Apartment buildings in Chicago. Photo by Flickr user Artistmac, CC BY-SA 2.0
Over the last several years, in the wake of increasing tenant displacement and housing insecurity, almost two dozen U.S. cities and a couple of states have considered passing laws that give residents and nonprofits first dibs on buying multifamily properties.
The policies—often called “right of first refusal” or tenant opportunity/community opportunity to purchase laws—serve as anti-displacement tools that can help preserve affordable homes. And so far, officials who work in places that have passed these policies say they’re working.
Since 2018, five cities have passed some version of these laws, according to PolicyLink, a research and advocacy organization that has been tracking these policies.
Shelterforce reached out to stakeholders in three municipalities that have recently passed or updated a version of these laws to see how things have been going, and the lessons they’ve learned along the way.
300 Affordable Housing Units Purchased in San Francisco
San Francisco passed its Community Opportunity to Purchase Act (COPA) in 2019. The law requires owners of multi-unit properties to notify qualified nonprofit organizations—groups like land trusts or affordable housing developers—of their intent to sell before a property is listed. If a qualified nonprofit doesn’t express interest in purchasing the property within 5 days, the seller is free to list the building.
For qualified nonprofits, the timeline requires quick action.
After expressing interest, the nonprofit has 20 days to assess the feasibility of buying the property. To do so, it must:
- Notify the building’s tenants of its intent to purchase.
- Get 80 percent of tenants to agree to pay 20 percent of their income on rent and sign a new lease. In some cases, this means a tenant’s rent could increase.
- Secure financing for the purchase of the building and any renovations it may need. (The city does offer a subsidy program for buyers, available at a low interest rate.)
“It’s a little overwhelming for small nonprofits. We’re a team of 3,” says Jose Garcia, a program manager for the Mission Economic Development Agency, a qualified nonprofit that primarily operates in San Francisco’s Mission District. For example, in May alone, Garcia’s team received 50 COPA notices.
Still, the Mission Economic Development Agency has acquired 7 multi-unit properties since the law was implemented. Most recently the organization closed on an 8-unit property that it plans to convert to 10 units. The building had years of deferred maintenance, Garcia says, bringing the cost of purchase and renovations to $6.2 million. (About $3.7 million will come from the city’s Small Sites subsidy program.)
There are more than a dozen other organizations on the city’s list of qualified nonprofits. To date they’ve purchased 13 buildings—nearly 300 units of affordable housing—according to Anne Stanley, communications manager in the Mayor’s Office of Housing and Community Development. If those buildings hadn’t been purchased through the COPA program, they could have been purchased by private developers, who often charge higher rents. Those rent increases could, and often do, lead to displacement of the building’s current tenants.
Garcia says tenants are starting to come to them when they learn their building is up for sale. “Tenants are a lot more educated about this [law],” he says.
But additional legislation may be needed to expand the program and further slow displacement in a city where rents have risen by 70 percent between 2010 and 2019. Garcia says a Tenant Opportunity to Purchase Act (TOPA)—where tenants are notified of their building’s impending sale and their right to purchase the property—would be a logical next step. That way, tenants can band together, with organizing assistance from nonprofit groups like the Mission Economic Development Agency or community land trusts, and purchase the property themselves. “This is crucial as a qualified nonprofit,” Garcia says, “because we can receive 10 to 15 (or more) per week and cannot assess the feasibility of all COPA notices.”
When it comes to passing these types of laws, Garcia says it’s important for folks to organize as they’ll likely face resistance. For example, in nearby San Jose, the California Apartment Association—an advocacy group for rental property owners—successfully organized to prevent a community opportunity to purchase law from passing there.
“Their issue is with the timeline,” Garcia says. “In the timeline we have to submit the offer, they want to close.”
Preserving 1,400 Affordable Housing Units in Prince George’s County
Prince George’s County, Maryland, has had a right of first refusal program on the books since 2013, but there was no action on it until 2021.
“When I was hired, I was told that this was important,” says Aspasia Xypolia, director of Prince George’s County’s Department of Housing and Community Development. “And the [county] government gave us the resources to do it.”
The county’s right of first refusal program is different from San Francisco’s COPA program in a couple of ways. First, Prince George’s County takes on the initial process of vetting properties that may be suitable to turn into affordable housing. And second, the process with the county begins after a seller has found a prospective buyer.
