This article is part of Community Strategies for Systemic Change, a series co-produced by the Local Initiatives Support Corporation (LISC) and NPQ. In the series, urban and rural grassroots leaders from across the United States share how their communities are developing and implementing strategies—grounded in local places, cultures, and histories—to shift power and achieve systemic change.
Washington, DC’s Tenant Opportunity to Purchase Act (TOPA), enacted in 1980, requires that tenants in buildings that are for sale be offered the first opportunity to purchase the building. TOPA has been a critical tool for enabling tenants to create housing cooperatives and condominiums, as well as preserving affordable rental housing. According to a 2020 report by the local Coalition for Nonprofit Housing and Economic Development, the city has 99 limited equity cooperatives providing an estimated 4,362 units of affordable housing (13) with most of these cooperatives “created through TOPA” (11).
For a long time, TOPA seemed like an anomaly, a product of the “home rule” movement in which the then Black-majority city finally won limited self-government from Congress in the 1970s. But in recent years, other US cities have begun to look at TOPA as a model for creating and preserving affordable housing, especially in the San Francisco Bay Area. TOPA proposals have also surfaced in Massachusetts, New York, and Minnesota.
For over 40 years, TOPA has benefitted thousands of DC families. Nonetheless, the city has yet to realize the full effect of its TOPA law, which in combination with other tools could achieve a coordinated affordable housing strategy that would stem the tide of gentrification and displacement sweeping through the city.
What’s at Stake? Why a Tenant Right to Purchase Matters
A 2019 report from the National Community Reinvestment Coalition indicated what many District residents already suspected—namely, that Washington, DC, had the highest percentage of gentrifying neighborhoods of any US city. DC reflects an alarming trend in cities globally in terms of class stratification, with a growing divide between those who own and those who do not. In DC, this disparity is compounded by race, as most of the city’s low-income households are non-white.
Because of TOPA laws, when buildings go up for sale in DC, tenants can negotiate with landlords or third-party buyers to guarantee an outcome that is more beneficial to them and their community by, for example, preserving affordable rent levels, negotiating building improvements, facilitating homeownership, and securing public funding that preserves long-term affordability.
What’s at stake is more than just tenancy for the building’s residents, but also retaining housing opportunities in DC neighborhoods for long-term and working-class residents, maintaining racial and economic diversity, and preventing the transportation cost burden that low-income households take on when they are forced to live far from where they work.
TOPA also provides an incomparable bridge between renting and homeownership for low-and-moderate-income tenants, who may purchase their buildings directly and become housing co-op or condominium owners. DC’s TOPA law, along with flexible, low-cost funding from the DC Department of Housing and Community Development (DHCD), has facilitated the preservation of thousands of affordable housing units. As noted, more than 4,000 families throughout the city live in limited equity cooperatives.
In such a cooperative, most of the equity stays with the co-op when residents leave, but generally, upon moving, residents can keep a small portion of any increase in the building’s value. (In a group equity co-op, a common model in DC, the co-op secures blanket financing and retains all equity in the building; this means residents don’t gain equity themselves, but it also boosts long-term affordability even more.) However, the benefits of co-op ownership extend beyond equity gain; they include democratic governance (one member, one vote) and predictable monthly housing expenses that tend to increase at a much lower rate than condo fees. Other benefits include the ability to “buy-in” with no or limited credit or ability to obtain an individual mortgage (in some cases paying only the cost of a security deposit), to leverage the power of blanket or group financing to improve building conditions, and to pass on co-op membership to family members.
Effectively, a limited equity co-op functions like a community land trust, which TOPA has recently facilitated in Anacostia. Specifically, a limited equity co-op costs less to buy into than a condo. In exchange, the buyer agrees to sell their share of the co-op back to the association or to a new income-qualified resident, preserving affordability for the next generation.
In many ways, this type of housing becomes non-commodified, outside (or beyond) the fluctuations of the housing market. In this manner, a community-based asset is created that provides an ongoing service to residents by maintaining their proximity to employment, schools, and commercial centers, and most importantly, the cohesive social networks of low-income communities.
And because TOPA is a local law supported by local statutes implemented by city agencies, the District Department of Housing and Community Development (DHCD) has largely supported tenant purchase with public financing. Such financing is accompanied by regulatory agreements or affordable housing covenants, which in turn require longer term affordability than typical rental or tax-credit developments (a minimum of 40 years), ensuring that the affordable housing remains a community asset for two generations or longer.
Creating a Predictable Path to Affordable Housing Preservation Under TOPA
The right of tenants to come together and have the first right to purchase the property where they reside is powerful. Even so, it is obvious that while TOPA has benefited thousands of households in the District of Columbia, it has not stopped a runaway housing market from pushing thousands of mostly Black and Latinx residents out of the city.
What can be done? Ensuring a clear and consistent public funding path for long-term —preferably permanent—affordable housing preservation through tenant purchase is critical.
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One challenge of exercising tenants’ TOPA right is that you don’t know in advance when a building will come up for sale. And there is limited time to act. District law specifies that tenants must notify the owner in writing within 45 days whether they want to attempt to purchase the property. For properties with five or more units (the most common TOPA purchases), the tenant association has 120 days to negotiate a sale contract (with additional time permitted to secure financing and close the sale).
Due to the unpredictable nature of buildings coming up for sale throughout the year, a rolling application process that provides flexible, permanent acquisition funding outside of planned, competitive funding rounds is needed. In addition, this initial public investment must ensure that future funding for building renovations is committed and available within a reasonable time frame to ensure that the building can be improved, stabilized, and preserved as affordable housing.
