Thursday, March 15, 2018

Getting Started – Choosing Between a Co-op and a Condo - The New York Times

Getting Started – Choosing Between a Co-op and a Condo - The New York Times:

If California gets serious about building more high-density housing (see my post below), they should consider housing cooperatives. New York City has more co-ops than condos. Chicago has lots of co-ops, including limited equity co-ops that remain affordable.

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"There is no question that there are more co-ops than condos in New York City, but the gap has been narrowing in recent decades. 'In Manhattan, it’s about 75 percent co-op versus 25 percent condo,' said Jonathan J. Miller, the president of the Miller Samuel appraisal firm. 'In the early 1990s, it was about 80/20, and in the mid-1980s it was 85/15.'”

1 comment:

Unknown said...

Evan, I agree with you that Limited equity cooperatives are somewhat less risky than condominiums sold as “affordable” housing.

But...co-ops are not without problems.
https://www.nytimes.com/2018/01/26/realestate/when-a-co-op-board-misbehaves.html?ref=oembed

Look at what’s going on in Aspen, where the housing authority created price controlled condominiums. (Apparently not co-ops)
https://www.aspentimes.com/news/local/aspens-housing-authority-taking-stock-of-homeowner-association-bank-accounts/

Any time you limit resale price, you take away the incentive to spend a ton of money on major renovations. Obviously, the co-op board can more easily refinance (get a mortgage) and collect assessments from shareholders, compared to a condo association board. But the board of a limited equity co-op association might lack the level of education and sophistication to make necessary investments in the long-term maintenance of their infrastructure.

After all, condo or co-op, the owner/shareholder does not want to use up all of their limited equity right before they’re ready to sell or pass on their estate. It would take some careful advanced financial forecasting to figure out a stable equity position for shareholders over the economic life of the housing.

And, because the co-op board does a more rigorous review of purchasers, buyer complaints of fair housing discrimination are a bigger risk, especially with HUD’s recent “disparate impact” policy. The co-op board says the purchaser is not financially qualified. The buyer says they are being denied because of their race, familial status, disability, etc. There’s a correlation between household income and each of these protected classes.

There’s no easy answer. But I think rental housing makes the most sense for households at lower income ranges. The U.S. needs to get rid of the stigma attached to renting vs. owning a home.