Introduction
DC’s First Right Purchase Program (also commonly known as “tenant purchase”) has helped to preserve nearly 1,400 units of affordable housing over the past decade and is one of the District’s key tools to help residents stay in their homes as housing costs rise around them. The program provides low-interest loans to tenant groups that want to purchase ‘ and in many cases rehabilitate their building ‘ when their landlord has decided to sell. Without financial and technical assistance provided by the First Right Purchase program, many tenant groups are unable to take advantage of the important right they have in DC to potentially purchase and preserve their housing when their apartment building is being sold.
DC’s First Right Purchase program, which is managed by DC’s Department of Housing and Community Development, has several benefits. It is a tremendous tool to help prevent displacement as neighborhoods develop and to preserve affordable housing in those neighborhoods for a significant length of time. In addition, the First Right Purchase program offers many low- and moderate-income residents their first opportunity for homeownership. It provides them with control over their living conditions, and gives them the ability to address neglected repairs to the buildings they live in. Because First Right Purchase helps preserves existing low-cost housing, it can also be cost effective, with lower costs per unit than other affordable housing development programs, according to a recent survey of some member projects by the Coalition for Non-Profit Housing and Economic Development.
Reductions in resources have resulted in limited use of the program in recent years. The majority of funding comes from either the District’s Housing Production Trust Fund or the federal Community Development Block Grant ‘ both of which had been significantly reduced in recent years. Just 35 new units were preserved using this program in fiscal year (FY) 2012 while over 5,000 units of rental housing up for sale across 99 buildings in DC. First Right Purchase can play a critical role in preserving housing that is affordable to low- and moderate-income residents, but only if it is adequately supported.
This paper looks at District-supported First Right Purchase projects from FY 2002 through FY 2013[1], using data obtained from DC’s Department of Housing and Community Development. It recommends that the District increase funding to more effectively deploy the First Right Purchase program as an affordable housing tool.
This paper also makes several recommendations to enhance the effectiveness of the First Right Purchase program. Changes to the underwriting guidelines are needed to ensure that tenant groups can get financing in a timely way. In addition, caps on funding might need to be increased on a project by project basis to make sure that a broad array of tenant groups are able to purchase their buildings. The District also should improve transparency of the availability of funds for tenant purchase. Finally, increased access to technical assistance for tenant associations after their purchase is completed can help ensure that they can manage as building owners, including complying with DHCD’s loan requirements to submit certain financial documents on a regular basis ‘ a current issue that can be improved with ongoing technical assistance.
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