Title
Rent to Own/Tenant Opportunity to Purchase Arrangements Discussion
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Discuss policy and programmatic options related to tenant opportunity to purchase and rent to own. Provide direction to staff on options to explore further.
Report
Issue:
Whether to Discuss policy and programmatic options related to tenant opportunity to purchase and rent to own. Provide direction to staff on options to explore further.
Staff Contact:
Christa Lenssen, Senior Housing Program Specialist, Community Planning & Economic Development, 360.570.3762
Presenter(s):
Christa Lenssen, Senior Housing Program Specialist, Community Planning & Economic Development, 360.570.3762
Background and Analysis:
Staff began exploring tenant opportunity-to-purchase and rent-to-own approaches to homeownership in 2023, following an Affordable Homeownership Study and direction from City Council and the Land Use and Environment Committee.
A rent-to-own, or lease-to-own, arrangement involves a landlord and tenant agreeing to terms under which the tenant will eventually purchase the property. In Olympia, this would likely apply to single-family stick-built homes and manufactured homes, with each transaction benefiting one household. While this approach increases access to homeownership and wealth-building, these sales would not include additional affordability standards or long-term protections for future households.
Tenant opportunity-to-purchase policies provide a structured process for tenants to be notified of an impending sale and given the chance to purchase the property, often with a right of first refusal to match other offers. These policies can also involve nonprofit affordable housing organizations, local government, or public housing authorities (sometimes called community opportunity-to-purchase or COPA). They can apply to various housing types, including multifamily residences, potentially impacting many households. There is also potential to create long-term affordability if properties are converted to limited-equity cooperatives.
Both rent-to-own and tenant opportunity-to-purchase programs help renters who might otherwise be outcompeted by investors, stabilize housing costs, transition properties to owner-occupants, and prevent displacement. Both approaches can be implemented with modest staff time and minimal costs. However, as noted in the following sections, supportive program elements are likely needed to fully achieve the City’s intended goals.
Expanding access to homeownership is a priority in the City’s Housing Action Plan and aligns with the Comprehensive Plan.
The City’s Housing Action Plan identifies several actions relating to support for homeownership or long-term affordability:
1.g. Partner with low-income housing developers to expand homeownership opportunities.
1.h. Provide funding for non-profit organizations to buy income restricted units proposed to be converted to market-rate housing.
1.i. Provide funding for low-income and special needs residents to purchase housing through community land trusts.
2.d. Consider a Tenant Opportunity to Purchase (TOPO) Ordinance.
2.g. Establish a down payment assistance program, for which the City may be interested in partnering with the Washington State Finance Commission to carry out.
The City’s Comprehensive Plan Update outlines the following strategies to prevent tenant displacement and preserve low-income housing stock:
• Consider adoption of policies to help renters access homeownership opportunities. Consider a Tenant Opportunity to Purchase Ordinance (TOPO) to give renters the first right to purchase their rental unit if the landlord decides to sell.
• Encourage and support community land trusts, tenant cooperatives, or nonprofit ownership models to protect residents from displacement due to redevelopment or corporate acquisition.
• When Community Development Block Grant, Home Fund, or Housing and Urban Development-funded buildings are at risk of being converted to market-rate status, inform the tenants of any purchase and relocation options available. When possible, help the Housing Authority of Thurston County and nonprofit organizations buy such housing.
Rent to own arrangements
In April 2024, the City Council approved an exemption from the rental registry for property owners renting to immediate family members. At the same time, Council directed staff to explore a potential exemption for landlords entering into rent-to-own contracts with tenants.
Staff research, including input from legal aid attorneys, raised concerns about risks to tenants in rent-to-own arrangements. Some agreements require tenants to invest upfront funds or perform maintenance without additional legal protections. In such cases, eviction could result in the tenant losing both their housing and any investment made. Additionally, some properties may be in disrepair or ineligible for financing, creating further risks. To address these concerns, staff developed an overview document outlining benefits, risks, and potential solutions, which was presented to the Land Use & Environment Committee (LUEC) in November 2024 and is included with this report.
Staff recommended requiring the following due diligence for properties seeking exemption: a home inspection to confirm the property’s condition and financing eligibility, an appraisal to determine a fair purchase price (if specified), and a title search to ensure clear ownership. The City could mandate these steps, provide partial subsidies for costs, and offer tenant education on their importance. Staff estimates the cost of these steps at approximately $2,000 per home, based on Fall 2024 outreach to local real estate professionals.
