See January 27, 2021 Berkeley TOPA Forum here - https://youtu.be/i_TG0-USqf8

TOPA in Washington, DC

What have the outcomes of TOPA been in Washington DC?

In 2014-2015, one-third of all multi family transactions in Washington DC happened through TOPA. Since 2002, DC TOPA has helped preserve over 3,500 homes. Between 2015 and 2018 alone, over 1,400 units were purchased through Department of Housing and Community Development (DHCD) TOPA acquisition funding across 26 projects. And TOPA has been an important part of creating limited equity housing cooperatives in DC; as of October 2019, DC had 4,400 units of limited equity housing cooperative housing across 99 buildings.

And in terms of long-term impacts on the City, Washington DC’s budget continues to grow year after year, and TOPA has been in place there since 1980. The District government established the Housing Production Trust Fund (HPTF) in 2002, which is funded by 15 percent of DC’s deed and recordation taxes as well as the City’s general fund. DC’s FY 2021 budget included $100 million for HPTF, despite the impact of the COVID-19 pandemic. In addition, the DC government has continued to invest in housing preservation, including setting up the Housing Preservation Fund, which is a private-public fund that provides short-term bridge acquisition and pre-development financing for TOPA projects.  

How do we know TOPA is useful if DC still has problems with displacement and homelessness?

There is significant displacement in DC, but DC is far ahead of other jurisdictions in its affordable housing programs, which have been built over decades by majority Black legislators and community organizers, most of whom came out of the Civil Rights Movement. There is more work to do, but their work has prevented more mass displacement. Additionally, DC's TOPA went through periods where it was not adequately funded, which is a lesson that it is important to combine both the legal rights and the resources to ensure the policy best meeting its intended outcomes. TOPA is not a silver bullet, but it will be a very important part of keeping Berkeley more diverse and equitable. 

What are the key differences between DC and Berkeley’s TOPA policies?

The Berkeley TOPA team did extensive research on DC's TOPA in order to glean lessons learned and develop the best possible policy from a tenant and property owner/seller perspective for Berkeley. Berkeley’s proposed TOPA policy does not allow tenants to sell their rights, and requires qualified organizations (to whom tenants can assign their rights) to meet certain criteria, like committing to keeping the property permanently affordable. The proposed Berkeley TOPA policy also includes incentives for property owners if they sell to tenants or a qualified organization at the right of first offer stage. Something that was clear from the DC policy is the need for technical assistance to tenant purchasers, as well as City funding to help make the deals happen. Berkeley has a Small Sites Program that can help fund these purchases, and the policy includes technical assistance from supportive organizations. 

Why does the proposed policy in Berkeley include single-family rental properties when the policy in DC does not?

DC TOPA actually included single-family homes (SFHs) for 39 years, and was only recently amended in 2019 to exclude most SFHs. Unfortunately, a couple of bad actors convinced several tenants living in owner-occupied SFHs to sell their TOPA rights and these bad actors then held up owners for additional money. These issues cannot happen in Berkeley, because owner-occupied SFHs are exempt from TOPA and most importantly, Berkeley’s proposed policy does not allow tenants to sell their rights and thus there’s no financial incentive for tenants to intentionally hold up a sale. Also, in Berkeley’s proposed ordinance, the timelines for SFHs are comparable to the normal timeline for selling a SFH on the market, per MLS data from 2020. There were several progressive DC Councilmembers who tried to offer amendments to continue including single-family homes in DC TOPA, but were unsuccessful due to outcry and misinformation. Note: In DC, there was no discussion of changing TOPA to not include multifamily properties (more information: https://dc.curbed.com/2018/3/6/17087220/topa-dc-single-family-home.)  

Why is TOPA Necessary?

Responding to the current crisis: Now is an ideal time to prioritize TOPA; if there are property owners who choose to get out of the rental market, those sales can be opportunities to help tenants stay in place and potentially become homeowners - instead of representing displacement risk as happened in the last market downturn, or massive transfer of rental property ownership from local owners to outside investors and corporations as took place in Oakland and many cities after the last recession.

Preserving existing affordable housing: Both affordable production and preservation of existing affordable housing are key. Preservation is cost-effective compared to new production, with Bay Area acquisition-rehabilitation projects coming in at 50-70% of the cost of new affordable housing production. Preservation proactively prevents displacement and promotes community stability –and where cooperatives and CLTs are involved, promotes community control. Preservation also offers continuity to existing tenants, whereas new production takes years to develop. Moreover, in cases where the building is remaining a rental, there is evidence that keeping the property affordable is good for the City (see "When Renters Rise, Cities Thrive" report). TOPA is one tool in the context of a broader effort to make Berkeley a diverse and equitable place to live.

