Despite the end of another cold Massachusetts winter, many smallholders are still feeling the chill from hostile housing proposals — which would violate their property rights — driving on Beacon Hill. Among the proposals heard by the Massachusetts state legislature, there is one proposal, in particular, that remains more worrisome due to its silent progress since last year without sufficient alarm being 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 Governor Charlie Baker not vetoed it. the end of the legislative session, thus avoiding overriding his veto. What the governor acknowledged, which some other officials eluded, was that the proposal would have imposed a government mandate dictating when, how and to whom owners could sell their buildings.
Often called a“tenant’s pre-emption right” or another abbreviation “TOPA”,this proposal amounts to the government pre-ordaining a small group of buyers, which expand beyond the tenants themselves in some cases, while artificially preventing others from buying rental properties on the open market.
As currently numbered,S.890andH.1426would impose a right of first refusal on tenants in the sale of rental properties throughout Massachusetts.H.4208meanwhile, is a petition for home rule that would apply the same restrictions in the town of Somerville exclusively.
If passed, these bills could prevent landlords from selling their properties at market value and make it much harder for buyers to buy and invest in rental properties. The law limits the seller’s ability to select the strongest offer and instead requires the seller to accept contingencies and meet the terms set out in the law, rather than the market.
If this policy is imported into Massachusetts, owners could witness to their lifelong work to build capital that was stolen from them.
This legislation would also create significant delays and uncertainty for buyers, particularly when trying to obtain financing, as the buyer must wait for the right of first refusal process provided for in the bills to materialize.
DC a cautionary tale
By Economist and Economic Development Consultant Joe Cortright, writing in City Observatory in 2020, Washington, DC’s TOPA law allowed a small subset of attorneys and speculators to use tenants as pawns to delay the sale of rental properties, in order to extort money from landlords. Meanwhile, less than 5% of tenants ended up buying the properties they were renting under this policy, according to a study reported by the Washington Post.
In Washington DC, a “for sale” sign on a building serves as a flashing neon advertisement for lawyers who have promised tenants large sums of money if they interfere with the landlord’s legitimate attempt to sell the property on the landlord’s terms. The lawyers then extort money from the landlord by pushing the landlord to pay each tenant to give up their TOPA rights – typically $15,000 to $20,000 depending on factors like unit size. However, according to a 2017 report from NBC News Washington, the payments were said to be as high as $50,000 to $100,000.
After delaying the sale of a property, lawyers take most of the landlord’s gain, yielding little or no benefit to the tenant, who is diverted from seeking alternative and affordable housing options. Then the lawyers start this extortion process all over again, diverting the owner’s efforts to sell each time the owner finds a new potential buyer. Since time is of the essence during a closing process, executing a sale on owner-friendly terms becomes essentially impossible under TOPA. The law has made selling multi-family 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 – at the expense of other potential buyers – while delaying the closing process. NBC News Washington’s 2017 report also showed that TOPA can help raise rents. It could even contribute to a greater shortage of affordable housing, if new construction of multi-family homes were arrested due to to onerous provisions within the boundaries of the district.
If this policy is imported to Massachusetts, owners who wish to sell their properties as part of their retirement plans would be prohibited from doing so, as they witness their lifelong work to build equity that has been given to them. stolen. In addition, property tax revenues would decline, which would likely lead to tax increases on the general public to compensate for these lost revenues.
Given that the TOPA bills almost became law in Massachusetts had it not been for a last-minute backup from Governor Baker, it’s 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 this year will end on July 31.
So, the Small Property Owners Association urges anyone who cares about fair housing policies to contact their representatives with increased 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% of rental housing in Massachusetts.
Amir Shahsavari is the vice president of the Small Property Owners Association. He can be reached at [email protected].