Tenant purchase preserves affordable housing in DC

July 14, 2011

This post also appears on www.greatergreaterwashington.org

The Tenant Opportunity to Purchase Act (TOPA) has been a boon to DC residents who wish to remain in their homes and purchase their properties. However, the recently-passed DC budget cuts funding to this program, making it very hard for low- and middle-income residents to make purchases and necessary improvements.

Back in the late 1970’s, DC was facing a different wave of gentrification. The neighborhoods near downtown were facing rapid price increases. Between 1975-1978, some areas of the city saw housing sale prices increase by 96.9 percent.

This change led the city to pass two laws to help preserve affordable housing by helping low income tenants become homeowners. Taken together, the Rental Housing Act of 1977 updated in the Rental Housing Conversion and Sale Act of 1980 create the legal basis for the tenant purchase program, often referred to as TOPA.

TOPA purchases from 2002 to 2008. Image from DHCD.

The basic legal framework that TOPA put forth was the idea that tenants in DC have the first right to buy their building when the owner decides to sell. The way this works is when a landlord decides to sell a building, they must alert the tenant and offer them a reasonable sale price. This price must be similar to what the owner would offer an outside buyer. The occupants must then respond within a set period of time indicating their interest to purchase the property.

The tenants have the ability to receive city funds through the Housing Production Trust Fund in order to make sure that low income tenants get the needed assistance to purchase and renovate the buildings, which often require significant repairs.

When tenants purchase their building, they have a few options of what to do with the property, including turning it into condos or creating joint ownership through a limited-equity cooperative. In a co-op, each member owns a share of the corporation that owns or controls the building. This way, the occupants own the whole building and carry a collective responsibility for its maintenance, mortgage, taxes, insurance etc. In a limited-equity co-op, there are restrictions placed on the purchase and resale price of a membership share, maintaining affordability for future residents.

For low and moderate income tenants, co-ops can often be the bridge between renting and ownership. It allows households who are not yet able to qualify for an individual mortgage to become group owners, maintaining a vote and a say on the future of their housing conditions and affordability.

2011 status of limited-equity cooperatives. Image from LEDC.

As this map and chart illustrate, there are currently over 84 limited-equity cooperatives and over 3,000 families currently live in affordable limited-equity cooperative housing today. 53 of the co-ops have been in existence for over 11 years, illustrating that cooperatively owned housing is a successful strategy for the long-term preservation of affordable housing.

Most of this housing exists and is available to low and moderate income families as a direct result of the Housing Production Trust Fund. It is the main funding vehicle for low income residents wishing to purchase and renovate their properties.

The Trust Fund is tied to property sales in DC, so when the housing market crashed, so did the fund, dramatically restricting the ability of low income tenants to purchase. Now, as the fund should be recovering due to increased property sales, the city government has passed a budget which takes $18 million of the dedicated money away. As a result, it will continue to be extremely difficult for tenants to purchase if their building is for sale.

This is particularly unfortunate because now is a great time for the city to be investing in these buildings to maintain affordability. Housing prices are much lower than they were five years ago, and lower than they likely will be in a few years. Not only are current tenants with the option to purchase losing their chance to become homeowners, the city is also missing an opportunity as housing prices will eventually rise.

And there are lots of buildings for sale now. There are 77 buildings with over 2,500 units where tenants have received Offers of Sale in the seven months between September 2010 and April 2011. They have the first right to purchase—within the timeline. There is currently a huge need and a very real opportunity to preserve affordable housing. But without city financing, tenant purchase will cease to be an option for low to moderate income tenants.

The Tenant Opportunity to Purchase program has suffered a series of setbacks over the years, including lack of enforcement, loopholes for owners and of funds. Since TOPA’s inception, tenant organizing has been crucial to the viability of the tenant purchase program and tenants have been fighting for decades to make sure all the tools are in place to make TOPA a reality.

This year, Tenant Opportunity to Purchase will be a major focus of the annual Tenant Town Hall. That event brings out over 150 tenants each year from around the city to highlight the needs of renters and set advocacy priorities. This year’s town hall will take place this Saturday, July 16, 2:30 pm at First Trinity Church, 309 E Street NW.

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