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DHCD Closes Loophole to Preserve Affordable Housing

Tuesday, October 6, 2020
Exemption for Transfer of Interest to Low-Income Housing Tax Credit Properties

The D.C. Department of Housing and Community Development (DHCD) will exempt affordable housing units from certain requirements of the Tenant Opportunity to Purchase Act of 1980 (“TOPA”) when low-income housing tax credits (LIHTC) or similar subsidies have been used and affordability will be maintained as a result of new investment.

“This is the final recommendation from Mayor Bowser’s Housing Preservation Strike Force that’s being implemented to preserve affordable housing in the District,” said DHCD Director Polly Donaldson. “We can now close the gap on attempts to destabilize our efforts to preserve affordable housing in our city.”

In 2016, the strike force recommended to advance preservation through TOPA, which is an important tool for tenants who have first rights to purchase and may want to maintain affordability when their building becomes available for sale. However, an unintended consequence of TOPA could potentially delay or even derail a property owner’s effort to reinvest in their properties. The delay could increase the costs of rehabilitating affordable housing or lead to the loss of affordable housing units in extreme instances.

Now, under the Low-Income Housing Tax Credit TOPA Exemption for Transfers of Interest Amendment Act of 2020, TOPA does not apply when the sole purpose of a transfer is to qualify for and enter into a new federal or District financing program for purposes of rehabilitating affordable housing units that will remain under control of the same owner.

Property owners must provide tenants with notice of when the transfer will occur, a statement of their rights, a description of any changes as a result of the new investment and an explanation of why the transaction is not subject to TOPA.

The new law takes effect on Tuesday, October 6, 2020.