Tenant Opportunity to Purchase push in Minneapolis stuck behind rent control bottleneck

A push to give Minneapolis tenants first dibs at buying the buildings they rent when landlords put them up for sale appears to have stalled.

The proposed policy, called Tenant Opportunity to Purchase (TOPA), is intended to prevent the displacement of renters who otherwise would be forced from their homes. But it faces challenges from the real estate industry, which argues that the policy would create excessive delays in the sales process.

First discussed in 2019, there has been little movement despite a 2021 draft ordinance and extensive public engagement. Renter advocates had rallied for its passage by June 1 to be included in next year's budget, but that deadline has come and gone.

"It has been stalled," said Tram Hoang, director of policy and research with the Housing Justice Center. "The research has been happening for over two years. Most policies don't take this long to develop and pass and implement."

When TOPA failed to pass in 2021, it expired and had to be reintroduced this year with Council Members Jeremiah Ellison and Aisha Chughtai as authors. In mid-February it was referred back to Community Planning and Economic Development staff for further development, and there it has stayed since.

As the months passed, Ellison and Chughtai also were unsure of its timeline.

"I think the ball is in staff hands, just getting it before council so that we can review it, amend it if necessary and pass something," said Ellison, the lead author. He said advocates' demands for final votes on TOPA before this year's end weren't unreasonable, given how long it has been in review.

But that won't be easy to pull off, according to staff.

Community Planning and Economic Development Director Andrea Brennan said there were two reasons rent control — which Minneapolis legalized by referendum last fall but has not yet implemented — needed to come first. One, the City Council has prioritized developing a rent stabilization policy, establishing a work group for that purpose in April. The deadline to apply is Monday. Second, rent control needs to be enacted before TOPA would work as intended.

"The reason rent stabilization is an important complementary policy is that a property owner could theoretically raise rents prior to a sale, displacing renters before the right of first refusal kicks in, taking away the renters' opportunity to purchase the building," said Brennan, referring to Washington, D.C., as the only American city with a comprehensive TOPA policy in part because it implemented rent control first.

She said staff also is working on a draft Affordable Housing Right of First Refusal policy, which would give a qualified developer the opportunity to purchase and preserve rental properties as affordable housing. This ordinance also had expired at the end of last year and had to be reintroduced.

"Since work has already been underway on this component and it is close to completion, the council could consider an Affordable Housing Right of First Refusal policy this year, which would be before TOPA," she said.

A dispute involving strawberry farmers appears to have thrown a wrench into the effort.

Chughtai said she was told the policy was on pause due to legal considerations, namely California's Cedar Point Nursery case, which deals with the fundamental rights of property owners. Labor organizers attempting to unionize migrant strawberry growers ran afoul of the nursery owners, who argued that a California law allowing unions to come onto the farm up to 120 days a year without their consent amounted to an unconstitutional "taking" of private property. The U.S. Supreme Court ruled in favor of the owners in 2021 and sent the case back to a lower court for further review.

"Questions around legality and its implications always come up, and that forces staff to do their due diligence but, ultimately, I am and this body is accountable to the residents of Minneapolis who sent us here to make their lives a little bit easier, and it's our job to figure out how to make that happen the fastest and in the most equitable way possible," Chughtai said.

There are unanswered questions about the cost of TOPA. When renter advocates called for passage of the policy by June 1, they had in mind a yet-unspecified subsidy that they want the city to set aside to help tenant cooperatives finance rental properties.

"There's not a fiscal piece to implementing the ordinance. It's more of a question of, 'Does the City Council value renter rights enough to actually invest in their opportunity to buy?'" Hoang said.

The city's consultants have advised that the best chance for TOPA to succeed is if the city devotes staff to managing the complex set of regulations it would invoke. It's unclear what city resources would be required to oversee the communications and deadlines of tenants and landlords over the amount of time that TOPA could stretch out the sale of a rental property: 150 days for a buildings with 1-4 units, and up to 405 days for a building with 51-plus units.

Eric Myers, director of government affairs of Minneapolis Area Realtors, said his association's members are mostly concerned about those delays.

"Since February 15, we've heard very little [about TOPA]," Myers said. "I think it does speak to the complicated nature of this, and the big question about whether this would even really work here... There's really no other place that it exists, besides D.C."