Giving tenants and affordable housing developers a chance in the fast-moving Bay Area real estate market: The process laid out in the TOPA policy is about leveling the playing field. The San Francisco Bay Area is among the top most expensive places to live in the U.S. According to Zillow, the current median home value in Berkeley is nearly $1.4 million dollars, compared to around $930,000 for Alameda County overall. Since 2000, adjusting for inflation, single-family home values in Berkeley have increased 225%, compared to a 200% increase in Alameda County overall (Zillow, 2020). The rapid rate of Bay Area home sales and high offers from investors has resulted in bidding wars that privilege cash offers and put buyers who use conventional financing at a disadvantage. These challenges place low- and moderate-income tenants, first-time homebuyers, and affordable housing developers such as community land trusts at a severe disadvantage when trying to purchase property in the Bay Area.

Funding is critical, but not enough; the legal rights to purchase and timelines are also an important part of leveling the playing field and reducing barriers to more Berkeley tenants becoming homeowners. Right now, there are Berkeley tenants who do not have a chance to purchase their building because they are not notified about the sale, or getting the chance to organize for a potential purchase. The Northern California Land Trust (NCLT) reports that for single-family homes and multi-family properties alike, it is nearly impossible to compete with open-market buyers who are offering either all cash or more simple financing terms and shorter closing timelines. TOPA would create a process and provide legal rights that give tenants and affordable housing developers a meaningful chance to purchase the property.

Decreasing displacement, especially among Black and Brown communities: Between 1990 to 2018, Berkeley lost 49% of its Black population (while Oakland and San Francisco lost 40% and 43% of their Black populations respectively). In 1990, there were nearly 19,000 African-Americans in Berkeley, comprising 19% of the population. By 2019, that number had fallen to less than 10,000, or 8% of the population. According to a 2019 UC-Berkeley Urban Displacement Project and California Housing Partnership report, between 2000 and 2015, Alameda County lost more than 1,900 low-income Black households, and these losses were concentrated in the flatlands of Oakland and Berkeley. According to UC-Berkeley’s Urban Displacement Project, 75% of low-income Berkeley neighborhoods are at risk of or undergoing gentrification, with increases in high-income White households in the same neighborhoods that lost low-income Black residents. Stronger anti-displacement policies are needed to intervene on these trends; TOPA is highlighted as a best practice in anti-displacement policy.

Increasing homeownership in Black and Brown communities: 51% of White households are homeowners in Berkeley, compared to just 31% of Black households that are homeowners, and 26% of Latinx households (2018 American Community Survey, 5-year estimates). DC TOPA has led to the creation of thousands of affordable homeownership units in limited equity housing cooperatives (LEHCs), home to mostly homeowners of color and the majority located in neighborhoods where housing prices have drastically increased. Of the LEHCs documented in a 2020 Coalition for Nonprofit Housing and Economic Development report, the median share of cooperative residents who are people of color is 75%. These affordable homeownership opportunities have led to housing stability and the opportunity to grow equity.  

Proposed Changes Based on Community Input

This section describes some of the major changes to the proposed policy since the last version was made public at the March 5, 2020 Land Use and Policy Committee meeting. Note that these changes do not represent all of the proposed changes to the ordinance. A fuller report of the changes will be included in upcoming policy revisions.

Removing appraisal provision

In order to respond to property owner feedback about the complexity and additional time of an appraisal component, the appraisal provision is being removed from the proposed Berkeley TOPA policy. The intended outcomes of this provision (to verify that 3rd party offers are genuine during the Right of First Refusal stage) can be addressed by strengthening the definition of “bona fide offers” and “arms-length transactions.” 

Limiting disclosures required on the front end

Under TOPA, the property owner can give the tenants notice of intent to sell as soon as they know they want to sell, and concurrently get the property ready for the market as they wait to see if tenants or a Qualified Organization (QO) is interested. To make this easier on sellers, the current Berkeley TOPA policy requires sellers to provide only limited disclosures with the initial notice and more substantial disclosures later once tenants or a QO submits a statement of interest (these disclosures were previously required with the initial notice of intent to sell).

Permanent affordability

The current Berkeley TOPA policy requires permanent affordability (deed resale restrictions) on all TOPA purchases. The latest proposal is to limit this permanent affordability (PA) requirement as it relates to tenant purchases without public subsidies. The change is for TOPA’s PA requirements to be dictated by the terms of applicable subsidies and not have PA restrictions on tenant purchases that are financed without public subsidy. Most TOPA transactions will have some form of subsidy, but this change responds to feedback from community groups that PA restrictions constrain wealth-building. Additionally, enforcement of PA deed restrictions would be more difficult to enforce on tenant projects without public subsidy, so there are practical considerations as well. However, the PA requirements for Qualified Organizations remain unchanged.

Clarifying process and exemptions

We are also revising ordinance language and educational materials to clarify the TOPA process and the properties and transfers that are exempt in response to feedback and questions. Look out for the revised ordinance and report for more details. In the meantime, we encourage you to review the FAQs, flyer, and other materials on the website, which also speak to process and exemptions.