General FAQ

Changes Made to Berkeley’s TOPA Policy

This section describes some of the major changes to the proposed policy since it was first introduced in February 2020.

Major changes introduced for January 27, 2022 Council Work Session (see here)

  • Exempt non investor-owned Single Family Residences inclusive of those with an ADU and/or JADU, if that is the Owner’s only rental property in Berkeley.

  • Exempt owner-occupied duplexes if (a) one of the units it the Owner’s principal residence and (b) that the property is the Owner’s only rental property in Berkeley.

  • Preserve offer/acceptance and closing timelines for Right of First Refusal as proposed prior to May 20, 2021 revisions. See timelines here.

  • Implementation Phase-In:

    • Notice of Sale to take effect within 30 days following second reading of the Ordinance.

    • Full implementation of all other TOPA provisions to take effect upon adoption of Administrative Regulations. This will phase full implementation of TOPA when there is adequate staffing and funding to launch the program.

Removing appraisal provision

The appraisal provision was removed from the proposed policy. This clause was removed in response to property owner feedback about the complexity and additional time of an appraisal provision.  

Added section to address confidentiality 

A provision was added to the policy that requires Owners (i.e. sellers) as well as Tenants, Qualified Organizations (QOs), and Supportive Partners to keep information exchanged under TOPA confidential.

Added requirement that tenants cannot sell a waiver of their rights 

A provision was added to the policy clarifying that tenants cannot sell a waiver of their rights. One key distinction of the proposed Berkeley policy from the Washington D.C. policy has been that tenants are not permitted to sell their TOPA rights under the policy; this latest provision clarifies that tenants cannot sell a waiver of their rights either.


Permanent affordability

The first proposed policy required permanent affordability (via recorded deed resale restrictions) on all TOPA purchases. The revised proposal removes this permanent affordability (PA) requirement for tenant purchases financed without public subsidies. While TOPA’s PA requirements remain unchanged for Qualified Organization purchasers, for tenant-purchased properties  PA requirements will now be dictated by the terms of applicable subsidies or limited equity ownership models. This revision responds to feedback from community groups that unfunded PA mandates constrain wealth-building. Public subsidies used to acquire and rehab any purchase typically carry their own enforceable affordability requirements. Enforcement of PA deed restrictions would also be more difficult to enforce on tenant projects without public subsidy. This revision promotes wealth building for tenants able to leverage their own resources and reduces administrative redundancies and burden.

Clarifying process and exemptions

Certain exemptions were clarified in the policy. For example:

  • The medical emergency exemption was clarified; this exemption applies when the transferor demonstrates that the sale of the property is necessary to pay for the immediate health care needs of the transferor or their family member. This exemption is limited to an Owner who owns only one Rental Housing Accommodation with five or fewer rental units.

TOPA in Washington, DC

What have the outcomes of TOPA been in Washington DC?

In 2014-2015, one-third of all multi family transactions in Washington DC happened through TOPA. Since 2002, DC TOPA has helped preserve over 3,500 homes. Between 2015 and 2018 alone, over 1,400 units were purchased through Department of Housing and Community Development (DHCD) TOPA acquisition funding across 26 projects. And TOPA has been an important part of creating limited equity housing cooperatives in DC; as of October 2019, DC had 4,400 units of limited equity housing cooperative housing across 99 buildings.

And in terms of long-term impacts on the City, Washington DC’s budget continues to grow year after year, and TOPA has been in place there since 1980. The District government established the Housing Production Trust Fund (HPTF) in 2002, which is funded by 15 percent of DC’s deed and recordation taxes as well as the City’s general fund. DC’s FY 2021 budget included $100 million for HPTF, despite the impact of the COVID-19 pandemic. In addition, the DC government has continued to invest in housing preservation, including setting up the Housing Preservation Fund, which is a private-public fund that provides short-term bridge acquisition and pre-development financing for TOPA projects.  

How do we know TOPA is useful if DC still has problems with displacement and homelessness?

