SPOA Takes TOPA Argument to the Media and the Massachusetts Legislature

Written By SPOA Inc

Please note: While the article below is up to date as of the date of printing, developments surrounding TOPA are continually evolving. For the most up-to-date information, please sign up for our Action Alert emails at tinyurl.com/spoaactionalerts and follow SPOA on Twitter at twitter.com/SPOA_Mass

Since producing a webinar about the dangerous impact of proposed Tenant Opportunity to Purchase Act (TOPA) legislation on April 14, 2022[1], the Small Property Owners Association (SPOA) has advanced its rebuke of this proposal to the media and the legislature. As numbered currently, Senate bill 890 and House bill 1426 would impose a tenant right of first refusal on the sale of rental properties throughout Massachusetts, including all LLCs. If you are not a resident of Massachusetts and own one condominium that you rent out, but have moved to another state, TOPA still applies to you. House bill 4208, meanwhile, is a home rule petition that would apply the same restrictions in the city of Somerville exclusively. 

These bills would negatively impact the rental housing stock in Massachusetts, while restricting rental property owners from selling their properties at market value. 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. In turn, this legislation could 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. This would make it much more difficult for buyers to purchase and invest in rental property. Tenants, meanwhile, would be diverted from finding alternative and affordable housing options after being used as pawns by a subset of lawyers and speculators who would benefit instead. After all, TOPA failed miserably in Washington, D.C., where less than 5 percent of tenants end up purchasing the properties that they rent. Currently, this proposal is only for apartment buildings, but the concept could potentially expand to single-family homes, where the government would grant preferred local buyers the privilege of purchasing a property before letting an owner sell to the broader market.

This deliberate and artificial devaluing of property would negatively impact the property tax revenues for cities and towns, likely triggering tax increases on the general public to compensate for those lost revenues. Moreover, 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 lifelong work to build equity stolen from them.

The TOPA debate in the media

After East Boston News published a version of the TOPA article from SPOA’s April 2022 edition of Small Property Owners News [2] on April 30, an abridged version of the article appeared as a column in Banker & Tradesman (Silent Threat to Property Rights Creeps Forward on Beacon Hill[3]) as well on May 29.

On June 19, the TOPA Coalition responded with a column of its own (TOPA is Good Housing Policy[4])  defending TOPA in Banker & Tradesman. In their defense, the three authors from the TOPA steering committee claimed that the bills were “refined” with industry feedback and that they did not place undo burden on property owners. They further claimed that small property owners of less than seven units were exempt from the policy.

On June 26, SPOA issued a rebuttal in Banker & Tradesman (Letter to the Editor: Don’t Sugarcoat the Bitter Truth About TOPA[5]) that advised against sugarcoating TOPA, which prolongs a sale up to 227 days (seven to eight months), and possibly more, to the detriment of buyers and sellers, given the way that real estate transactions actually work. The rebuttal also addressed the unrealistic nature of limiting small property owners to six units or less in owner‑occupied buildings, in order to qualify for exemption, when most small owners are not in this category. Small property owners are defined neither by the number of units they own nor whether their buildings are owner-occupied, but by the degree to which they oversee management duties directly versus adopting complex corporate structures. In addition, since most small housing providers own their properties through LLCs and trusts, they would be subject to TOPA automatically, per the sloppy way in which the bills are written. 

In response to the claim that we can’t simply build our way out of the housing crisis—despite the vital importance of new construction—tenants would be better helped by increasing needs-based voucher programs, like RAFT, that do not infringe upon contract law or the rights of property owners. We must avoid counterproductive policies that damage the housing market and reduce the production of new housing—especially affordable housing—as out‑of‑state investment companies withstand the delays caused by the legislation before seizing the affordable housing supply.

TOPA passes in Housing Committee and next steps

The TOPA bills that SPOA fought against passed favorably in the Housing Committee on June 30. The bills are now on their way to the Ways and Means Committee. If passed there, TOPA will be considered by the full House and Senate, where many lawmakers still don’t understand the devastating consequences it could have on our Commonwealth. Therefore, it is ever more crucial for us to continue voicing our opposition with more intensity! Please contact your elected officials and urge them to vote no. You must contact them urgently and often throughout the entire month of July! We have also included talking points that you can use in our action alert email dated July 2[6]. 

You can find your state Senator and Representative here:  https://malegislature.gov/search/findmylegislator

Using the URL above, the elected officials we need to influence are:

Ways and Means Chairman, Sen. Michael Rodrigues

Senate President, Karen Spilka

Speaker of the House, Ron Mariano

State Senator John Keenan

State Representative Aaron Michlewitz

If any of the above represent the district where you live, it is especially vital that you make every effort to reach out to them. If you know landlords in their districts, please forward this message to them—and please contact these officials yourselves, even if you are not in their districts. All of them need to hear from SPOA members!

