Willie Richardson is one of dozens of property owners who recently triumphed in a lawsuit against New York City when its government attempted to foreclose on six financially troubled apartment buildings.
Richardson owns shares in a city-sponsored housing cooperative, and the story of how he got those shares and why he may still lose them is part of the herculean struggle to preserve affordable housing in one of the world’s most expensive cities, where an apartment in the most affluent borough – Manhattan – costs a median $1m.
A county judge recently issued a blistering condemnation of New York City’s attempt to seize the building where Richardson lives (in Brooklyn, the borough southeast of Manhattan) along with five other buildings in that area and turn them over to a publicly appointed property-management company.
Apartments like Richardson’s home, which is in the rapidly gentrifying Clinton Hill neighbourhood, are attractive to management companies and other real-estate developers because they are often valued at hundreds of thousands of dollars or more depending on the size, location and financial health of the cooperative – or co-op – to which they belong.
Holding onto New York City co-ops – or losing them – can make or break the financial health of low-income people who face the threat that the city government will take these buildings away and sell them to investors. With New York’s average home costing $677,000 and its average monthly rent totalling $3,519, people in the greater metropolitan area devote an average 36 percent of their incomes to housing. That’s 17 percent above the US national norm. But among most low-income renters, reports the Community Service Society, housing eats up more than half of income – 50 percent above the national average.
History of housing help
Richardson’s low-income co-op in a Housing Development Fund Corporation (HDFC) building is among hundreds of thousands of such co-ops that New York City’s government established in the financially beleaguered 1970s and 1980s, when the city’s population was shrinking because crime and economic stress were driving thousands of middle-income people to leave.
At the time of their creation, city-sponsored low-income co-ops – also known as HDFCs – were seen as a way to assist people like Richardson while simultaneously saving buildings from landlords who had abandoned them rather than pay back taxes, unpaid water bills and other arrears.
New York City helped people living in neglected buildings form corporations or co-ops, then sold the buildings to these residents at prices as low as $250 per apartment. As part of the deal, co-op members were required to manage the buildings themselves.
Attaining these properties gave middle- and working-class New Yorkers like Richardson a chance to become homeowners. And in a city where the majority of people are renters that simple change in status not only stabilised housing costs for less-affluent New Yorkers, but also allowed them to build wealth.
HDFC co-op units have been known to trade hands for $500,000 or more – despite the fact that their government-subsidised nature reduces the speed at which their values grow because the city takes a 30 to 50 percent cut of the profit from resales of such apartments.
All told, the return on these investments can be more than two hundred thousand percent.
Source: Will Swarts