Tenant Opportunity to Purchase Act (TOPA): Policy Issue
Overview
Tenant Opportunity to Purchase Act (TOPA) legislation creates an overly complex, lengthy and bureaucratic process for the sale of an apartment community, beginning with the requirement that a housing provider offers residents the right of first refusal.
Progressive lawmakers at the local level bill the policy as an anti-displacement tool. However, in practice, TOPA has had devastating consequences for housing providers and renters in the limited housing markets where it has become law by increasing housing costs and worsening housing stability.
Industry Viewpoint
TOPA legislation increases rental housing providers’ cost of doing business and, ultimately, contributes to rental housing becoming increasingly unaffordable due to overregulation. The National Apartment Association (NAA) opposes TOPA legislation in all forms. Instead, lawmakers should prioritize sustainable solutions to stabilize rental households at risk of displacement, including investments in the Section 8 Housing Choice Voucher program and pro-development policies.
As an Owner or Operator, How Does this Affect My Business?
TOPA policies, sometimes known as “Community Opportunity to Purchase” (COPA) or simply “Opportunity to Purchase” (OPA), lay out a specific process for the sale of rental units that can include minimum wait times of up to a year before an owner is legally allowed to place their property on the market. In some versions of the legislation, property owners are still able to negotiate a contract of sale with a third party but must provide the same terms to their residents or a third-party nonprofit organization. Other versions of the law require that TOPA negotiations with tenants or their representatives restart in full if no sales contract is signed within 360 days.
Other TOPA provisions can include:
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Providing residents with the right of first refusal, although it is highly unlikely that they will be able to counter an existing offer.
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Allowing renters to sell their right of first refusal to the highest bidder, directly contradicting the intent of these laws to keep renters in their homes.
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Including invasive data collection and reporting requirements for housing providers that would provide residents with proprietary data, such as operating expenses, utility consumption rates, capital expenditures, rent rolls, and vacancies.
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Establishing “permanent affordability requirements” creating an upper limit to what the new owner can subsequently sell the property for, which would devalue the asset and its potential sales price.
A comprehensive study of Washington, D.C found that, of all the rental units sold in the city between 2006 and 2020 where residents were eligible to make use of TOPA, 62 percent of those units saw residents exercising their TOPA rights, but only 2 percent of units were ultimately purchased by the residents. Instead, 95.5 percent of housing units acquired through TOPA were the result of residents giving or selling their rights to a third-party who maintained the property’s status as a rental. Meanwhile, all properties subject to TOPA took an average of 5 months longer to sell, regardless of whether the residents ultimately purchased the property.
As a tool to prevent displacement, TOPA has proven to be ineffective. The cumulative effects of TOPA legislation results in higher costs of doing business and ultimately increased housing costs for renters.
Contact Information
To learn more about this issue, please contact NAA's Public Policy team.