TOPA passed last year without debate as an add-on to a bigger bill. No one noticed it at the time because it sounded good and like something that would not be problematic. We are now moving beyond the pandemic and we have more data as to how damaging TOPA is. We hear that legislators are thinking TOPA can’t be that bad since it passed once before.

Housing provider rights are under assault. Now, more than ever, we need you to explain to representatives that it is getting close to impossible to be a small housing provider in Massachusetts. YOUR VOICE MATTERS!

These policies do the exact opposite of what they are intended to do. As small property owners throw up their hands in the face of unprecedented market interference, we sell out existing affordable housing to be gobbled up by large corporate entities that have the resources and time to wait out red tape. Moreover, these large entities cannot facilitate the supportive personal relationships and face-to-face interactions with tenants that we do.

SPOA sends letter to Massachusetts legislature regarding TOPA

6 July 2022

Dear Legislators:

As the legislative session comes to a close, SPOA (“Small Property Owners Association”) is contacting you today to raise the alarm on proposed legislation that negatively impacts small housing providers. 

SPOA is a statewide landlord advocacy group, representing small housing providers in Boston, Cambridge, and throughout the state. Small landlords provide 60 percent of all rental housing, especially affordable housing, in the Commonwealth. We have a reach of 30,000 small landlords.

We urge you to oppose any Right of First Refusal legislation or TOPA, Tenant Opportunity to Purchase legislation (see H.1426/S890). 

While sounding innocuous, TOPA is simply deadly for small housing providers.

We will detail below our specific objections to the bill, but proposed legislation such as this is already forcing small landlords to sell their property out of fear that it could become law. This harms tenants by removing existing affordable housing stock from the marketplace and promotes gentrification. For example, when a small landlord in South Boston or Jamaica Plain sells a three-decker, most likely two to three new multimillion-dollar condominiums take the place of three units of affordable housing.

The very policies put in place to appease housing advocates are taking out small housing providers and paving the way for large corporations to come into the market and gobble up existing rental housing.

i. TOPA will reduce the production of new affordable housing. If this policy is adopted without a viable exit strategy (essential to any business enterprise), developers will take their dollars and their projects elsewhere. The way out of our affordable housing crisis is supply, supply, and more supply. There will be far less production if TOPA is passed. This is exactly what happened in Washington, D.C. when they passed TOPA legislation.

ii. TOPA punishes small landlords who supply 60 percent of the rental housing in the Commonwealth. If you couldn’t cash in your 401K without lengthy delays and time constraints placed by the legislature, what impacts would that have on your retirement? Small landlords have struggled through the pandemic. Many of us have made rental payment deals with our tenants during hard times and now we are to bear the brunt of the lack of affordable housing?

iii. Time is essential to real estate transactions. There are bank and financing implications, tax ramifications, and estate planning impacts. The Right of First Refusal mandates up to 227 days, or seven months of delays, which is simply untenable. Any businessperson can discern the harmful impacts this will have on real estate sales. Very simply, you will have fewer of them.

iv. The concept in the proposed legislation vaguely outlines “Tenant Associations.” What and who are they? How are they defined? This vagueness sets the stage for arduous and expensive litigation. This provision in the law only further takes existing housing offline.

v. The exemptions do not help the people they are supposed to. Most landlords own their income properties in LLCs and trusts for liability reasons. This is the way that real estate holdings are structured. No LLCs or trusts are exempt. The exemptions are written to reassure legislators that TOPA is less restrictive than it really is. In actuality, TOPA will apply to almost all real estate sales and transactions of rental properties.

vi. TOPA complicates bank financing. The delays and mandates included in the bill add burdensome layers to community and larger banks that provide housing providers with mortgages. It is essential for both financial institutions to complete real estate transactions.

Small landlords, housing advocates, tenants, and the legislature must come together to create innovate solutions for the Commonwealth’s affordable housing crisis. We applaud the efforts made during the last legislative session when the legislature passed the Housing Choice Bill. We believe that easing zoning, combatting NIMBYism, and providing incentives is the right policy agenda to create more affordable housing.

Unfortunately, there are many proposed laws like TOPA which take a punitive approach towards property owners, especially small landlords in particular. Why are we harming productive people who pay commercial taxes and provide a vital service instead of finding real solutions where multiple parties benefit?

TOPA is dangerous housing policy. Inserting governmental regulation into transactions between buyers and sellers will have catastrophic impacts on the state’s housing market. Many parties will suffer — but simply put, when small landlords sell their property, tenants lose affordable places to live.

Please consider these impacts and vote no on TOPA.

Sincerely,

Small Property Owners Association

by Amir Shahsavari

SPOA Inc
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