There is significant displacement in DC, but DC is far ahead of other jurisdictions in its affordable housing programs, which have been built over decades by majority Black legislators and community organizers, most of whom came out of the Civil Rights Movement. There is more work to do, but their work has prevented more mass displacement. Additionally, DC's TOPA went through periods where it was not adequately funded, which is a lesson that it is important to combine both the legal rights and the resources to ensure the policy best meeting its intended outcomes. TOPA is not a silver bullet, but it will be a very important part of keeping Berkeley more diverse and equitable. 

What are the key differences between DC and Berkeley’s TOPA policies?

The Berkeley TOPA team did extensive research on DC's TOPA in order to glean lessons learned and develop the best possible policy from a tenant and property owner/seller perspective for Berkeley. Berkeley’s proposed TOPA policy does not allow tenants to sell their rights, and requires qualified organizations (to whom tenants can assign their rights) to meet certain criteria, like committing to keeping the property permanently affordable. The proposed Berkeley TOPA policy also includes incentives for property owners if they sell to tenants or a qualified organization at the right of first offer stage. Something that was clear from the DC policy is the need for technical assistance to tenant purchasers, as well as City funding to help make the deals happen. Berkeley has a Small Sites Program that can help fund these purchases, and the policy includes technical assistance from supportive organizations. 

Did TOPA cause real estate values in DC to decrease?

No. DC real estate values have continued to rise year after year. Per a 2018 DC Policy Center Housing report, those who purchased a house in DC before 1995 are at least 4.5 times richer in their investment, which has outperformed the 2.6-fold increase in the Washington Metro area. DC is the only jurisdiction in the area that has a comprehensive TOPA. Similarly, a 2020 study found that DC rental properties that received TOPA notices (meaning the owners notified tenants that the property they lived in was going up for sale and what their rights are under TOPA, as required by law) between 2013 and 2019 have seen consistent increases in land prices and cost per unit. The cost per unit in 2013 for these properties was just above $100,000 and in 2019 was well over $200,000.


Why is TOPA Necessary?

Responding to the current crisis: Now is an ideal time to prioritize TOPA; if there are property owners who choose to get out of the rental market, those sales can be opportunities to help tenants stay in place and potentially become homeowners - instead of representing displacement risk as happened in the last market downturn, or massive transfer of rental property ownership from local owners to outside investors and corporations as took place in Oakland and many cities after the last recession. Many places - including Oakland, Los Angeles County, Minneapolis, New York State, and Massachusetts - are turning to opportunity to purchase policies as a means of ensuring a more equitable recovery from the pandemic. 

Preserving existing affordable housing: Both affordable production and preservation of existing affordable housing are key. Preservation is cost-effective compared to new production, with Bay Area acquisition-rehabilitation projects coming in at 50-70% of the cost of new affordable housing production. Preservation proactively prevents displacement and promotes community stability –and where cooperatives and CLTs are involved, promotes community control. Preservation also offers continuity to existing tenants, whereas new production takes years to develop. Moreover, in cases where the building is remaining a rental, there is evidence that keeping the property affordable is good for the City (see "When Renters Rise, Cities Thrive" report). TOPA is one tool in the context of a broader effort to make Berkeley a diverse and equitable place to live.

Giving tenants and affordable housing developers a chance in the fast-moving Bay Area real estate market: The process laid out in the TOPA policy is about leveling the playing field. The San Francisco Bay Area is among the top most expensive places to live in the U.S. According to Zillow, the current median home value in Berkeley is nearly $1.4 million dollars, compared to around $930,000 for Alameda County overall. Since 2000, adjusting for inflation, single-family home values in Berkeley have increased 225%, compared to a 200% increase in Alameda County overall (Zillow, 2020). The rapid rate of Bay Area home sales and high offers from investors has resulted in bidding wars that privilege cash offers and put buyers who use conventional financing at a disadvantage. These challenges place low- and moderate-income tenants, first-time homebuyers, and affordable housing developers such as community land trusts at a severe disadvantage when trying to purchase property in the Bay Area.

