After Real Estate Warned Of 'Death Knell,' City Council Waters Down COPA Bill

After weeks of panic emanating from New York City’s multifamily industry, the city council has diluted a long-debated housing bill that would give nonprofits a leg up as buyers over free-market players.

The Community Opportunity to Purchase Act, proposed by progressive Council Member Sandy Nurse last year, would originally have required all owners of buildings with three or more units intending to sell their property to give nonprofits the first chance at purchasing them before any other buyer.

But as the council inches toward a potential vote, Nurse introduced an amendment this week that drastically reduces the number of buildings COPA would apply to and allows for-profits and nonprofits to pair up for acquisitions.

“There’s great strides towards a more practical type of overall process from the initial draft to where we are today,” Ariel Property Advisors founding partner Victor Sozio said. “It makes me feel somewhat encouraged that at least there's been an open dialogue about the problems in the initial draft.”

Industry professionals flipped out when COPA, first raised by lawmakers five years ago and most recently introduced to the council this summer, became eligible for a vote before the end of the year.

The previous bill would have given 120 days for nonprofits — exclusively defined as community land trusts, or CLTs, and nonprofits on the NYC Department of Preservation and Development’s qualified preservation buyers list — to take the first crack at submitting bids for the buildings. 

“This preliminary policy could be the death knell for multifamily investment sales as we know it,” influential sales broker Bob Knakal wrote on social media platform X last month.

The bill has undergone significant revisions since then.

Nonprofits can be any of the previously eligible nonprofits or CLTs on HPD's list, but now those buyers can work in partnership with for-profit companies on the same list.

The amendments narrowed building eligibility to properties with four or more units and residential-zoned vacant lots capable of providing as many units, and it exempted owner-occupied buildings with five units or fewer.  

Plus, buildings must have at least as many reported Class-B violations — such as roaches, leaks or mold — as they have units to be eligible.

Under the new proposal, nonprofits hoping to purchase the property would also have significantly less time to do so: only 45 days to submit a letter of intent to purchase the property, then 90 days to make an offer, then 30 days to enter into a contract. If a landlord receives a private market offer, the nonprofit buyer has 15 days to match that offer.

Additionally, COPA would now be phased in over two years. Only owners who are already working with HPD to remedy physical distress would be eligible in the program’s first year.

Financial distress — defined as any debt that the city could place a lien against, such as water or tax bills amounting to $1,500 per unit — would only become a factor in the second year.

“By working closely with diverse stakeholders, we’ve refined the bill while keeping its central purpose intact: preserving and expanding permanently affordable homes for New Yorkers,” Nurse said in a statement.

But the amended COPA is still almost certain to face legal challenges, Nixon Peabody partner Erica Buckley said by email. Attorneys will likely file suit claiming it violates owners’ rights to sell their property freely and in a timely manner.

“There are many owners looking to sell their properties to tenants, but to date, there hasn’t been any framework to facilitate these transactions,” Buckley said. “A well-structured, well-funded voluntary program is the way to facilitate transfer of property to tenants, not a forced bill that will likely be successfully challenged.”

Sozio said the revisions didn't fix all of the industry's complaints about COPA. Although the new purchase timeline is 50% shorter than the original proposal, the schedule and the restrictions prohibiting owners from accepting an offer before those first 90 days are up could chill the market, he said. 

“Whenever you have restrictions on a selling group’s ability to exit an investment quickly, I think it has to be factored into their decision to invest in a specific market,” Sozio said. “It does impact overall investor sentiment of our market and will likely affect values at least somewhat.”

Similar laws in San Francisco and Washington, D.C., have had that effect, Sozio said.

D.C. has had its Tenant Opportunity to Purchase Act — which gives tenants, not outside groups, the right to organize and select a buyer — since the 1980s. But after strengthening the law during the pandemic and consequently seeing housing starts drop by 79%, it recently passed a law to water down TOPA.

But in San Francisco, a model more closely replicated in NYC’s proposal, challenges have largely been around a short timeline for nonprofit buyers to come up with acquisition funding.

Nonprofit funding for acquisitions and repairs could be NYC’s version of COPA’s largest obstacle, said Hannah Anousheh, a director at East New York CLT.

The CLT, which helped shape the bill, purchased a distressed 20-unit rental building in the Brooklyn neighborhood last year and will soon be rehabilitating it with city, state and federal funding to keep it low-cost in perpetuity.

“There are existing city programs to rehab buildings, and they need more robust and expansive financing,” Anousheh said, citing HPD’s Neighborhood Pillars and Participation Loan programs. “They’re designed for these types of acquisitions, but it definitely does need a lot more funding.”

COPA would create opportunities for more fair-price, tenant-led acquisitions of buildings where landlords are overwhelmed by how much repairs might cost, she said. But some owners are still “freaking out.”

“Some landlords aren’t really familiar with this whole model,” Anousheh said. “The transaction could be really beneficial for them.”