Despite the end of another cold winter in Massachusetts, many small property owners still feel the chill of hostile housing proposals – which would violate their property rights – circulating on Beacon Hill. Among the proposals heard by the Massachusetts state legislature, there is one proposal, in particular, that remains more ominous due to its silent progression since last year without sufficient alarm raised by lawmakers and the public.
In fact, a version of this silent killer actually passed the House and Senate in 2021 and would have become law had Gov. Charlie Baker not vetoed it at the end of the legislative session, thereby averting an override of his veto. What the governor recognized, which evaded some other officials, was that the proposal would have imposed a government mandate dictating when, how and to whom property owners could sell their buildings.
Often called a “tenant right of first refusal,” or an alternative abbreviation “TOPA,” this proposal amounts to the government pre-ordaining a small set of buyers, who extend beyond tenants themselves in some cases, while artificially blocking others from purchasing rental properties on the open market.
As numbered currently, S.890 and H.1426 would impose a tenant right of first refusal in the sale of rental properties throughout Massachusetts. H.4208, meanwhile, is a home rule petition that would apply the same restrictions in the city of Somerville exclusively.
If passed, these bills could prevent property owners from selling their properties at market value and make it much more difficult for buyers to purchase and invest in rental property. The law restricts the seller’s ability to select the strongest offer and instead forces the seller to accept contingencies and abide by terms and conditions spelled out in the legislation, rather than the marketplace.
If this policy is imported to Massachusetts, property owners could witness their life-long work to build equity stolen from them.
This legislation would also create significant delays and uncertainty for buyers, especially when trying to secure financing, as the buyer must wait in place for the right of first refusal process prescribed in the bills to play out.
D.C. a Cautionary Tale
Per economist and economic development consultant Joe Cortright, writing in City Observatory in 2020, Washington, D.C.’s TOPA law has allowed a small subset of lawyers and speculators to use tenants as pawns in delaying the sale of rental properties, in order to extort money from property owners. Meanwhile, less than 5 percent of tenants ended up buying the properties that they rented under this policy, according to a study reported by the Washington Post.
In Washington D.C., a “for sale” sign on an apartment building serves as a blinking neon ad to attorneys who have promised tenants large sums of money if they obstruct the owner’s rightful attempt to sell the property on the owner’s terms. The attorneys then extort money from the property owner by pushing the owner to pay off each tenant to forgo his or her TOPA rights – typically $15,000 to $20,000 depending on factors like the size of a unit. However, according to a 2017 report by NBC News Washington, payouts were said to be as high as $50,000 to $100,000.
After delaying the sale of a property, the attorneys take the greater share of the property owner’s payoff, yielding little to no advantage to the tenant, who is diverted from finding alternative and affordable housing options. Then the attorneys start this process of extortion all over again by hijacking the owner’s effort to sell each time the owner finds a new prospective buyer. Since time is of the essence during a closing process, executing a sale on terms that are favorable to an owner becomes essentially impossible under TOPA. The law has made selling multifamily properties much more difficult and expensive.
It Could Happen Here
Tenants were also found to be selling their TOPA rights to speculators for large sums of money – to the detriment of other potential buyers – while delaying the closing process. NBC News Washington’s 2017 report also showed that TOPA can contribute to higher rents. It could even contribute to a greater shortage of affordable housing, if new construction of multifamily homes were halted due to the onerous provisions within the District’s boundaries.
If this policy is imported to Massachusetts, the property owners who wish to sell their properties as part of their retirement plans would be barred from doing so, as they witness their life-long work to build equity stolen from them. Moreover, property tax revenues would shrink, likely triggering tax increases on the general public to compensate for those lost revenues.
Given that TOPA bills almost became law in Massachusetts if it were not for a last-minute save by Gov. Baker, it is clear that this threat remains real and imminent, especially given the hijinks and shenanigans that traditionally take place before the end of the legislative session, which will conclude this year on July 31.
Thus, the Small Property Owners Association urges all who care about fair housing policies to contact their representatives with heightened urgency to oppose these bills. If tenant activists believe that “housing is about people,” they must respect the rights of the very people who provide more than 60 percent of the rental housing in Massachusetts.
Amir Shahsavari is the vice president of the Small Property Owners Association. He can be reached at firstname.lastname@example.org.