The district currently has a fund known as the First Right Purchase Program (FRPP), which has been instrumental in funding tenant purchase projects on a rolling basis over many decades, as well as providing funding for building repairs and pre-development costs. In some cases, FRPP loans, (that is, to take a higher risk position, thereby reducing the risk to the private lender) are enough to support building improvements and long-term affordability. However, no FRPP loans have been awarded in recent years, and even projects that have received them have no guaranty of securing through highly competitive funding rounds the additional subsidies needed to complete building renovations. Having a guaranteed path with a clear timeline, through acquisition to renovation, would enable far more tenants to preserve their buildings as permanently affordable.
Similarly, funding sources and processes can better support tenants by providing multiple pathways to ownership housing. DC has a robust down-payment assistance program known as the Home Purchase Assistance Program (HPAP), which is responding to increased purchase prices by increasing its maximum award to $202,000. In 2007, the city also established a Local Rent Supplement Program, essentially a local Section-8, which supports households at highest risk of homelessness by allowing them to pay only 30 percent of their income towards monthly housing costs while the city makes up the difference.
Creative funding for co-ops can include rent supplements to support the lowest-income residents, as well as using down-payment assistance like HPAP (either by allowing the money to be used toward co-op share loans or a blanket “down payment” loan that remains with the co-op), combined with public and private acquisition and renovation financing. Providing clear information about and incentives for tenants opting to convert to limited equity co-ops—such as tax abatement, matched savings plans, or shared-equity through limited appreciation share loans—could further encourage the use of co-ops to preserve housing affordability.
A firm commitment by local government to facilitate the public benefits that TOPA provides could foster collaboration across sectors to better meet these goals—eg, low-cost housing for very low-income residents, non-displacement, resident ownership, preserving diverse neighborhoods, and improving the quality of housing stock. Consistent collection of data, setting benchmarks on improving public benefits under TOPA, and annual review of outcomes could further enhance effectiveness.
Combining TOPA with Affordable Housing Supports
In short, TOPA’s public benefit is maximized when combined with the affordable housing programs described above and with policy and coordinated practice that support its goals. For example, the city government could ensure that TOPA projects, once acquired by former tenants and committed to long-term affordability, have a clear, dedicated path forward to access additional funding and tools needed to renovate aging buildings and ensure their preservation.
The city’s local affordable housing fund, the Housing Production Trust Fund (HPTF), can extend its public investment through a forward commitment to renovating properties acquired under TOPA. Although it is possible to combine LRSP and HPTF to provide the depth of subsidy needed to fund housing affordable to very low-income earners, the TOPA funding process and limited rent supplement allocations do not facilitate this in practice. Instead, TOPA projects that effectively combine subsidies could be rewarded, as well as those that maintain permanent affordability using such mechanisms as community land trusts and limited equity cooperatives. In effect, these one-time investments, typically in the form of soft “cash-flow” loans that get repaid over a longer term, also help to ensure the public benefit for multiple generations.
By contrast, tax credit-financed rental housing has affordability restrictions; such credits last only 30 years. And when housing trust funds support fee-simple home ownership, the period of affordability can be limited to as few as five to 10 years.
As an NPQ article a few years ago pointed out, using forgivable “soft second” loans to support simple homeownership is great for the family that receives the benefit, but if the loan is forgiven, the housing becomes much more expensive for the next buyer, and the public investment in affordability lasts for less than a generation. Without a focus on maintaining affordability for the long haul or a plan to recapture and reinvest the public investment (through shared equity or repayment of soft seconds), a process is set in motion where it becomes more and more expensive to subsidize home ownership, even as the subsidies benefit fewer and fewer people. Investing in housing models that promote long-term and, when feasible, permanent affordability helps to meet a city mandate to spend at least half of HPTF dollars on housing affordable to people earning extremely low incomes (one-third of the area’s median family income).
The Power of Coordination
The benefits of coordinating TOPA with public subsidies to prevent displacement and support permanently, instead of temporarily, affordable housing could be dramatic. How to take advantage of this difference? The key, clearly, is to combine housing subsidy dollars, effective policy, and coordinated implementation with the existing TOPA tool.
The good news is that if preservation opportunities through TOPA are coordinated and combined with existing affordable housing tools, TOPA can realize its full potential and become a powerful tool to preserve racial and class diversity in DC.
Recently, the district government’s housing department established and staffed the Preservation Unit to focus on the preservation of affordable housing, tenant purchase opportunities, and technical assistance for affordable common interest communities (co-ops and condos). This office’s establishment and its coordination with nonprofits that focus on better utilizing TOPA is a step in the direction toward better coordination of tenant purchase and preservation opportunities.
And because DC continues to lose low-income apartments at a faster rate than it can produce or preserve them, it is not a moment too soon to support tenant purchases in ways that ensure permanent affordability and community control. The same could be said for many other cities across the country that also face gentrification.
In NPQ earlier this year, Peter Sabonis of Partners for Dignity and Rights wrote about a similar approach being advocated in Baltimore. The exact elements were different, but the fundamentals are clear—and they include a mix of public financing with mechanisms that can sustain permanent community ownership. As Sabonis writes, to bring real estate under community control requires shifting “power by developing new, value-based institutional actors.” DC’s TOPA model—strengthened through coordination and improved policy—could offer a clear path towards accomplishing this goal.