As part of Minneapolis’ efforts to create and maintain affordable housing, a group of city council members are developing a proposal that would require landlords who want to sell rental homes to give tenants an opportunity to buy the property.

The plan would require property owners who want to sell or tear down properties to put their renters first in line for buying the buildings cooperatively. If renters express interest, they would be able to solicit the help of the city of Minneapolis or a housing nonprofit to finance the purchase. Under the concept, the city would also provide the tenants with technical assistance — such as help filing loan applications or preparing legal documents — to see the transaction go through.

“Our housing market is really well suited to this because we have so many single-family homes as the rental stock,” said Council Member Steve Fletcher, whose Ward 3 includes downtown and the Marcy-Holmes area and who is co-authoring the proposal. “We have a lot of property that could fit this model very well and good, and it could be fairly easy to finance for low-income families that haven’t had access to ownership.”

The group behind the idea — Fletcher, Jeremy Schroeder (Ward 11), Cam Gordon (Ward 2), and Jeremiah Ellison (Ward 5) — is modeling the concept after D.C.’s Tenant Opportunity to Purchase Act, or TOPA, which the district’s council enacted more than three decades ago.

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Under the act, the district helps interested tenants match bonafide offers for properties, or considers buying the properties for public use. Gordon said the Minneapolis council members are considering that latter option, too. “Even if it’s just to slow the timeline and give us enough time for the tenant to purchase or for us to sell it to somebody else,” he said.

D.C.’s guidelines only apply to tenants of multi-family homes; they can buy properties and convert them into condominiums or cooperatives or establish development contracts with a third party. Renters of duplexes, triplexes and fourplexes can join together to purchase their homes, or individual tenants can pursue a sale. For larger apartment complexes, the law requires tenants to organize with an official tenant-advocacy association (such as Minneapolis’ Inquilinxs Unidxs) that can represent them in the buying process.

The Minneapolis plan aims to build upon a 2019 policy that requires owners of affordable rental housing to give tenants written notice of the landlords’ intent to sell, as well as new renter protections and zoning rules that aim to boost the city’s stock of affordable housing, say the council members behind the proposal. They have been exploring the tenant-purchasing concept for more than a year.

“It’s a preservation strategy, and it’s a pathway to ownership,” said Fletcher.

Currently, the group is finalizing a request for proposals from third-party consultants who would research real-estate trends and housing data to determine recommendations for the plan. The yet-to-be-named consultant will take on a similar role as Grounded Solutions Network, a Portland-based housing nonprofit, has played in Minneapolis’ efforts around inclusionary zoning: rules that require housing developers to dedicate a percentage of big multifamily complexes to low-income households.

The council members are hoping to select the contractor before the end of the year. They anticipate getting policy recommendations from the consultant next spring and are aiming to host a public hearing on a draft ordinance in summer 2020.

A way to address home ownership disparities

The work on the new rule comes as residents of five buildings owned by the former landlord Stephen Frenz push for a collective property purchase. The apartment complexes, which are located in Minneapolis’ Corcoran neighborhood, are among the last in Frenz’s portfolio after the city took away his rental license in 2017, as tenants complained of poor building conditions and fraud.

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Gordon said Frenz is denying any buying offers from the tenants. (A jury convicted Frenz of perjury last month, and he is scheduled to be sentenced to up to five years in prison and-or pay a $10,000 fine in December.)

“We’ve all heard different versions of tenants asking for a tool like this, especially in cases where maybe the relationship between the tenant and their landlord has become hostile,” Council Member Ellison said.

Council members believe the policy could also be key to addressing Minneapolis’ racial disparities in homeownership; almost three-fourths of white residents own their homes in Minneapolis, according to census data, compared with 25 percent of black residents — the worst disparity in the country among cities with significant black populations, Urban Institute researchers found.

“There’s a big gap racially on homeownership in the city, and it’s not really closing very quickly,” Gordon said. “But this could really help with that in terms of people building some wealth and getting some assets.”

Not anticipating intense pushback

In initial discussions about the tenant-purchasing proposal, the group of council members faced skepticism from some colleagues, council staff and residents over the concept’s feasibility, Fletcher said.

But then, in September, Minneapolis leaders and Local Initiatives Support Corporation (LISC) — a national nonprofit that provides gap funding for property deals — invited housing staff and renter advocates from the nation’s capital to explain the district’s TOPA, and that study session eased some skeptics’ worries, Fletcher said. “That overcame a lot of people’s concerns and got people much more moving together … and feeling like this is going to be a good thing,” he said.

The council has sparked controversy with its approach to housing policy this year. While council members tout a menu of new guidelines to boost residents’ accessibility, some landlords and private developers have criticized council members’ actions.

This fall, for example, the Minnesota Multi Housing Association (MHA), which advocates on behalf of some 1,900 property owners, campaigned against ordinances that established limits for security deposits and changed how landlords can screen prospective tenants. The council finalized the rules in September.

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Meanwhile, a group of developers organized a campaign, “Building Minneapolis Together,” to push back against inclusionary zoning. They say the added cost of mandatory affordable units will keep investors from building in Minneapolis, further exacerbating the city’s housing crunch and eventually depleting the supply of affordable housing altogether. (The council is set to vote on a permanent inclusionary zoning policy next month.)

Council members said they are not expecting the same level of pushback on the tenant-purchasing proposal. Fletcher said he talked with representatives of MHA early in the brainstorming process, and some landlords have given feedback on the policy’s timeline and scope. “In general, I think they’re less concerned about this [than other policies] because, I mean, at the end of the day, they still get their money — if they want to sell, they can sell,” he said. “We’re not hearing the same kind of resistance so far.”