[image_credit]MinnPost photo by Peter Callaghan[/image_credit][image_caption]TOPA would give tenants who live in eligible properties the option of pooling their resources together as a co-operative to provide financing to buy their building when a landlord puts it up for sale.[/image_caption]
Here’s what TOPA actually stands for — and what it would potentially mean for the city:
What is TOPA? And what would it do?
TOPA stands for Tenant Opportunity to Purchase Act, and it gives tenants of rental properties the right to purchase the building if the owner puts it up for sale.
Under a proposal being considered by Minneapolis and co-authored by City Council Members Cam Gordon, Jeremiah Ellison, Jeremy Schroeder and Steve Fletcher, it would apply in the city to all rental housing — save certain properties with fewer than five units.
Tenants who live in eligible properties would have the option of pooling their resources together as a co-operative to provide financing to buy the building. Alternatively, the current proposal would allow tenants to team up with non-profit housing organizations — or the city — to secure funding to finalize a deal with the owner.
The goal is to avoid displacing renters when their building is sold — and to give renters the opportunity to build wealth by becoming homeowners. Advocates also say TOPA could also help do something about the city’s racial disparities in real estate ownership.
Even if the TOPA process doesn’t end with tenants purchasing the housing complex, advocates argue, the right of first refusal requirement could also give renters some leverage when their building is put on sale. “It ensures that the tenants who are displaced, aren’t displaced with nothing in hand,” said Ellison. “They end up getting, sometimes, settlements; they end up getting bought out to leave the building.”
So why are people in Minneapolis getting flyers about it?
The Minneapolis Area Association of Realtors views TOPA as an infringement of ownership rights, the kind that will complicate housing sales and scare off prospective buyers and developers. The organization launched a mailer campaign in June urging Minneapolis residents to contact their City Council representatives and declare their opposition to TOPA. “Don’t let this happen to Minneapolis,” reads one of the mailers.
“The definition of homeownership is represented by being able to buy it, sell it, or let it for rent without unreasonable government restriction,” said Eric Myers, director of government affairs for the realtors association. “When you buy a house, you’re not just buying the house, you’re buying the house and the land and those rights.”
[image_caption]Some Minneapolis residents have received multiple mailings from the Minneapolis Area Association of Realtors opposing TOPA.[/image_caption]
Since the Minneapolis proposal does not have an exact timeline in place, Myers and the Minneapolis Realtors looked to Washington, D.C.’s TOPA as an example. Under the Washington D.C. policy, if a tenant group chooses to pursue a purchase and exhausts every option in bringing that goal to fruition, it can take more than 250 days to finalize a deal. Compared to around 30 days — the average time it takes to close a housing deal, especially for smaller complexes, says Myers — the several months it might take to offload a property to tenants under TOPA could cause buyers and developers to avoid the Minneapolis housing market entirely. Or as one TOPA flyer warns, it potentially, “decreases future investment in Minneapolis, reducing the supply of affordable housing.”
What do TOPA supporters say about the realtors’ criticism of the idea?
One of the proposal’s authors, Fletcher, noted that the city already has multiple regulations in place that put delays into the sale of a housing complex, and that adding a delay for a tenant purchase option isn’t unreasonable. He and the other council members behind the proposal see TOPA as an extension of an ordinance already on the books — a 2019 law that requires owners of affordable housing buildings to provide notice to the city and tenants at least 60 days before making the building available for sale.
Fletcher also points out that TOPA would not impact the price of the building sale. “We’re allowing people to sell their property at the price they want to sell it for,” he said. “I don’t think it really infringes on that right to give tenants an opportunity to match that price. We’re not taking anything away from them.”
Why is this happening now?
The realtors campaign has picked up steam just as the TOPA ordinance has moved through the city’s law-making process. The proposal is currently before the city’s Business, Inspections, Housing & Zoning Committee, where city officials are likely to debate what kinds of properties should be exempt, and what a timeline for the tenant option should be. Fletcher said he anticipates the full City Council will discuss and vote on TOPA sometime later this year.
