Photo by James Sanna | Banker & Tradesman Staff
House of Representatives leaders didn’t just add several billion dollars of additional housing funding to Gov. Maura Healey’s big bonding-and-policy bill earlier this month. They also added a measure anathema to real estate trade groups.
The House version of Healey’s bill, H.4726, includes language giving towns and cities the option to grant multifamily tenants the right of first refusal if their landlord moves to sell their building. Supporters of the idea, which has circulated on Beacon Hill in different forms over the past several legislative sessions, say it’s necessary to make sure that multifamily buildings that rent at lower prices, typically to poorer, urban Bay Staters, can be bought up by nonprofits and preserved as affordable housing.
If passed, the law would not apply statewide, only in municipalities whose town meetings or city councils voted to adopt the measure.
“The Tenant Opportunity To Purchase Act Coalition (TOPA Coalition) is very happy that the House leadership believes that TOPA is an important tool in addressing the affordable housing crisis and put the bill into the Affordable Homes Act Bond Bill. We hope that the Senate will do the same thing and we can have the Governor sign the Bond Bill soon,” Rich Giordano, director of policy at Fenway Community Development Corp. and a leader of the pro-TOPA coalition, said in an email.
But opponents in the real estate industry say the idea, in use in Washington, D.C., would deal a hammer blow to the multifamily real estate sector. Landlord groups MassLandlords and the Small Property Owners Association have launched advocacy campaigns in the last two weeks to try and convince state senators to strip the language from their version of the bill when the body takes it up next week, or to use the inevitable conference committee process to stop the concept, known by the acronym “TOPA,” from becoming law.
“TOPA would allow any town or city to collapse its local real estate market, destroy an important source of municipal funding [in the form of property taxes] and make it much more expensive if not impossible to borrow,” MassLandlords Executive Director Doug Quattrochi said in an email.
Some of the groups’ opposition is ideological, with SPOA in particular criticizing the measure as a government intrusion into private property rights, but much of their arguments rest on the contention that the delay it would cause in any sale, and what they view as inevitable political pressure from municipal leaders to sell to a nonprofit, would drive investors away, crushing the values of their rental units, raising risks for lenders and making it even more difficult to finance the construction of new housing.
Unlike a 2021 TOPA proposal, the House bill does not exempt new construction, previously included by backers in response to criticisms of its impact on housing production. Instead, only buildings owned by in-state residents who own six or fewer units, student housing, transitional housing for the formerly homeless, nursing homes, subsidized housing and housing for substance-abuse recovery programs.
In towns and cities that adopt the bill, landlords would have to notify tenants of their intent to sell, setting off a 15-day shot clock for an established tenant organization or a joint venture in which it’s a part-owner or general partner to make a offer on the property.
And any time a landlord gets an offer from a third-party, the tenant organization and its partners will have 15 days to make a counter-offer, which a landlord can reject provided they don’t accept an offer from a third party that’s “the same as, or materially more favorable to the proposed third party purchaser.”
Once a landlord accepts a tenant group’s offer, that triggers a 160-day deadline for the tenant group and its partners to secure financing and close on the property. Real estate trade groups question whether most affordable housing developers can raise the necessary cash to purchase a building this way, raising the specter of multifamily deals that fall through after private-sector investors have been turned down.
“This TOPA bill contains the same concepts as before, but the wrapping is a bit different. TOPA remains a non-starter, as it interferes substantially with the process of transferring a property. It inserts government and unneeded regulations into the private transaction process between buyers and sellers, bringing harm to both parties, without helping tenants who wish to purchase the properties that they rent. TOPA will further diminish the availability of affordable housing, which is desperately needed,” SPOA vice president Amir Shahsavari said in an email.