If the City allows a rent-to-own exemption, staff further recommends contracting with a qualified legal service provider to assist parties in understanding risks, negotiating terms, and drafting written contracts. Sound Legal Aid provided a draft scope of work and cost estimate in mid-2025, including preparation of contract templates and educational materials, individualized consultation, and contract drafting per transaction, along with hourly and monthly indirect rates. Once a written contract is executed and due diligence is completed, parties may submit a request to the City for exemption from the rental registry and inspection program.
After drafting exemption language in the Rental Housing Code, staff’s primary roles would include:
• Developing and monitoring a contract with a legal aid service provider;
• Administering funds (if available) to perform due diligence (inspection, appraisal, title search);
o If no funds are available, the legal aid service provider could be asked to develop educational materials about the rationale for completing these steps, how to complete these steps, and negotiate who will pay for these costs in the contracting process
• Recording the exemption from the rental registry and inspection program;
• Providing community outreach and education;
• Tracking and reporting outcomes.
LUEC directed staff in November 2024 to continue exploring rent to own arrangements after the initial briefing.
Tenant Opportunity to Purchase
In 2023-2024, the City contracted with a consultant to conduct an Affordable Homeownership Study. The study evaluated options and provided recommendations for a potential Tenant Opportunity to Purchase Ordinance (TOPO).
Consultants shared sample policies from other jurisdictions, including Takoma Park, Maryland-a small city of approximately 18,000 residents that adopted its TOPO law in 1986. The City’s consultants recommended initially applying a tenant opportunity-to-purchase policy to rental properties with ten or more units. Supporting materials, including a model conversion project for a 40-unit property, outline estimated costs and financing strategies (Homeownership Project Final Brief, pages 5 and 9-14).
Tenant opportunity-to-purchase policies for manufactured home communities have gained traction in Washington state. In 2023, the Washington State Legislature amended the Manufactured Home Landlord Tenant Act (MHLTA) to allow manufactured homeowners to compete for the purchase of their communities. The law requires owners to notify residents of a planned sale and allow them to submit an offer. State financing and technical assistance are available through ROCNW (Resident Owned Communities Northwest), a regional affiliate of ROC USA and program of the Northwest Cooperative Development Center (NWCDC), which provides pre-development loans for earnest money. Local support is also available through the Regional Housing Council’s Opportunity Fund for cooperative acquisitions and repairs.
Staff reviewed policies from multiple jurisdictions, including Washington, D.C., which has operated a TOPO for over 40 years. Lessons learned indicate that financial support for acquisition and technical assistance is essential for tenants to purchase properties cooperatively. Flexible and timely financing is critical to successful conversion. When effectively implemented, TOPO can preserve affordable housing, prevent displacement, improve household stability, and support better property maintenance, with up to 75% fewer housing violations observed in tenant-owned properties.
Based on these findings, staff recommends that if the City pursues a TOPO, funding sources should be identified to support tenant acquisitions, including RHC Opportunity Funds and third-party sources such as LISC Puget Sound and the Washington Community Reinvestment Association. Staff also recommends supporting nonprofit capacity-building to provide technical assistance for tenants exploring cooperative ownership. A next step could include outreach to NWCDC/ROCNW to assess capacity and potential funding for pre-development, acquisition, and permanent financing, helping identify any gaps needed for successful implementation of a local TOPO.
After drafting the Tenant Opportunity to Purchase Ordinance, staff would be responsible for program implementation through a third-party technical assistance provider. Staff’s primary roles would include:
• Developing and monitoring a contract with a technical assistance provider(s);
o Administering funds (if available) to acquire the property, perform repairs, or connect tenant organization with existing funding supports;
• Providing community outreach and information;
• Ensuring compliance with notice timelines and process;
• If nonprofit organizations are provided the opportunity to compete for purchase, keep records of parties to notify when a property goes up for sale and notify parties;
• Tracking and reporting outcomes.
Next steps
Staff is requesting guidance from the LUEC on whether to pursue additional research and policy options. Specifically, staff seeks direction on whether to explore both rent-to-own and Tenant Opportunity to Purchase (TOPO) programs, one of these options, or neither. Staff also requests input on any additional information or options LUEC would like included. Based on LUEC’s guidance, staff will return in April with additional information or policy options.
Climate Analysis:
It is anticipated that this work will have no direct impact on reducing greenhouse gas emissions. Any low to moderate income households who are able to become homeowners in the future may be eligible for other City-funded programs, such as energy efficiency upgrades and group solar projects. Any residential development will have impacts on urban density and there may be opportunities to reduce energy use in new or existing construction at a later date. Tenants who are able to stay in their homes rather than facing displacement may have reduced commute times, reducing greenhouse gas emissions.