Thank you for this clear explanation of TOPA and the debate around it. I received the mailings in question; they struck me as a dishonest attempt to frame the debate by construing TOPA as bad without even bothering to say what it is or why they oppose it (I did look it up for myself, of course). My first thought, really, was that if a bunch of Edina realtors oppose this, it’s probably good for people in the city.
Actually, this a terrible explanation of TOPA and completely missed the whole point. Just awful journalism.
The problem with TOPA is this: very few renters can actually afford to buy the places they are renting. But that doesn’t stop then from asserting their rights under TOPA and delaying the sale. The renters have no intention of buying – they just want to delay the sales in order to extort payments from the sellers. The sellers write the tenants a check, the tenants then drop their TOPA claim, and then the sale goes through. It is cheaper for the owner to pay off the fake TOPA claim than it is to wait for the tenants to admit they can’t/won’t buy the property.
Well, if they can’t buy it, then they won’t buy it… so what’s the problem?
but isn’t the new framework for tenants who otherwise couldn’t create an ownership framework? nothing here removes an investor’s ability to sell a property…real estate owners and developers have an upper hand in Minneapolis property rights until the City regulates a more level playing field. one small step for mankind…
Also, one of the problems is that in places like Washington D.C. tenants will sell their Topa rights to companies who know how to extort the owners. Its an absolute racket.
It is so frustrating that Minnpost can write such a poor article and then people think they have a good understanding and that this is good for Minneapolis. Its journalistic malpractice.
There’s nothing stopping the City Council from writing its ordinances and rules better — thus eliminating loopholes — than Washington D.C. did. It may not be perfect, but it’s a start.
Ellison gives the game away here a bit with his comment about tenants getting paid off to leave the building – in fact in DC that’s been a problem where developers pay the tenants to assign their rights to them, and they then can outbid a more traditional homeowner-wanna-be purchaser. in DC the developers are typically looking to tear down and replace the building. Ellison seems to be willing to encourage that behavior by either forcing the landlord to pay off their renter to agree to leave, or acquiescing to developers acquiring those rights – neither of which further home ownership for the people they claim to be supporting.
https://www.nbcwashington.com/news/local/some-dc-renters-make-tens-of-thousands-of-dollars-exploiting-decades-old-law/14478/
Exactly. TOPA won’t make any renters into homeowners. Its just legalized fraud. Legalized extortion.
So the alternative of wealthy landlords throwing poor tenants out on their ass, with said tenants having absolutely no recourse whatsoever, is supposedly better? Let me guess, they’re just supposed to wait the 6 decades or so it will take to build up the housing supply and everything will be sunshine and rainbows for everyone! You wonder why the poor, the young, the oppressed, and societally adrift eschew pragmatism in favor of bold ideals, and in this case the promise of corrective retribution (perhaps the threat of extortion might sway the opinion of those wealthy landlords as to whether selling the property is REALLY worth the trouble), when all you offer is descriptions of how the problems of the world will NEVER, and CAN never be fixed in any realistic, or remotely likely to happen way. Have you considered you may actually need to FIX a few problems before your ideas and opinions might find a willing audience? (Not speaking of you personally Pat, just the worldview you zealously represent)
First of all, this has nothing whatsoever to do with throwing tenants out on their ass. If a tenant has a lease, that lease is still good through its original term even if the building is sold.
The ideas being proposed aren’t bold. They are just stupid and counterproductive. Rent control reduces the availability of affordable housing. TOPA does nothing to help renters buy their units. All it does it lets the renters (and third-parties that take advantage of renters) extort money from landlords. It fixes nothing. It makes the problem worse.
Adding more housing does reduce housing costs. It does take time, but unlike the nonsense, counterproductive “solutions” it does work. And if we could remove the impediments to adding housing, it would work faster. The first thing we need to fix is to stop well-meaning but economically illiterate politicians who push nonsense like this.
examples of housing costs declining by building more housing, please.
And to be clear, I don’t have a worldview on this subject. What I have is an education in and understanding of economics. This isn’t about competing ideologies. This is about facts vs. nonsense. Reality vs make-believe.
Whether I can convince anyone of that, who knows. A good chunk of the country believes that Trump won the election, so getting people to understand economics is going to be a pretty tall order. There are as many dumb people on the left as on the right.
