal.

Specifically, COPA requires all sellers of multi-family housing to notify QNPs before they put a property on the market (this is the right of first offer) so they have a fighting chance against deep-pocketed developers. If the seller rejects a QNP’s bid, and finds a buyer on the open market, the QNP can still refuse the sale once it is contracted. To become a QNP, a non-profit must have 5013c tax-exempt status, a commitment to protecting affordability, an existing relationship with a neighborhood-based organization, experience acquiring/managing multi-family residential buildings, and at least two successful projects under their belt.

COPA outcomes are also more prescribed than TOPA’s. In terms of housing tenure, for example, DC tenants invoking their TOPA rights can choose one of three options — remain a rental, convert to a co-op, or convert to a condominium. COPA, by contrast, requires that rental buildings going through a COPA process remain rental.

COPA also requires affordability guarantees that TOPA does not. In a typical TOPA process, housing costs (for purchase or rent) only remain affordable for tenants staying put. New residents of TOPA buildings, whether tenants or buyers, can expect market-rate prices.

In a TOPA process I covered in my book, for example, the average rent increased by over $800 per month in bought-out and vacant units after the tenants signed a voluntary agreement. In a COPA process, by contrast, QNPs are required to guarantee affordability “in perpetuity.” COPA also strictly stipulates affordability: “the mean value of all rents paid by residential tenants in the Building shall not exceed 80% of Area Median Income.”

What explains these differences?

TOPA was established in the early 1980s when displacement was confined to a few DC neighborhoods, housing costs were relatively low, and people with means were often leaving cities. Giving tenants bargaining power was seen as sufficient for the task.

In contrast, COPA was created during a period of widespread displacement, historically low housing supply, rapidly increasing housing costs, and a ‘back to the city’ surge. Essentially, today’s crisis is bigger in scope and advocates saw the need to go further.

As a result, different philosophies govern how these two statutes were formulated and implemented. In DC, the council and associated agencies have tended to treat TOPA as a right rather than a set of regulations. As such, our TOPA policy does not guarantee affordability or limit displacement.

To be sure, DC does have other programs that help tenants stay put, and they do work, but TOPA doesn’t prevent, or disincentivize, developers and tenants from making decisions that lead to displacement or rising costs. The fact that developers can still use voluntary agreements inside a TOPA process is proof of this approach. COPA, on the other hand, is more single-minded. To wit, ensuring long-term affordability and preventing displacement are baked into the statute.

Going forward, it will be interesting to see which path other cities considering TOPA/COPA laws take as they finalize their own tenant right of refusal laws.

Carolyn Gallaher is a geographer and associate professor at American University.  Her research interests include gentrification in DC, the emergence of “ethnoburbs” in Maryland and Virginia, payday lending, and tenant empowerment.  Previously, she studied the militia movement in the US and Loyalist paramilitaries in Northern Ireland.  She lives in Silver Spring with her husband and son.