Equity Analysis:
Many community groups have historically been left out of homeownership and as a result, have had less opportunity to create individual and intergenerational wealth. The average American homeowner has a net worth that is approximately 40 times that of the average renter. Creating homeownership opportunities can not only have an immediate impact on housing stability, but a long-term generational impact on wealth.
According to ACS data (retrieved from the Thurston County Assessment of Fair Housing), about 82% of Olympia households with a single mother rent rather than own their homes. According to HUD CHAS data (retrieved from Department of Commerce), 50% of white households in Olympia rent, while 61% of BIPOC households and 73% of Hispanic/Latinx households rent. The Washington State Department of Commerce report Improving Homeownership Rates for Black, Indigenous, and People of Color in Washington finds that 2,866 Black, Indigenous and People of Color (BIPOC) households would need to become homeowners in Thurston County to equal the rate of white, non-Hispanic homeownership.
Economic disparities and lack of intergenerational wealth have contributed to income gaps between BIPOC and white households. According to HUD CHAS data, 24% of households of color in Olympia and 22% of Hispanic/Latinx households in Olympia earn less than 30% of Area Median Income, while 15% of white households earn less than 30% of Area Median Income. According to 2020 ACS data (retrieved from the Assessment of Fair Housing), a person with a disability earned on average $26,075, compared to $37,168 earned by a person without a disability. Just over 33% of single mother households in Olympia had income below the federal poverty level, compared to 11% of the total population.
Low to moderate income households, people of color, people with disabilities, single parents, and other groups who have more difficulty accessing homeownership opportunities will benefit from increased access to affordable homeownership opportunities. Decreasing housing costs for cost-burdened households provides more flexibility to increase spending on food, healthcare, and other resources.
If Council passes policy action without financial support, many renters may still have difficulty accessing the ownership opportunities and the policies may disproportionately benefit more moderate to high income earners who can pay for home inspections, appraisals, title searches, downpayments, and provide earnest money without City support. Staff has suggested options for City financial support to ensure these policy actions to lead to ownership transitions.
Rental property owners may benefit from rent-to-own agreements that balance the interests of owners and tenants and exempt them from rental registry and inspection requirements. Rental property owners would be burdened by additional requirements and longer timeframes associated with tenant opportunity to purchase policies. There is limited data on landlord demographics. City of Olympia surveys include demographic data, but not all respondents provide demographic information and there is a limited sample size. Approximately 71% of landlords who completed the landlord survey (part of the Olympia rental housing code update in 2022) identified as white, which is similar to the general population of Olympia overall.
Neighborhood/Community Interests (if known):
Affordable housing is of great interest to the community. In a community survey completed as part of the Assessment of Fair Housing in 2022, increased access to homeownership was identified as a key priority. Over half (340 of 605) of survey respondents selected increased access to homeownership as one of the most important strategies to increase equity and address housing disparities in Thurston County. Any work on this topic will draw local and regional attention and public engagement.
Financial Impact:
Financial investment will likely be required to provide programmatic support for a pilot project and/or policy actions that facilitate the transition of rental housing to tenant ownership.
For a pilot project supporting rent-to-own arrangements, staff recommends contracting with a legal services provider experienced in these agreements. A proposal from Sound Legal Aid is included in the staff report, with an annual contract cap not to exceed $50,000. The City could also fund property inspections, appraisals, and title reports, with staff recommending a budget of at least $2,000 per transaction, excluding legal services.
If the City pursues a Tenant Opportunity to Purchase Ordinance (TOPO), financial assistance may be needed to help low- and moderate-income residents acquire and rehabilitate properties, particularly if RHC Opportunity Fund support is unavailable or insufficient. Additional technical assistance is likely required for tenant organizing, operations and management, financing, and legal support. Nonprofit organizations that currently support resident-owned manufactured housing communities may need capacity-building to provide these services, and staff can engage with local nonprofits to assess current capacity and potential needs.
Options:
1. Discuss policy and programmatic options related to tenant opportunity to purchase and rent to own. Provide direction to staff on options to explore further
2. Do not discuss policy and programmatic options related to tenant opportunity to purchase and rent to own.
3. Take other action.
Attachments:
Homeownership Project Final Brief
Rent to Own Overview
Rent to Own Proposal
City of Takoma Park, MD webpage
TOPA Summary of Literature Recommendations