And its not always developers. There are guys who just buy the rights to extort the money. They know how to drag the process out as long as possible, thus driving up the price for the seller to be rid of them.
This is one of these seemingly helpful ideas (like rent control) that accomplishes nothing and has terrible adverse consequences.
I don’t have a position on the merits, but when I receive a mailer that very intentionally doesn’t even say what “TOPA” stands for, let alone tell me what it is or link me to a credible resource on it, I’m not caused to be inclined in the direction they would like.
Thanks for the clarification commenters.
On the surface, it looks a like a great idea. Getting skin in the game changes your life outlook.
But looking into this deeper, its ripe for trouble. The article should have explained the realtors true problems with this.
But think, anything proposed by the current city council needs to be looked into deeply. If they are for it, it probably isn’t good.
Well Andy you rang the bell “anything proposed by the current city council” perhaps they should educate renters on how to buy real-estate?
So, the Minneapolis Area Realtors group is concerned that buyers in MPLS will be scared off? Okay, not enough buyers.. sure.
And if someone is told to leave their home in a hurry because it’s been sold, they don’t deserve any money?
If “very few renters can actually afford to buy the places they are renting”, then wouldn’t a little money help?
Breathless commenters seem to feel they aren’t as deserving as owners.
I thought this was an informative, well written, & timely article. I also agree with fellow commenters about the utter dishonesty of the mailings.
“then wouldn’t a little money help?”
Exactly!
Giving someone the right to block a sale in the name of their having a right of first refusal when they have no means to actually make the purchase simply leads to all the corruption described above.
Fix the money problem first. Affordable housing, ANY housing is a critical element in individual’s lives and the communities they live in.
It is, GASP! infrastructure and a problem that needs fixing. If the tenants have some kind of consensus that they would like to purchase the building and have proven access to the funds necessary to do it, providing a right of first refusal becomes more practical.
There isn’t anything dishonest about the mailings. Only the article was dishonest.
And it sounds like you support extortion. Even if a renter can’t afford a house, they should be able to extort money from the owner to not delay the sale? And you think the realtors are dishonest?
This is pure corruption.
And as I mentioned in another comment, the fact that the property was sold does not effect the existing lease. No one’s rights would be changed in any way.
It really is a shame that this article was so poorly written that is left people so misinformed about this.
Pat, this isn’t a court room, no one is concerned about their rights. They’re concerned about their homes, and the ability to keep living in it.
The right I am talking about is the right to keep living in your home. And if you have a lease, that continues even if the house is sold. Letting people extort money out of sellers doesn’t change that.
You complain that addressing the actual cause of high housing costs – building more housing – is too slow. It doesn’t have to be, but ok. But the alternative is doing nothing. Topa does nothing. Rent control actually reduces affordable housing.
Are you under the impression that renting means one is inclined to change residency at the end of every lease? Exactly what difference does it make that existing leases are honored, one gets to be thrown out three months in the future, as opposed to immediately? Gee, neat. It’s great that you look forward to the Mlps 2040 plan (as though nothing could possibly happen to derail it in the next 20! years) but those in the situation described need a 2021 plan.
“I also agree with fellow commenters about the utter dishonesty of the mailings”
Please re-read the article and identify any statement made by the realtor association that could be described as “utter dishonesty”.
Nothing of that nature occurred in the article: Solomon simply quoted their position and the image clips of the mailers just offered their opposition with no statement that could be discerned as dishonest.
Just because you disagree with something does not require that an automatic label of “dishonesty” must be pinned on the other side. If we start any disagreement with “you are a crook and I’m honest” progress to a reasoned compromise is very difficult. I am sympathetic to Pat’s telling of the Washington DC apparent abuse of TOPA and I am in agreement with you that it begins by providing a financial path for the renters to buy the property. Fix those two things and we have……
A reasoned compromise….
Pat, I appreciate your concern for the realtors.
This may be incorrect, but I’d venture to guess that you haven’t been a renter in MPLS recently.
Its been a few years, but I have represented both landlords and tenants quite a bit. I expect I have a far better handle on this issue than anyone here.
