The Case for Co-ops
I have been to a number of real estate events recently where the talk was all about whether co-op apartments should be converting to condominiums. (For those who don’t know, co-op ownership comes in the form of stock in the corporation which owns the building, such stock entitling you as the buyer to the exclusive use of your apartment through a vehicle called a proprietary lease; condo ownership is outright ownership, in which all the owners also own a percentage of the common areas.) Condos sell for more, so the logic goes, and are generally more flexible about what the owner is permitted to do with the property. Currently, of course, there is no easy way to convert one form of ownership to the other: the co-op needs to be liquidated with huge tax consequences to the shareholders, the underlying mortgage has to be satisfied, and then the unit owners buy their apartments back as owners rather than tenant shareholders. But every few years there is talk of the city creating a program which makes the conversion less disadvantageous. So if there is a fairly simple way to make the change, so the conversation goes, who wouldn’t do it?
Me, for one. I have lived in the same co-op for 37 years, and I would NOT prefer that it were a condo. I suspect many co-op owners feel similarly. Here are a few of the reasons that I personally would rather live in a co-op, and that I think co-op ownership is good for a substantial segment of the population of the city:
• Co-ops, by exhaustively reviewing the financial and personal profiles of prospective residents, ascertain that they are both financially and personally well suited for the environment. Financing in co-ops tends to be at least somewhat limited, which also means that in a tough financial environment (think 2008) co-op owners are rarely burdened with unsustainable debt. The default rate in co-ops, even in tough times, is extremely low. So most co-ops end up with good neighbors who really can afford their apartments. No surprise that, increasingly, condo Boards mimic co-ops in their requirements and diligence, even though when push comes to shove the condo Board’s only recourse if they don’t like a candidate is to exercise their right of first refusal and buy the apartment themselves.
• Many co-ops do not like pied-a-terre buyers, but even those which accept them tend to be strict about who can use the apartment in the owner’s absence. And most co-ops have strict one time, two-year rental allowances. So either the owner lives there, or no one does. No dark building with no one living in it because the owners are all foreign billionaires parking their money here, no stream of rental tenants who don’t care about the building. I like that my building is a community of neighbors who really LIVE there, so we share concerns about how the building is run, how the lobby looks, whether our beloved staff is well treated and happy, etc. It’s a vertical village which creates a sense of belonging in the sometimes anonymous enormity of the city.
• Since so many of the city’s most beautiful older buildings are co-ops, the renovation restrictions many of these buildings impose safeguard the beautiful interiors which are as much a hallmark of the New York way of life as the iconic exteriors. As I wrote in my recent blog “No Guts” , maintaining the room detailing and layouts of the great Candela, Carpenter, Roth, Blum, and Schwartz and Gross (to mention a few) buildings reflects a commitment to the unique cultural heritage implicit in New York apartment construction of the golden age from 1910 to 1940. Co-ops, because they are conservative by nature, enhance the likelihood that many of these interiors will be preserved.
There is a place in the vast panoply of life in New York for every possible sort of housing. Every city needs new construction to maintain its vitality, and these days the new construction is either rentals or condos. For a variety of reasons both social and financial, no one builds co-ops anymore (unless they have to because the land on which they are building is leased, not owned.) But co-ops are a venerable New York institution, both inconvenient and wonderful. Most New York co-op residents wouldn’t have it any other way.