Clarifying TOPA to encourage investment in the District of Columbia

Today, I will speak to the proposed reforms to the Tenant Opportunity to Purchase Act (TOPA), as introduced through the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act and the Common Sense TOPA Reform Amendment Act. My testimony draws from our March 2025 report, TOPA’s Promise and Pitfalls: Balancing tenant rights, affordability, and housing investment in Washington, D.C., which analyzed 11 years of TOPA activity, housing stock data, and stakeholder interviews. I have attached the full report to my testimony for your perusal as well as a more detailed analysis of what buildings and TOPA activity would be affected by the RENTAL Act.

What we know about TOPA today

TOPA activity including transaction and tenant association (TA) formations are highly concentrated in older, smaller, rent-controlled buildings.

• Over 94 percent of transactions subject to TOPA and 96 percent of TA formations were in rent-controlled buildings that were built before 1978.
• Most of these instances were in smaller buildings: 71 percent of TA formations were in buildings with fewer than 20 units; and 88 percent were in buildings with fewer than 50 units.

Yet, TOPA has implications beyond these buildings, often delaying investment and complicating preservation efforts.

• Transactions can be delayed by over a year—up to 420 days—due to regulatory uncertainty and legal challenges.
• These delays create risk for investors, particularly in a high- and variable-interest rate environment, and reduce housing production.

The RENTAL Act and Common Sense TOPA Reform Amendment Act make changes to TOPA to alleviate issues with recapitalizations and investment in new construction and exempt affordable units. But they do not address other issues including incompatibility with LIHTC qualifications, issues with internal transfers of interest, and insufficient data collection to evaluate the effectiveness of TOPA laws.

Estimating the impact of the RENTAL Act

The RENTAL Act proposes targeted exemptions to spur new housing development and preserve affordability. Specifically, it exempts buildings that are either:

1. New or substantially improved within the last 25 years, that are market rate (where over half the units have rents at 80 percent of Area Median Income (AMI) or higher), or
2. Income restricted (over half the units are covenanted at or below 80 percent of AMI) for at least 20 years, with 5 or more years remaining on the covenant at time of sale.

We estimate that the RENTAL Act would exempt 19 percent of D.C.’s rental buildings (572 buildings) and 35 percent of rental units (47,982 units).

Our analysis shows that under this proposal:

• 19 percent of D.C.’s rental buildings (572 buildings) and 35 percent of units (47,982 units) would be exempted.
• These properties account for just 6 percent of recent TOPA-eligible transactions and 4 percent of registered tenant associations (TAs).¹

Summary of exempted buildings and units under the RENTAL Act by exemption category ^2,3,4:

In other words, most properties that go through TOPA today—older, rent-controlled buildings—would remain unaffected:

• Over 80 percent of multifamily rental buildings (2,433 buildings) and 65 percent of multifamily rental units (91,215 units) would still be subject to TOPA under the RENTAL Act. 93 percent of buildings that would still be subject to TOPA are rent-controlled.
• Over 99 percent of rent-controlled buildings would remain subject to TOPA.
• Nearly half of newer buildings built in the last 25 years would still be subject to TOPA due to prevailing rents or insufficient covenant duration.
• Buildings less than 25 years old accounted for 5.4 percent of the applicable transactions, and 3.7 percent of total TAs, meaning that exemptions to these properties will affect little TOPA activity.

The RENTAL Act is a step in the right direction. But its practical impact on reducing transaction friction or attracting capital will be limited unless the scope of reform is expanded.

Evaluating the Common Sense TOPA Reform Amendment Act

The Common Sense TOPA Reform Amendment Act offers several provisions that attempt to address important issues with how TOPA functions today:

• A temporary exemption for new construction (for 3 years)
• An exemption for LIHTC exits
• Allowances for limited equity partner exits
• Data collection requirements on TOPA outcomes including information on buyouts, rent-stabilizations, subsidies, and sales price

However, these proposed reforms are not sufficient to address the TOPA challenges they intend to address. Seven key issues stand out.