And I’m not worried about the realtors. They will work around this. No, I’m worried about the tenants, who are the ones who always get the short end when economically illiterate ideas get put into practice. The big landlords can ride out nonsense like Topa. Its the small landlords, those who rent out one or two units, who will suffer the most from legalized extortion and rent control.
Housing is expensive because there isn’t enough it. That’s what the 2040 plan is trying to address. But garbage like this is counterproductive.
Recent newspaper articles, including one in the Strib, have reported on how the boards at condominiums and townhome associations cannot convince the property owners to raise their monthly fees adequately to afford big ticket repairs. (Example: Surfside, Florida) What are the odds that a diverse set of previous renters/now homeowners will increase their fees to cover anticipated costs five to ten years later? I sympathize with those who want to own a residence but TOPA is not the solution.
Once again the guys who have handed us the affordable housing crises for decades are “explaining” how supply and demand works and promising affordable housing will emerge any day, week, month, year, or decade now if we just stay out of the way and let the market do it’s magic. Bushwa!
Let me “explain” for gazillionth time… In a democracy, when your markets fail… people have the right to try something else. The community is not obligated to suffer your failures indefinitely simply because those failures put money in your pocket.
If you don’t like the solutions we develop, then don’t fail for years and decades. If you’ve got solutions let’s see them, don’t sit on your profits for years and decades and expect the rest of us to live with your empty promises… you don’t want us to mess with your “markets”… then make your markets work the way you claim they will. If you had produced affordable housing, living wages, etc. etc. when you SAID you would years and decades ago we wouldn’t be having these conversations, and we wouldn’t be looking at alternatives.
Meanwhile… I can’t help but notice the rather glaring logical inconsistency of claiming that TOPA is useless and ineffective yet it causes so many problems for property owners? The idea that owners and landlords are just hapless victims of circumstances while their tenets are all powerful masters of the universe wielding power beyond imagination is almost comical. When a lawyer points out the fact that a tenet gets to stay in an apartment until the lease runs out… as if that’s prevents a landlord from emptying an apartment… you know you’re in a la la land. Hey… legal eagle… landlords can wait until leases expire… you don’t sell a property overnight, some people plan business decisions in advance. Not everyone living on the street got evicted… some just couldn’t find a new affordable place. And the problem with giving people legal rights is… the might use them? O.K. then.
I’m not saying TOPA in MPLS is a perfect solution, but to the extent there are problems with it elsewhere it can be modified. Meanwhile, we’ve spent decades watching neoliberal promises fail and wealthy interests manipulate policy to their advantage, so when I see mailings like this, and campaigns like this in comment sections… I’ve seen it before and it’s rarely if ever honest and reliable.
These mailings ARE a propaganda campaign, not an education campaign.
You have to remember, what you’re seeing here is competition between different interests… you’re seeing a group with vested interests (i.e. landlords, real estate, developers, and owners) trying to retain their economic advantages, they’re not trying to solve any housing problems, they’re making money and assuming that’s all there is. You will note that a guy like Pat never suggests any actual proposals or solutions to produce affordable housing… he just sits back and waits for it to emerge and tells us to do the same, as if it’s out of our hands until the gods of supply and demand provide. Meanwhile… it’s just cowinkidink that some people are making gobs of money while others live in desperate straights… can’t be helped it’s just the way it is. ANYTHING that interferes with neoliberal status quo’s is an anathema to all that’s right in the universe… like throwing holy water on a vampire.
So we can wait another few years or forever for affordable housing to magically manifest itself, or we can try things like TOPA and rent control, and tweak them to make them work where they’ve failed before. Neoliberal “markets” aren’t the only failures we can risk taking. A scenario wherein landlords, owners, and developers are protected from loss, but everyone else just has to live with it or take their chances, is NOT just the “natural” order of things… it’s inequity by design.
I’ll keep saying it, Paul. The markets haven’t failed. They haven’t been tried. The market has been restricted for decades and is just being opened up. When you build more housing, prices go down. That’s why we have the 2040 plan. That is the solution to the underlying problem.
We can try rent control and TOPA. But they will fail like they do everywhere else because they aren’t based on real economics.
“ I’ll keep saying it, Paul. The markets haven’t failed. They haven’t been tried”
And there you have it… doubling down on faith based “economics” as if the magic would work if only we’d let it. We haven’t tried unregulated markets? Google “Great Depression” Pat. You don’t think markets can fail?
