Creating a Tenant Opportunity to Purchase
Berkeley, CA
Population: 100,000 - 500,000 | Government type: City | Topic: Tenant protections
The POLICY
The city of Berkeley is facing a housing affordability crisis driven by rising rental prices and a hot real estate market. With 75 percent of the city’s low-income census tracts at risk of or currently undergoing displacement and a continued loss of thousands of Black households, the city is focused on anti-displacement strategies that prioritize low-income renters and communities of color. The Tenant Opportunity to Purchase Act (TOPA) is one of these strategies. TOPA is an important tool that helps create long-term affordable housing, empowers tenants and helps keep them in their homes, creates permanently-affordable housing, and supports a diverse and equitable community.
Work to develop this act has been a long-term organizing effort. In 2015, tenants rights groups, community law centers, and land trusts began exploring TOPA as an anti-displacement strategy, both locally and regionally. Organizers used Washington DC’s TOPA and other similar policies as models. In 2019, the East Bay Community Law Center (EBCLC), Northern California Land Trust, and Bay Area Community Land Trust worked closely with Mayor Jesse Arreguin and consulted with tenants, tenant advocates, lending institutions, real estate brokers, and others to develop a TOPA policy tailored for Berkeley—one that stays true to the city’s vision of democratic and community-controlled affordable housing. The Berkeley TOPA working group maintains ongoing efforts for community stakeholder outreach and education on TOPA, and for collecting relevant policy feedback in the process.
In early 2020, Berkeley and EBCLC received a Partnership for the Bay’s Future Challenge Grant to support the implementation of TOPA. In February, the mayor announced TOPA at a Southwest Berkley property where tenants had partnered with a community land trust to purchase their homes and keep them permanently affordable. In March, a version of TOPA was presented to the Land Use, Housing, and Economic Development Committee, followed by public comment and initial discussion/questions by committee members.
Source: East Bay Community Law Center
The TOPA policy focuses on preventing displacement of low-income communities of color and marginalized tenants, creating permanently affordable housing, protecting rental housing from speculative investment, stabilizing housing for existing tenants, creating pathways to ownership for tenants, and giving tenants choice and voice regarding their housing. TOPA includes three distinct components: 1) the right of first offer and refusal, 2) technical assistance if tenants decide to purchase, and 3) permanent affordability requirements.
TOPA will create legal rights for tenants to make the first offer to purchase the property they live in when the owner decides to sell. Alternatively, tenants can assign their rights to a qualifying organization (QO) such as a community land trust, nonprofit housing developer, or cooperative to make an offer. A QO is a nonprofit, California cooperative corporation, or a public agency such as the Berkeley Housing Authority, which agrees to transfer ownership of the rental housing accommodation it purchases to the tenants when feasible, if the tenants so wish and if they meet additional criteria. If tenants waive their rights, QOs have an opportunity to make an offer on the property for the purpose of stabilizing housing for the tenants and preserving the property as permanently affordable. If an owner rejects the initial offer from tenants/QO and enters into a third-party contract, then tenants/QO (whoever made the initial offer) have the right to match the offer and purchase the property.
If tenants decide to make an offer, they will work with a Supportive Partner to understand the steps for completing a purchase or assigning rights. The Supportive Partner may be the same as the QO, the City of Berkeley, a tenants’ rights nonprofit, a legal service provider, etc., and functions in a supportive role to assist tenants in exercising their rights under TOPA. Supportive Partners will help tenants understand financing and ownership options.
Finally, TOPA requires tenants or QOs to commit to keeping properties purchased through TOPA permanently affordable for future generations.
Collaborative Governance
Berkeley Mayor Jesse Arreguin announces the Tenant Opportunity to Purchase Act (TOPA) at a press conference in Feb 2020. (Photo: East Bay Community Law Center)
The community, through a five-year-long process, has helped make TOPA a near-reality, even including TOPA in a new Affordable Housing Framework. The plan proposes expanding Berkeley's major existing affordable housing programs and putting substantial resources into directions that reflect core Berkeley values such as cooperative ownership, democratic control, and the empowerment of underserved communities.
The community also helped elect a progressive council majority and a 100 percent supportive Rent Board to make this vision a reality. The work of community advocates has resulted in a shift from a city council majority that refused to consider the idea of TOPA to a progressive council and a Mayor who is a strong champion of the proposal. TOPA is likely to pass by mid-2021. There is ongoing pushback from the Berkeley Property Owners Association (BPOA), which is using every tool at its disposal to prevent the implementation of TOPA. However, the TOPA working group, along with supportive organizational and individual allies and the Mayor’s Office, initiated a dialogue between BPOA, in an effort to clarify any misinformation and capture potential for minimizing pushback moving forward.
Emphasis on equity
Berkeley is in Alameda County, one of the least affordable housing markets in the country. The rapid rate of home sales coupled with cash offers results in bidding wars that privilege all-cash investors over buyers who use conventional financing. Tenants are typically locked in a “race to the bottom” of the housing market, shuffling from rental to rental and navigating skyrocketing rent in areas with weak eviction protections, often getting displaced when a new owner moves in. A 2013 report found that a low-income tenant had 40% less income remaining after paying the rent for a low-rent apartment than the equivalent low-income tenant in 1980. This disparity has only worsened over the past 17 years. In addition, a report from the Urban Displacement Project at UC Berkeley and the California Housing Project shows that rising housing costs between 2000 and 2015 have contributed to displacement of lower-income people of color and resulted in “new concentrations of poverty and racial segregation in the Bay Area.” There are significant disparities in median income levels between Berkeley tenants and homeowners, and tenant households are disproportionately impacted by these patterns of gentrification and displacement.
TOPA levels the playing field with timelines that make it possible for tenants and QOs to organize, negotiate a contract, secure financing and close a deal. TOPA also prevents displacement by empowering tenants with choices for their future housing when the owner of a rental property decides to sell. In Washington, DC, TOPA has helped preserve over 3500 units of affordable housing since 2002, and those numbers continue to grow.
Finally, TOPA empowers tenants with options when the property they live in is going to be sold. Tenants will be able to explore different ownership options (limited equity homes, condos, cooperatives, etc.), or they can choose to remain renters at an affordable rate. Under the TOPA model, tenants would have the opportunity to work together to become homeowners and shift the housing stock from market-rate housing to permanently affordable, socially democratic cooperative housing models.
Analysis
The TOPA framework was the subject of proposed state legislation, which got quite far before it, unfortunately, was unable to get support for inclusion into an omnibus COVID-19 emergency relief bill for tenants.
Local government dynamics: Berkeley now has a strongly progressive council and mayor in support of this effort.
Policy impact: High. When adequately funded and widely utilized, TOPA empowers tenants, stabilizes housing affordability and helps prevent displacement.
Last updated: January 19, 2021
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