1. Three years is too short.
   Most housing investments recapitalize between years 5 and 15 as they rebalance their portfolios.⁵ Limiting the exemption for new construction to just three years does little to reduce investor uncertainty.
2. The LIHTC fix is only partial.
   While the bill allows an exemption at LIHTC exit, it fails to reconcile TOPA’s exemption criteria with federal tax requirements. Under current TOPA law, LIHTC exemptions require the original owner to remain, while federal credits require ownership change. This inconsistency jeopardizes preservation deals.
3. Legal ambiguity remains.
   DHCD currently lacks the capacity to certify tenant associations or determine exempt status. This allows any tenant—regardless of TA standing—to challenge a sale, creating legal risk. DHCD should certify each tenant association, making it clear which group has standing to negotiate a purchase or assign purchase rights. Additionally, legislation should reinstate DHCD’s role in certifying exemptions and tenant associations to limit frivolous claims and create more predictable outcomes. In the past, DHCD reviewed TOPA sales and transactions, and certified which ones were exempt from the process. Bringing back this process would stop frivolous lawsuits from halting these proceedings.
4. DHCD compliance review duplicates existing systems.
   The bill requires DHCD to review each transaction for compliance with TOPA—duplicating work already performed by title agencies. Title agencies already enforce compliance because title insurance depends on it. A more useful role for DHCD would be to determine and certify which transactions are exempt from TOPA altogether.
5. Certification of qualified purchasers could function as a buyer subsidy.
   The bill directs DHCD to create a certification process for “qualified purchasers” and provides financial incentives when tenants assign their rights to these purchasers including exempting transactions from deed and recordation taxes. This creates a public subsidy that could raise transaction prices and give qualified purchasers a competitive advantage over market buyers. The policy unintentionally distorts the market by embedding tax breaks into private negotiations.
6. Data collection is a step in the right direction but should go further.
   The proposed data collection requirements are necessary to evaluate TOPA’s effectiveness. The legislation calls for information on unit count, sales price, and information on buyouts, rent stabilization, and income restricted units and subsidies. This should be expanded to include:
   • Length of the transaction
   • Other negotiated outcomes
   • A broader definition of “buyout” to include payments for assignment of rights
   • Data on TA registrations and TA purchases
   • Time elapsed between Offer of Sale and the final sale
   • Whether the transaction was completed by the original purchaser or another buyer.

These changes would provide a more complete picture of TOPA’s impact and guide future reforms.

TOPA remains one of the most powerful—but least predictable—tools in the District’s housing policy. Both the Common Sense and RENTAL Act proposals take important steps toward reform. But without clearer rules, streamlined oversight, and alignment with the District’s housing goals, the law will continue to discourage the very housing investments the city needs.

1. Over the past two decades, the District added 48,114 new rental units across 356 multifamily buildings. Despite this growth, new buildings have seen limited TOPA activity: Between 2012 and 2023, 419 multifamily transactions were subject to TOPA. Only 23 transactions (5.4 percent) occurred in buildings less than 25 years old. Of these 23 transactions, only 6 led to the formation of a registered tenant association (TA)—just 3.7 percent of all TAs formed during this period. As such, exempting newer buildings from TOPA would affect only a small share of transactions and an even smaller share of tenant associations.
2. “Market rate” refers to buildings that have been built or substantially renovated in the last 25 years and meet the affordability requirement that more than 51 percent of the units in a building have rents under 80 percent MFI. To estimate this, the D.C. Policy Center used the median rent in a building as the qualifier: if the median rent is under 80 percent MFI, that means that at least half the units in the building must have rents at that rate or lower.
3. “Committed affordability” refers to buildings that were financed by the Housing Production Trust Fund (HPTF) and have long-term housing covenants. While we do not have information on the length of affordability covenants on these properties, it is likely that almost all units have more than 5 years remaining on the covenant, based on typical 40-year covenants and when buildings were built. This estimate may include properties that are already exempt from TOPA, as many HPTF-funded properties have been individually exempted from TOPA through council legislation. These buildings represent 3.5 percent of all buildings in the District.
4. The “publicly owned” estimate is based on D.C. tax rolls where D.C. government is listed as the property owner. There are approximately 2,000 other units that are owned by private developers with D.C. government as a partial or secondary owner. These units were not captured in our analysis, but they are still considered publicly owned housing and D.C. government is ultimately responsible for the units.
5. Based on investor and broker interviews.