Proposals for a “right of first refusal” or “tenant opportunity to purchase” (TOPA) failed to be passed out of the legislature at the end of this 192nd legislative session. Separately, the Somerville Property Owners Coalition succeeded in nullifying a TOPA ordinance in Somerville as part of broader litigation there.
TOPA is anathema to landlords and developers, but before I explain what it says, let me explain how it makes us feel. By way of example: In 2008 I bought and moved into a three-decker. I learned soon after that the kitchens were sinking. A structural engineer said, “the building has cancer.” I lived on the second floor of this Titanic, with renters above and below, saving and waiting for the chance to gut and reframe it. When the time came, I offered the tenants temporary housing or relocation assistance. In the end, they all left.
Enter Richard Giordano of the Fenway Community Development Corp., a leading member of the coalition behind the most recent TOPA bill, who wrote to me in 2021: “What we are trying to prevent [with TOPA] is … where investor vultures move in to buy distress [sic] multifamily buildings and … displace tenants.” Had Richard called me a vulture to my face? Let’s accept the label for the time being. Now that you understand the acrimony in this debate, let me show you the proposal.
A Route for CDC Aggrandizement
The theory behind TOPA is to prevent displacement by giving renters a chance to become owners. When an owner is ready to sell an occupied rental property, the owner would be legally required to notify the renters, wait for them to obtain financing, and sell to them at a fair market price. The renters-turned-owners then live happily ever after. Current proposals for TOPA in Massachusetts require sellers to wait up to 220 days to close.
Washington, D.C. has had TOPA for decades. They have repealed it in part. The REALTOR Association of DC told the region’s NBC affiliate that no renter has ever bought a property under TOPA. Rather than wait months for renters to buy the property, owners in D.C. have paid renters to assign their rights back. This has amounted to a kind of legalized extortion, where owners pay to regain the right to sell. So, who wants this?
TOPA proposals in Massachusetts have been shepherded (or driven like cattle) by the community development corporations, and in particular the Massachusetts Association of Community Development Corporations, which lists TOPA as a statewide policy priority. The CDCs are in part nonprofit landlords. They are funded by state money and pay no real estate tax. You’d think they’d be able to compete! But no, public financing is crazy slow, as in, it takes 220 days to close. So, the CDCs can’t compete in a 30 days-to-close market.
Enter TOPA. Just as the CDCs govern the Massachusetts Growth Capital Corporation and some of the funding streams to which they apply, now they would control the real estate they seek to buy. A prominent feature of all Massachusetts TOPA proposals is the ability for renters to gift their right to a CDC, even if they can’t sell it outright under the current bill. So, renters without the money or the inclination to become their own landlord can now become unwitting pawns in CDC aggrandizement.
TOPA Overturned in Somerville
TOPA cannot pass as stand-alone legislation, owing to what would rightly be an apoplectic demonstration by local developers, closing attorneys and brokers. So, it keeps getting added as one of the 800 amendments to the economic development bills. These bills are normally sure bets.
Last session, in December 2020, the bill passed but Gov. Charlie Baker line-item-vetoed TOPA. This session, the same trick was used, but this time the whole economic development bill faceplanted due to the debacle involving an obscure 1986 tax law. It’s hard not feel a sense of schadenfreude.
Advocates for TOPA have zeroed in on Somerville as the likeliest beachhead, so some of these proposals would enact TOPA in Somerville only.
Separately from what’s happening at the State House, Somerville’s attempt to create its own TOPA has been declared unlawful. In a partial win for the new Somerville Property Owners Coalition July 26, who are suing Somerville over the condominium conversion ordinance, Judge Camille Sarouf wrote, “Somerville’s right of first refusal to purchase units to maintain as affordable housing was not ‘conferred on the city by necessary implication.’” In other words, since the right was never explicitly granted, the city lacks the authority to create TOPA for itself.
The solution to collapsing buildings is gut renovation. Love it or hate it, we need the real estate market to do this because there aren’t enough CDC dollars. So, what of the residents displaced? Short-term, we need rental assistance, and we need that safety net to work for everyone. Long-term, we need zoning reform and a ton more housing.
All of this doesn’t spell the end for TOPA. But it does keep TOPA at bay for a time. And it does make a tired vulture smile.
Doug Quattrochi is executive director of MassLandlords Inc.