Title
Discuss Tenant Opportunity to Purchase Arrangements
Recommended Action
Committee Recommendation:
Not referred to a committee.
City Manager Recommendation:
Hold a discussion on tenant opportunity to purchase with local stakeholders. Discuss system capacity and roles, approaches, and provide direction to staff on next steps.
Report
Issue:
Whether to hold a discussion on tenant opportunity to purchase with local stakeholders. Discuss system capacity and roles, approaches, and provide direction to staff on next steps.
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
Background and Analysis:
Tenant Opportunity to Purchase (TOPO) policies establish a structured process and timeline requiring property owners to notify tenants of an impending sale and provide them with an opportunity to purchase the property. In many cases, tenants are also granted a right of first refusal, allowing them to match an offer from another prospective purchaser.
Frequently, TOPO policies are expanded to include nonprofit affordable housing organizations, local governments, and public housing authorities. These broader approaches are commonly referred to as Community Opportunity to Purchase (COPO) policies.
TOPO and COPO policies can be applied to a variety of housing types, including single-family homes and multifamily residential properties. Because many households reside in multifamily housing, these policies have the potential to preserve affordability for a larger number of residents. They can also create opportunities for long-term affordability when properties are acquired and converted to ownership models such as limited-equity cooperatives.
TOPO and COPO policies are intended to help renters who would not be able to compete with investors in the real estate market. These approaches can help stabilize housing costs, support transitions from investor ownership to resident ownership, and reduce the risk of displacement for existing renters.
As with any right of first refusal or opportunity-to-purchase requirement, there is some legal risk that such policies could be challenged as an unconstitutional taking or as a violation of substantive due process. However, statewide advocates have successfully addressed these legal concerns in the context of manufactured housing communities.
In 2023, the Washington State Legislature amended the Manufactured Home Landlord-Tenant Act (MHLTA) to provide manufactured homeowners with an opportunity to compete for the purchase of their manufactured home community. The law requires property owners to notify residents of an intended sale and allows residents to submit an offer to purchase the property.
Several resources have been established to support resident purchases of manufactured home communities. The State has dedicated funding for acquisitions and technical assistance through Resident-Owned Communities Northwest (ROCNW), a regional affiliate of ROC USA and a program of the Northwest Cooperative Development Center (NWCDC). As a Community Development Financial Institution (CDFI), NWCDC provides pre-development financing, including earnest money loans, to resident groups pursuing community ownership.
Locally, the Thurston County Regional Housing Council’s Opportunity Fund may help manufactured home communities and other tenant groups that are organizing under cooperative ownership models to acquire or rehabilitate housing.
Statewide stakeholders are exploring opportunities to build upon the success of manufactured housing conversions and expand opportunity-to-purchase policies to multifamily housing. Staff is monitoring these discussions, which are being convened by NWCDC. As part of this effort, NWCDC recently released the Washington Multifamily Opportunity to Compete Playbook, which is attached to this report.
Alignment with City workplans and goals
Increasing access to homeownership is identified as a priority in the City’s Housing Action Plan and aligns with the City’s Comprehensive Plan.
The City’s Housing Action Plan identifies several actions relating to support for homeownership and cooperative purchase:
• 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.
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.
Previous work to date
At the direction of the Land Use and Environment Committee (LUEC), staff completed initial research on the feasibility of a TOPA/COPA policy. Additional information regarding prior work is included in an attachment to this report.
Special Meeting with stakeholders
LUEC directed staff to convene a special meeting with stakeholders to discuss tenant opportunity-to-purchase policies and related strategies. Staff invited representatives from NWCDC/ROCNW, Thurston Housing Land Trust, the Washington State Department of Commerce Homeownership Unit, a local credit union, and individuals who have previously conducted research and advocacy on this topic.
The goals of the stakeholder discussion are to:
• Identify ways the City could support transitions to tenant ownership
• Current landscape and organizational roles to understand if TOPO/COPO is feasible
• Initial discussion regarding policy design or approach
Participants representing organizations or programs will be asked to describe the work they currently do, their potential role or connection with TOPO/COPO, and capacity to pursue this work. Participants will discuss possible roles for the City of Olympia to support this work and, if time allows, what approaches or policy elements may be most effective (given the current landscape and system capacity). See the attachment to this report titled Special Meeting Agenda which is available to guide this discussion.
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:
Enacting a tenant opportunity to purchase will prevent displacement when a rental property goes up for sale, stabilize households and housing costs, as well as provide homeownership opportunities to build wealth. 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, housing stability, and lower household costs. Decreasing housing costs for cost-burdened households provides more flexibility to increase spending on food, healthcare, and other resources.
Rental property owners may 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:
While policy action will not require additional financial investment (beyond staff time), additional programmatic support will likely be necessary to realize the benefits of the policy. Financial assistance for low to moderate income residents to acquire and rehabilitate their property may be needed if Thurston Regional Housing Council Opportunity Fund support is not available or sufficient.
Additional technical assistance will also likely be required for tenant organizing, operations and management, obtaining financing, legal assistance, and other supports. Existing nonprofit organizations who provide similar assistance to resident-owned manufactured housing communities may need additional support to build capacity to take on this new work.
Options:
1. Hold a discussion on tenant opportunity to purchase with local stakeholders. Discuss system capacity and roles, approaches, and provide direction to staff on next steps.
2. Do not hold a discussion on tenant opportunity to purchase with local stakeholders and take other action.
3. Hold the discussion at another time.
Attachments:
Special Meeting Agenda
Tenant Opportunity to Purchase Work to Date
Washington Multifamily Opportunity to Compete Playbook
Homeownership Project Final Brief
Tenant Opportunity to Purchase Summary of Literature Recommendations