TOPA Reform Divides D.C. Housing Industry At Marathon Council Hearing

The fight over one of D.C.’s most controversial housing laws came into full view Wednesday, but the battle lines weren’t clear-cut between landlords and tenants. 

The D.C. Council’s Committee on Housing held a 13-hour public hearing on a series of housing-related bills, with more than 180 speakers representing some of the biggest names in the housing industry and the tenant advocacy space. During the hearing, a divide emerged between for-profit developers and some nonprofit housing owners on the competing proposals to reform the Tenant Opportunity to Purchase Act.

The 45-year-old law gives tenants power to intervene in the selling of their building either by purchasing it themselves or assigning their TOPA rights to a preferred buyer. It has become a target of many real estate developers, who say it introduces delays and uncertainty into the sale process and deters investors from D.C. 

Mayor Muriel Bowser, as part of her RENTAL Act, proposed to reform TOPA in part by exempting all market-rate buildings for their first 25 years after construction. 

Council Member Brianne Nadeau introduced an alternative proposal to exempt buildings for three years.

Many real estate developers — including executives at MRP Realty, JBG Smith, Jair Lynch Real Estate Partners and real estate groups AOBA and DCBIA — testified Wednesday in support of Bowser’s proposal. They said the law has scared investors away from the city and contributed to a significant slowdown in new housing development. 

“Coupled with other regulatory challenges, the TOPA uncertainty and process are a significant disincentive to develop in the District,” JBG Smith Chief Strategy Officer Evan Regan Levine said. “We developed our last building in D.C. five years ago, and in the meantime, we’ve developed 1,600 units in four buildings in Northern Virginia.”

But nonprofit developers, including The NHP Foundation, Mi Casa and the Coalition for Nonprofit Housing and Economic Development, joined tenant advocates in opposing the specifics of Bowser's proposal and speaking about the value of TOPA. 

NHP, a New York-based nonprofit that has invested $3B in affordable housing since 1989, has partnered with tenants associations in D.C. to acquire properties and preserve affordability using the TOPA process, Assistant Vice President Pamela Lee said at the hearing. 

Lee said she sees TOPA as a “powerful tool” for preserving and creating affordability, and she doesn’t think it has impacted investment into D.C.

“We do support efforts to make the process more efficient, but also urge caution when it comes to broad exemptions,” she said. “Let’s improve the policy without removing tools that give residents a voice in the future of their homes.”

CNHED Chief Housing Officer Maya Brennan, whose organization represents developers and other players in the affordable housing market, said TOPA isn’t the real issue facing the industry. She instead pointed to the unprecedented amounts of unpaid rent that have put owners’ financial health at risk.

The council last month passed reforms to the Emergency Rental Assistance Program aiming to address the rent delinquency issue, and Bowser’s RENTAL Act includes more provisions to accelerate the eviction process for tenants who aren’t paying rent. Brennan praised the ERAP bill and said she is “largely in agreement” with the mayor and council on additional reforms to solve that problem, but the divide on TOPA remains. 

“On the multifamily investment side, TOPA has become the scapegoat,” Brennan said. “Rather than TOPA affecting multifamily investment interest, rent arrears are where the blame lies. Changes to TOPA, even ones the coalition supports, will have little effect on multifamily investors.”  

Several prominent local developers disagreed. 

MRP Realty Managing Principal Bob Murphy, whose firm was D.C.’s most active multifamily developer over the last five years with 11 projects completed, said that TOPA combined with other D.C. regulations have “nearly eliminated institutional investment” in the city.

“When you are developing an apartment building, it’s a lot more risk than buying it, so the money that comes in — the investor type that comes in — is taking a lot of risk, and they want to be rewarded for that risk,” Murphy said. “The process we have eliminates at least half of these guys.”

A key debate that emerged throughout the hearing was over how many years buildings should be exempted from TOPA after construction.

Many real estate leaders argued that the 25-year exemption is necessary for buildings to go through multiple investment cycles without the uncertainty that the TOPA process introduces. 

But some nonprofit landlords, like Mi Casa Project Manager Victoria Goncalves, argued the three-year proposal is long enough for buildings to lease up, for initial investors to exit, then “give tenants a seat at the table.”

“If we decide to use 25 years as the basis in this bill, we might as well start having the funeral because TOPA will be dead,” D.C. Chief Tenant Advocate Johanna Shreve said. 

Council Member Robert White, who chairs the housing committee, said during the hearing he has issues with both the three-year and 25-year proposals, adding that he thinks 15 years “is the right mark.”

Deputy Mayor for Planning and Economic Development Nina Albert told Bisnow Wednesday that the 25-year exemption provision in the RENTAL Act wasn’t an arbitrary number. She said the administration studied the examples in which TOPA successfully led to tenants purchasing buildings, and “the vast majority” have been buildings built more than than 25 years ago. 

Bowser’s RENTAL Act would also exempt buildings that have affordability covenants of 20 years or more, a proposal that tenant advocates took issue with. Albert said those buildings already have protections for low-income residents, and exempting them from TOPA could support more investment into affordable housing. 

Older residential buildings without covenants would still have full TOPA protections under Bowser’s proposal.

“Naturally occurring affordable units are the ones we’re trying to protect that we think are the best candidates for TOPA,” Albert said near the end of the council hearing, which ran past midnight into Thursday after starting at 9:30 a.m. Wednesday.

CORRECTION, MAY 30, 1 P.M. ET: Most buildings sold to residents through TOPA are more than 25 years old, not less than, as a previous version of this story stated. This story has been updated.