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What is a limited equity housing cooperative and how affordable is it?

The jargon can be complicated but the goal is simple—affordable housing for low-income New Yorkers.

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You may not be familiar with the concept of a limited equity housing cooperative, but if affordable housing is important to you, you should get to know these types of buildings.

Limited equity housing cooperatives have the same structure as traditional co-op buildings, which are owned collectively by the residents. The main difference is that limited equity cooperatives offer below-market buy-in, and are only for  people with low or moderate incomes. Unlike traditional co-ops, there’s a limit on the profit members can make on the resale of their units. The below-market asking price, together with restrictions on resale, keep the apartments insulated from New York City’s sky-high prices, making them an affordable option for generations of the city's low-income residents.

The rules in New York City mean you can only buy shares in a limited equity housing cooperative if your household income is below 165 percent of area median income. The 2018 AMI for a three-person family in New York City is $93,900 so in this situation, residents could only join the co-op if their income was below $154,935.

Both market-rate and limited equity housing co-ops in New York are usually formed as corporations. For limited equity co-ops in the city, most are formed under Housing Development Fund Corporations with approval by a government agency like the State Division of Housing and Community Renewal or more locally, New York City's Department of Housing Preservation and Development. There are benefits to Housing Development Fund Corporations that aren’t available to other types of business and cooperative corporations.

Generally, there will be some kind of financing arrangement in place to help residents pay the initial purchase costs. National Cooperative Bank (FYI a Brick Underground sponsor), is among a number of lenders helping New York residents get loans to enter into these cooperatives.

The loans aren’t pocket change, but at around $10,000 to $20,000, once you’ve factored in a bank’s analysis, risk assessment and administration, many traditional banks find it isn’t cost-efficient to supply the money. That’s where financing partnerships come in. National Cooperative Bank, for example, recently joined forces with a nonprofit Community Development Financial Institution to provide a line of credit to New Yorkers with limited funds wanting co-op membership.

“Having a small-share loan program available for people buying into limited equity housing cooperatives is critical for New York to help grow affordable housing,” says Mary Alex Blanton, a spokesperson for NCB.

Each cooperative will have its own rules of governance and resale. The goal of the programs is to support low-income residents so most co-ops require owner-occupancy and limit subletting. In addition, most are subject to flip taxes. According to the city, HDFC rules state the sale price of a limited equity housing cooperative unit should be “low enough such that a purchasing household would not spend more than 30 percent of its income on housing costs, which include mortgage payments, maintenance payments, and other potential costs."

You can find listings through NYC’s Housing Connect.