Minneapolis examining right of first refusal policy for multifamily sales

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With the hope it will preserve naturally occurring affordable housing and bridge racial disparities of homeownership, Minneapolis City Council Member Jeremiah Ellison has reintroduced ordinances that would create an opportunity for tenants and community groups to purchase some apartment buildings.

The ordinances related to the policies were referred to city staff at the Business, Housing and Zoning Committee meeting on Feb. 13.

The two policies that would arise from the ordinances are the Community Opportunity to Purchase Act and Tenant Opportunity to Purchase Act, commonly referred to as COPA and TOPA, respectively.

COPA is a policy that requires a notice when a property owner looks to sell their building, which gives affordable housing developers or preservers the chance to offer to buy the property. TOPA, on the other hand, notifies the renters living in a property that is going up for sale and gives them the chance to purchase the unit before it is sold to a different owner.

“It’s not about setting the price, but it is about giving some opportunity for folks who maybe are a little bit less cash rich.” Ellison said in an interview with Finance & Commerce. “It does sort of allow for them to interject in the timeline when they maybe otherwise wouldn’t have even known about the opportunity.”

This is not the first time that Ellison has supported efforts to examine a COPA or TOPA policy while on the City Council. Such policies were first introduced in 2019, but he said they fell to the wayside because of the uncertainty introduced by the COVID-19 pandemic.

Ellison said he will be getting briefs from city staff on their study of COPA and TOPA and would like to see the “more baked” COPA policy have some action taken on it this year. He also said he is open to the idea that the policy might “miss the mark.”

“The question always is, ‘If the goal is to close the homeownership gap, does this policy achieve that?’” he said. “If the answer is no, then we don’t bring it forward — we keep working on it, trying to get to that question. If it is yes, then it’s ready to go, we’ll bring it before the community.”

Minnesota Multi Housing Association President Cecil Smith said he does believe the TOPA policy is well-intended but that it would slow down the markets and disincentivize “good operators from being in that market.”

He points to Washington, D.C., which has had a TOPA policy since 1980, and that it has made the market illiquid. He also said it would saddle tenants with a responsibility they are not prepared for and ultimately place them in a bad position financially if something goes wrong.

“It’s lost on me how this enables housing stability, even if you get the deal done, which I have yet to see a successful example of this,” Smith said.

Smith said MHA does not have a stance on COPA.

Peter McLaughlin, executive director of LISC Twin Cities, a nonprofit that supports the development and preservation of affordable housing, said the COPA and TOPA policies are “worth further exploration” but emphasized that the city would likely need to create a financing mechanism for when tenants purchase the properties.

“The needle you have to thread here is how do you get enough resources to make this a viable undertaking, to make the housing units sustainable in the long run,” McLaughlin said.

The policies would also need to not serve as a deterrent to rental property owners, McLaughlin said, because that could potentially cause an issue with creation of future housing stock.

Ellison also acknowledged money would have to be put forward to support the tenants and said that would come in conjunction with the ordinance.

“We don’t have the policy yet, so we don’t have the programmatics,” he said.

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