ENROLLED ORIGINAL
A RESOLUTION
23-500
IN THE COUNCIL OF THE DISTRICT OF COLUMBIA
July 28, 2020
To declare the existence of an emergency with respect to the need to amend the Tenant
Opportunity to Purchase Act of 1980 (TOPA) to clarify that under certain limited
circumstances, low-income housing tax credit redevelopment projects do not fall under
the requirements of TOPA, and to require that a notice of transfer include certain material
facts.
RESOLVED, BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this
resolution may be cited as the Low Income Housing Tax Credit TOPA Exemption for Transfers
of Interest Emergency Declaration Resolution of 2020.
Sec. 2. (a) The Low Income Housing Tax Credit TOPA Exemption for Transfers of
Interest Act of 2019, as introduced on January 16, 2019 (Bill 23-74, was referred to the
Committee on Housing and Neighborhood Revitalization (Committee) on January 22, 2019,
and the Committee held a public hearing on the bill on October 2, 2019. The bill was discussed
at length among tenant advocates, staff at the Department of Housing and Community
Development, and affordable housing providers in the District, all of whom have reached
consensus on the legislation. Bill 23-74 was marked up on July 27, 2020.
(b) The Low-Income Housing Tax Credit (LIHTC) provides equity financing that
subsidizes the acquisition, construction, and rehabilitation of affordable rental housing for low-
and moderate-income tenants. Since the mid-1990s, the LIHTC program has supported the
construction or rehabilitation of over 2 million affordable housing units nationally.
(c) Under LIHTC, the federal government issues tax credits to state and territorial
governments. LIHTC-funded affordable housing projects must meet a gross rent test, which
requires that rents do not exceed 30% of either 50 or 60% of area median income, depending
upon the share of tax credit rental units in the project.
(d) LIHTC leverages the self-interest of private investors who infuse much needed
capital directly into local affordable housing. A LIHTC project partnership allocates to investors
99% of the tax credits generated over a 10-year period and federal tax law requires that these
investments have a compliance period of 15 years. Thereafter, the investors may withdraw from
the investment and deploy their capital into new or newly renovated affordable housing.
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(e) In the District, the LIHTC life cycle has become complicated by the Districts Tenant
Opportunity to Purchase Act of 1980 (TOPA), which requires an owner of a rental housing
accommodation to give tenants an offer of sale before selling the accommodation. In most
buildings, TOPA can be an important tool in preventing tenant displacement, maintaining
affordable housing, promoting home ownership, and protecting the homes of tenants. However,
particularly in lower income buildings, with TOPA comes a very real risk that market rate
investors might successfully outmaneuver and outbid affordable housing developers and then try
to buyout low- to moderate-income tenants with lucrative cash offers that appear to have short-
term benefits, but in the long run usually result in tenant displacement and the loss of affordable
housing.
(f) TOPA may potentially be triggered when, as required by federal LIHTC law, a new
tax entity is created after 15 years when a housing provider renews LIHTC or recapitalizes in
order to continue to maintain the building as affordable housing. It is at this point the continued
affordability of a building is threatened if market rate investors outbid affordable housing
developers, cease the affordability of the project, entice tenants to leave with cash buyouts, and
then proceed to convert the building into luxury apartments.
(g) Currently, District law is unclear whether TOPA offers are required during a LIHTC
renewal or similar recapitalization, as unlike in standard TOPA sales, the affordable housing
accommodation remains under the control of the same entity and only new non-management
investors leave or enter the new entity. The legislative history of TOPA from 40 years ago
indicates that the intent of TOPA was to provide tenants an opportunity to purchase their homes
when the ownership of a building actually changes, but not when the ownership effectively stays
the same and only the corporate entity changes on paper to comply with federal LIHTC
requirements.
(h) An additional complicating factor is that title insurance companies often will serve as
TOPA gatekeepers by requiring documentation of compliance with TOPA as a condition of
issuing title insurance covering a transaction that might appear to include elements of a TOPA
sale. Because title companies by their nature are always very wary of the risk of litigation, title
insurance companies prefer a bright-line test in the form of a specific statutory provision that
plainly states whether a particular type of transaction falls under TOPA, or not. In the absence of
near absolute clarity, it is not uncommon for title insurance companies to refuse to insure a
LIHTC transaction if there is not a clear statutory exemption, even where there is little doubt that
the transaction does not constitute a sale under TOPA.
(i) The resolution of this problem has become even more essential with the current public
health emergency arising from the COVID-19 pandemic. Even when a clear TOPA exemption
exists, prior to closing a transaction owners still must provide tenants a 90-day Notice of
Transfer. The COVID-19 pandemic has further interfered with the ability of affordable housing
developers to complete LIHTC deals that finance these affordable housing projects, as during the
public health emergency all TOPA deadlines have been tolled.
(j) Because of all of these complications to the effective production and preservation of
affordable housing in the District through LIHTC tax credits, affordable housing developers and
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private investors in affordable housing are potentially deterred from creating and preserving
affordable housing through LIHTC tax credit transactions.
(k) For example, the continued financial and physical viability of an active LIHTC
affordable housing project in Ward 6 is currently jeopardized unless remedial legislation
clarifying the law is passed without delay.
(l) With the passage of this emergency legislation, TOPA clarity will be provided to
affordable housing developers and investors alike, and the obstacles for title insurance
companies to issue title insurance and close the planned transaction will be removed. This will
then make funds available for needed reinvestment and upgrades at the Ward 6 affordable
housing accommodation.
(m) Emergency legislation is necessary to remedy these impasses by clarifying TOPA
law in a narrow set of LIHTC and similar transactions.
Sec. 3. The Council of the District of Columbia determines that the circumstances
enumerated in section 2 constitute emergency circumstances making it necessary that the Low
Income Housing Tax Credit TOPA Exemption for Transfers of Interest Emergency Amendment
Act of 2020 be adopted after a single reading.
Sec. 4. This resolution shall take effect immediately.
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