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Anna Klenkar

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What's With Co-ops?

January 24, 2022

Co-ops get a bad rap, and some of it is definitely deserved. Because they are allowed to turn down sellers for a multitude of reasons and don't have to say why, some bad actors reject buyers for reasons that violate fair housing. They will even tell the parties involved, while being careful it isn't in writing so they can't be sued.

Also, the same mechanisms that protect the buildings and have kept our housing market so stable over time -- 20-25% + down payments, 28% debt-to-income ratio (when mortgages accept closer to 40%), and two years of post-closing liquidity -- have placed an impossible barrier against ownership for the majority of New Yorkers.

Without family money (gift or loan) and/or a two income home with little or no student debt, it's very difficult for a first time homebuyer, especially a young first time homebuyer, to get over the down payment and liquidity hurdles. I'm not saying these mechanisms are bad, but because we have failed to build enough non-hyper-luxury additional housing, prices have increased to the point where we are asking people to have more than $350,000 in cash and earn about $250,000/yr to purchase a $1m apartment (so like a 2-bedroom in Manhattan). When these apartments were $250,000 (and salaries weren't THAT far below they are today) this was a more attainable prospect. 


There are simply too many Millennials and Boomers trying to own at the same time, and not enough inventory for the both of 'em.


Is there an upside?

Yes, co-op prices are still well below condos of the same basic caliber, so if you are able to save like crazy or have a family member who wants to help you out, you can get in much more cheaply than for a condo. Co-ops continue to keep our market stable, and stop investors from purchasing every square inch of Manhattan. The legislation that would require co-op boards to explain why they rejected a potential purchaser is gaining traction, meaning we could see an end to board rejections based on sale price, source of income, marital status, or other illegal reasons.

And the great irony of co-ops is that they started out as tenants organizing to purchase their rental buildings, which were often in disrepair, only to end up as gatekeepers blocking people from joining them as homeowners. That's the only way most young people hear about co-ops -- the gatekeeper part, not the origins.

About a year ago I saw a 20 year old on TikTok pitching people to join him in purchasing a huge property out West and all co-owning it as one group. He essentially, without realizing it, was selling people on the idea of a co-op. I hope that as we continue to push back against the commodification of housing (it can definitely be an asset but it's a home first), people will stop demonizing co-ops and see the positives as well.

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