This is just circular reasoning pretending to be economic expertise. This is NOT reality based economics, on the contrary.
Just to get back to something Joe said about the private sector… the idea there’s more accountability, people would lose their jobs etc. etc. Bushwa!
Anyone who pays attention to the private or works in it can give you multiple examples incompetents rising thought the ranks rather than ending up out on their butts. And the higher you are in the executive structure the more protected you are, even if you get fired. How many times do we see multi million dollar executives leave with huge bonuses even when they get forced out? And how many times do you mediocre executives simply bounce from one corporate office to another? Executives in the private sector are far less accountable than their counterparts in the public sector. There are no golden parachutes for failed executives in the public sector.
This libertarian myth of meritocracy wherein only the best of the best survive in the private sector is simply fantasy pretending to natural law.
Housing problems are essentially housing shortages. How do you solve housing shortages? You make more housing.
It is not solved by slicing and dicing what is already there. More housing must be created.
And that is where the issues being discussed here hit the wall. Pure government built housing has a history of disastrous results. Never better described than in Tom Wolfes’ “From Bauhaus to Our House” and the story of the Pruitt Igoe project in St Louis:
https://en.wikipedia.org/wiki/Pruitt%E2%80%93Igoe
And that indicates that success has come and will come from the joint effort of public / private organizations in some cases and private only in others. I have a friend who is a developer and has built thousands of housing units across the Upper Midwest. Sometimes high end condos and sometimes subsidized affordable housing with a recent project being at a far outer ring suburb where there are jobs to be had and a long and difficult public transportation path to get there. And yes he makes money. Get him talking and it is apparent that he cares about housing and practical housing solutions. To describe him as just capitalistic swine that could care less about solving problems is as stereotypical as you can get:
“I don’t know any of these guys so they all must be evil.”
But we’re supposed to assume from your line anecdotal example that all are good? Good for your friend, I’m sure he’s a great guy, but as a whole the rental industry is by design exploitative of its customers (I mean the term for its primary activity, rent seeking, is used as short hand for all exploitative capitalistic excess), one good apple in a rotten barrel does not an industry redeem.
Affordable housing solutions (ie: Get more units built):
Alternative 1: Government – public built and managed housing projects / properties.
Alternative 2: Public – private projects / properties.
Alternative 3: Private projects / properties.
Maybe we can agree that #1 has been very troublesome. And #2 can get things built; and if the public has their money in the project they have the right and obligation to insure basic fairness in how things are managed.
And we can probably disagree on the extent that we tell fully private properties on how they must operate. And I personally certainly do not favor “It’s my property, I’ll do as I see fit”. I do see telling property owners that they must sell to folks who don’t have the $$$ to buy it as a stretch.
I don’t think we agree that #1 doesn’t work, only that in the context on how it’s been attempted in this country, and in most capitalistic systems, as housing of last resort for the desperately poor, hasn’t. Ghettoizing the impoverished and oppressed is generally poor public policy, it’s true, but creating public housing that accomplishes that feat is a choice, not an inevitable outcome.
In the spirit of reasoned compromise, can you point me to a few public housing built and managed projects that are exemplary?
Actually, I’m not sure we’ve actually built public housing for decades, Pat could probably answer that question. I don’t know what your idea of “exemplary” is, obviously no public housing would compare to any luxury housing anywhere, and of course we know that not all private housing is exemplary.
We do have a number of converted privately owned housing that is now public housing like the Heltzer high rise over in Riverside, I think that was built as a private high rise in the 70’s and became public housing at some point. By and large most of our pubic housing has been torn down in the last few decades, like the “projects” on the North side. There are many apartment complexes with some section 8 units among their regular units. Cedar Square has a number of section 8 units I think. We’ve got a few complexes here in St. Louis Park as well, again, not luxury units, but no worse than some of the stuff around Steven’s Square.
Edward, this is just another example of circular logic predicated on false assumptions.
