"Had it not been for this program, I would not have been able to purchase my own home," says Oliver. "And this is a home, a place where most everyone knows everyone else. Most of my neighbors have lived here 30, 40 years. The HDFC gave us a chance to live in an affordable place that's comfortable."

Bleak House

But some such co-ops become their own worst enemies. At a 36-unit Fort Washington Avenue HDFC co-op (below) in the Washington Heights section of Manhattan, years of inept self-management nearly drove the building to ruin. "We had $2 million in unpaid back taxes [and] $1 million in unpaid water bills," says Renee Davenport, who moved into the building in 1994, joined the board in 2004 and is now its president. "We were in a bad, bad situation."

In 2003, shortly before Davenport joined the co-op board, UHAB came to the rescue. Working with a new piece of state legislation that allowed tax forgiveness for co-ops, UHAB got the city to forgive $1.26 million in taxes due prior to January 2001, and got the water department to forgive $570,000 in interest on unpaid bills. In exchange for these and other concessions, including loans, the co-op entered into an agreement with the city for the next 30 years to make sure the co-op would stick to the terms of its deal.

The co-op's shareholders are a working-class mix of office workers, mechanics, bakers and retirees. While there is a limit on the income of new shareholders ($85,000 for a family of four), there is no limit on resale prices.

A 30 percent flip tax has been paying down the loan that covered the unpaid water bill. The co-op also took out a low-interest $903,000 "8-A" loan from the city to tackle major capital improvements to the boiler, masonry, roof, elevator and handicapped ramps. The deal with the city requires the co-op to add $7,200 a year to its reserve fund. "We've been doing that for the past two years," says Davenport, 43, who works as an administrative assistant at Columbia University. "The goal is to get on our feet and never be in the position we were in before."

The co-op is now managed by Veritas Propertty Management, and the board, Davenport says, is " close-knit." "We communicate with UHAB and our lawyer to make sure we're doing things according to the law." As for UHAB, "You can trust them to walk you through what needs to be done. Having someone you can trust on your side, that makes a big difference."

A House to Let

Veteran New York real estate lawyer Larry McGaughey believes it's impossible to turn back the clock. The HDFC co-ops that have sold for large sums are gone from the city's stock of low-income housing. The emphasis now, he says, should be on developing guidelines that will protect the dwindling supply of affordable middleclass co-ops.

"The certificate of incorporation for all HDFC co-ops says it's to operate 'low-income' housing, but exactly what that means is open to interpretation," McGaughey says. "The city's policy decision was that they didn't have the resources to regulate [Article 11 co-ops] the way the city and state regulate Mitchell-Lamas. Basically, the city's Department of Housing Preservation and Development [HPD] has no enforcement mechanism over HDFCs. Each individual co-op is on its own."

In certain areas of the city, McGaughey says, market pressures on HDFC co-ops have become especially acute. He cites the Lower East Side, central Harlem, and the co-called "brownstone neighborhoods" of Brooklyn as areas where HDFC residents are finding the temptation to sell increasingly irresistible.

"Are you going to put a cap on resale prices? Are people entitled to a windfall? It's up to the people to decide for themselves," he says. "Usually, it takes a super-majority to do that – two-thirds of the shareholders. That's a tough sell."

If there is a solution, McGaughey and many others believe it lies with the city government. But the city has so far shown little inclination to step in. "HPD is basically sitting on its hands," McGaughey says, "while the market is pushing really hard. Money talks, and it's hard to fight that."

But UHAB is. "We're pushing the city council," says Reicher. "The city needs to set not only an income standard for admission to HDFC co-ops but a maximum resale price as well. I don't believe they should be sold for large amounts of money. That's the struggle we're going through now."

Adapted from Habitat June 2008. For the complete article and more, join our Archive >>

Photos by Carol Ott