Funding is critical, but not enough; the legal rights to purchase and timelines are also an important part of leveling the playing field and reducing barriers to more Berkeley tenants becoming homeowners. Right now, there are Berkeley tenants who do not have a chance to purchase their building because they are not notified about the sale, or getting the chance to organize for a potential purchase. The Northern California Land Trust (NCLT) reports that for single-family homes and multi-family properties alike, it is nearly impossible to compete with open-market buyers who are offering either all cash or more simple financing terms and shorter closing timelines. TOPA would create a process and provide legal rights that give tenants and affordable housing developers a meaningful chance to purchase the property.

Decreasing displacement, especially among Black and Brown communities: Between 1990 to 2018, Berkeley lost 49% of its Black population (while Oakland and San Francisco lost 40% and 43% of their Black populations respectively). In 1990, there were nearly 19,000 African-Americans in Berkeley, comprising 19% of the population. By 2019, that number had fallen to less than 10,000, or 8% of the population. According to a 2019 UC-Berkeley Urban Displacement Project and California Housing Partnership report, between 2000 and 2015, Alameda County lost more than 1,900 low-income Black households, and these losses were concentrated in the flatlands of Oakland and Berkeley. According to UC-Berkeley’s Urban Displacement Project, 75% of low-income Berkeley neighborhoods are at risk of or undergoing gentrification, with increases in high-income White households in the same neighborhoods that lost low-income Black residents. Stronger anti-displacement policies are needed to intervene on these trends; TOPA is highlighted as a best practice in anti-displacement policy.

Increasing homeownership in Black and Brown communities: 51% of White households are homeowners in Berkeley, compared to just 31% of Black households that are homeowners, and 26% of Latinx households (2018 American Community Survey, 5-year estimates). DC TOPA has led to the creation of thousands of affordable homeownership units in limited equity housing cooperatives (LEHCs), home to mostly homeowners of color and the majority located in neighborhoods where housing prices have drastically increased. Of the LEHCs documented in a 2020 Coalition for Nonprofit Housing and Economic Development report, the median share of cooperative residents who are people of color is 75%. These affordable homeownership opportunities have led to housing stability and the opportunity to grow equity.  

 

TOPA Funding

How will TOPA be funded?

Funding is critical to ensure that TOPA leads to meaningful outcomes. There will be funding needs around supporting the acquisition and rehabilitation of properties, as well as for supportive partners that will provide guidance to tenants considering purchases under TOPA. The TOPA working group has always maintained funding as a key priority in our advocacy efforts, and the Mayor has committed to an initial investment of $10M into Berkeley’s Small Sites Program (SSP) to support TOPA purchases. SSP is a program that started as a pilot in 2017 to fund small-scale preservation projects in Berkeley, modeled off of San Francisco’s program of the same name. The fact that such a fund already exists here in Berkeley is a great foundation for TOPA to build off of. Beyond local funding, there is also regional and statewide funding that TOPA will be able to draw on. Such sources include funding from the Bay Area Housing Finance Agency (BAHFA) as that gets fully funded, as well as county-level funds. Additionally, the working group has had several conversations with Community Development Financial Institutions (CDFIs) who could provide rapid acquisition funding in order to ensure purchases could happen within TOPA timeframes. The recent purchase of Jocelyn’s Corner is a great example of a policy being established while funding is still solidifying. SB1079 allowed Jocelyn Foreman to work with many partners and the Northern California Land Trust to match the highest bid at the foreclosure auction and purchase the property on Jocelyn’s behalf, with the goal of transferring ownership of the house to her. A huge fundraising campaign and the public spotlight allowed this purchase to happen, but ongoing funding is needed for SB1079 purchases and is being championed by the California Community Land Trust Network and allies for adoption in this year’s state budget. 

 

Why is TOPA a good investment in housing affordability?

TOPA is one of many necessary strategies to create affordable housing in Berkeley. Both production of new affordable housing and preservation of existing affordable housing are critical to Berkeley’s housing affordability landscape. Preservation has unique benefits, however; for example, it allows people to stay in their current homes and avoid the disruption and trauma of displacement. Additionally, it can be more cost effective than production of new affordable housing; a 2020 Enterprise report found that Bay Area acquisition-rehabilitation projects come in at 50-70% of the cost of new affordable housing production. Most importantly, TOPA creates distinct outcomes from the production of new affordable rental housing; TOPA creates pathways to affordable homeownership.