In the last two years, the law has helped preserve 1,400 units of affordable housing.
As for the timeline, in broad strokes this is what Xypolia’s office came up with: Every owner of a building that has 20 or more units must notify the county of their intent to sell once they have a “bona fide contract of sale” with a potential buyer. At this point, Xypolia’s department has 7 days to evaluate the building and determine whether it will exercise its right of first refusal. The county’s goal is to preserve existing affordable housing and to expand the pool of available affordable housing, and so the department assesses the property’s location and the rental income it generates to determine the income level of tenants who live in the building.
[RELATED ARTICLE: COVID Relief Funds Filling Some Housing Budget Gaps]
If the department decides to move forward, it must find a pre-qualified third-party designee that is interested in purchasing the property. (Designees are like qualified nonprofits in San Francisco, but in Prince George’s County, they also include some for-profit developers.) The county then notifies the seller and the third-party designee to move toward the sale from there. The two parties have more than two weeks to coordinate the purchase.
The county does not guarantee financial help or incentives, says Xypolia, but it may consider helping potential designees who are serious about buying the property. Prince George’s County recently launched a gap financing fund using money from the American Recovery Act and the state of Maryland. “We needed tools both on the policy and the funding side,” says Xypolia.
If a third-party designee chooses not to move forward, the county will issue a certificate of compliance to the seller, which is required for them to close. (This is the enforcement mechanism for the law.) The seller can then finalize the purchase with the buyer they found before they submitted for evaluation by the department.
So far, Xypolia says, the program “has been a tremendous success.” In the last two years, the law has helped preserve 1,400 units of affordable housing.
“We want to keep growing, minimize displacement,” Xypolia says, “and [we] do believe it’s a unique program that’s demonstrated success.”
No Uptake in Chicago
Community groups and residents who fought to expand affordable housing access and reduce displacement in the Woodlawn neighborhood of Chicago gained a major victory in 2020 when the city approved the Woodlawn Housing Preservation Ordinance.
The ordinance included a Tenant Opportunity to Purchase (TOPA) pilot program, which requires that tenants be notified 30 days before buildings with 10-plus units are listed for sale. Tenants then have 90 days to form an association, and an additional 120 days to secure funding for the building’s purchase. If the tenants can successfully buy the building, it must be maintained as rent-restricted affordable housing for at least 30 years.
Aaron Johnson, who works for the city and implements the Woodlawn Housing Preservation Ordinance, says tenants haven’t utilized the TOPA program yet. The first step in getting tenants to use the program is a public education campaign that notifies them of their rights, Johnson says.
“We’ve spent time developing a communications campaign about tenant rights around TOPA,” he says. For example, Johnson’s department has worked to create “know your rights” flyers for tenants in the neighborhood. But because the pilot program applies to one neighborhood in Chicago, outreach must be carefully focused so as not to confuse residents who live outside of Woodlawn.
“It’s a unique program only in one community in the city,” Johnson says, “so that requires targeted outreach and communication.” Also, some building owners don’t even live in the city or neighborhood, he adds, and they should be made aware of their obligations under the new law as well.
Johnson and local housing advocates say that the city has placed more emphasis on constructing new affordable housing and preserving the housing that exists than on the tenant opportunity to purchase program. Johnson says the city has received requests to learn more about the program from other municipalities around the country, but not from tenants in other sections of Chicago. “It could be a tool in the toolbox, but I’m not hearing about this as much as other things,” he says.
“If buildings were connected to nonprofits, they could access funding to do renovations,” Johnson says. There are some city pathways available to funding for affordable housing, “but it requires a level of technical expertise that tenants wouldn’t necessarily have. Public education could help facilitate that conversation.”
Something like a qualified nonprofit or community land trust could help tenants access funding and implement structures of governance within the building. Johnson says that an ecosystem to help facilitate tenant purchase exists in Chicago, but tenants must be connected to the resources necessary to act.
Editor’s Note: This article has been updated. In the original article, Shelterforce incorrectly listed the entity in Prince George’s County that issued a mandate to the Department of Housing and Community Development (DHCD) to create a roadmap for implementing the right of first refusal program. The Angela Alsobrooks Administration was the driving force behind moving this law into action, according to DHCD. Shelterforce apologizes for the error.
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