We don’t have a shortage of housing space… we have a shortage of space that everyone can afford. You need to understand the difference. We’ve been through this a gazillion times: you guys say “just build more housing”… then when we point out the fact that we’ve been in the middle of building boom for years wherein developers are building high end housing to make as much money as they can… you guys say: “Well, we can’t afford to build cheaper housing because the numbers don’t work”. Then we get this garbage about supply and demand that assumes developers are automatons who don’t manage inventory in order to preserve their revenue and we’re back where we started.
A lot people around here find it extremely easy to live crises THEY don’t have to live with. When you’re a teenager dying of an asthma attack in a tent off of Hiawatha Ave. you don’t have the luxury of waiting for the “markets” to respond to the “shortage”. This isn’t a theoretical problem or a classroom exercise in a neoliberal economics class.
“Well, we can’t afford to build cheaper housing because the numbers don’t work”
And I am saying housing is infrastructure and we need to dedicate a good sized chunk of the 3.5 trillion dollars going thru reconciliation to affordable housing to make the numbers work.
“And I am saying housing is infrastructure and we need to dedicate a good sized chunk of the 3.5 trillion dollars going thru reconciliation to affordable housing to make the numbers work.”
Thank you, I agree. However this has been a decades long-long term problem so we might need to look at more systemic options in addition to short time infusions of capital.
Two item to consider:
“Rep. Omar took a bold stand last November when she proposed a Homes for All Act that would provide $1 trillion to housing authorities across the nation to construct 12 million new units over the next 10 years. This breaks down into $800 billion for constructing 8.5 million new public housing units, and $200 billion toward the Housing Trust Fund to build 3.5 million new private, affordable rental units.”
And
“There are an estimated 553,742 people in the United States experiencing homelessness on a given night, according to the most recent national point-in-time estimate (January 2017). This represents a rate of approximately 17 people experiencing homelessness per every 10,000 people in the general population.”
A 20 to 1 ratio of homes to homeless people. John McCain eat your heart out! (7 homes in 2008 debate).
Just kidding, but I have no issues with Omar’s plan and it no doubt has the scope to make a huge difference in putting people into decent places to live.
I agree, Omar’s plan would help… if it makes it into law. You ration of available homes to homeless doesn’t appear to be data driven, at least the information in your comment doesn’t get us there assuming you actually meant to that there is ration of 1 to home for every 20 homeless people. If the ratio homes to homeless were 20 to 1 (20 homes for every 1 homeless person) we wouldn’t be having this conversation. At any rate I don’t see how you could make either claim since we don’t actually have that data. What we do know is that a large portion of homeless people lost their housing for financial reasons, not because is simply disappeared.
Look, when I say we have an affordable housing shortage, not a “housing” shortage, here are some numbers: We know that vacancy rates are around 5%-7%. We also know that we have around 300k rental units, not including 68k new units recently built.
Do the math, that leaves us with 25k vacant units, and we have an estimated homeless population in the Twin Cities is around 11k. So no… we don’t have 1 home for every 20 homeless, we have more like 2 homes for every homeless person but the homeless can’t afford them. This isn’t a housing shortage, it’s an affordable housing shortage.
Be happy when I am agreeing with you. My point was that Omar’s plan claims 12 million new housing units. Which, if we accept the data of a little over 500,000 homeless you get to 20 home per homeless person: A JOKE!
Had dinner tonight with my evil developer friend and we talked affordable housing. First, he said he could not identify a recent, successful, pure public built and managed affordable housing example. Omar’s plan numbers are based on $100,000 per unit. You can’t build ground up units for less than $275,000. In a recent project, his team purchased adjacent dilapidated 4 unit buildings next to their new construction and for about $75,000 per unit upgraded these to livable affordable housing “qualified” units.
Support for building affordable housing is not a check from the government. Tax Increment Financing is available for specific costs in the building process: infrastructure, foundations, certain construction steps: not the whole project. There is a lot of opportunity to partner and create affordable housing.
OK Edward… I’m happy. However, I need your developer friend to tell us what his definition of “successful” is? Is he talking about profit? And if so, is he saying that such housing always produces a loss, or just not a profit developers are looking for.
It’s a better idea than private equity firms buying houses and real estate and then renting the properties out to multiple people who then overwhelm a neighborhood with cars, parking, and so forth. It’s a better idea than private equity period.