It doesn’t look like much from the outside. Just another six-story tenement walkup on the Lower East Side of Manhattan. But this modest building on Rivington Street is home to 26 shareholders who have resisted powerful temptations and have remained stubbornly – almost unfashionably – faithful to the cardinal tenets of affordable housing.
The five-member board continues to impose strict income limits on potential shareholders; it rigorously screens applicants in an effort to preserve the building’s working-class roots; it discourages subletting; and while there is no cap on resale prices, there is a 30 percent flip tax, which has both deterred speculators and allowed the board to improve the building’s physical condition while avoiding assessments and big maintenance increases.
“I think everyone in the building is on board with keeping this place affordable,” says Peter Ciaramella, a real estate agent who moved in five years ago and was elected board vice president in 2014. “There have been maybe two or three shareholders who wanted to get rid of HDFC. They’d been here a long time, they paid their dues, and they wanted to cash out. They’re gone.”
He’s referring to the Housing Development Fund Corporation, which helped convert the Rivington Street building into a limited-income co-op in 1990. Back then, no one was talking about cashing in: the neighborhood was peppered with drug dealers, abandoned buildings, and other emblems of urban blight. But as New York real estate values have soared, oversight of these “affordable” co-ops – including the crucial cap on resale prices – has slackened to the point where some HDFC co-ops have recently sold for more than $1 million. In response to the resulting disappearance of affordable housing units, the City Council is now considering ways to tighten the running of HDFCs, including the enforcement of strict income limits and resale price caps.
CEOs Need Not Apply
While that debate rages, the Rivington Street co-op quietly soldiers on. “It’s important that this building is self-managed,” says Ray Sage, an electrician who has served on the board since he arrived in 2000. Self-management is just one of the strategies that cuts costs and helps keep the building affordable, he adds. Another is the intense scrutiny of potential buyers.“We allow a maximum income that’s 120 percent of the neighborhood median,” says Ciaramella. “That works out to about $70,000 for a single person and $98,000 for two. Sometimes we call them back for three, four interviews. We look at regular financials, but we want to know why they want to live in an HDFC. What’s their plan for the next five to ten years? We’ve had a candidate come in here, and we come to find out that her dad’s CEO of Mobil, and she’s making $60,000 a year. She’s not right for an HDFC. We want working-class people.” “[We want] people who are starting out in their careers,” Sage adds, “or maybe finishing their careers. We want people who are committed to this neighborhood. My criterion is: does this person need a break?”
What the board doesn’t want is people who turn their apartments into hotel rooms. Shareholders are allowed to sublet their apartments for a maximum of 18 months in a five-year period, and the shareholder can’t make more than a 10 percent profit from subletters. All subletters must meet the same income criteria as shareholders. Despite these safeguards, there are still abuses. “We try to control it,” says Ciaramella, “but how much can you do?” Another key to affordability is the 30-percent flip tax. “The flip tax built up something this building never had before – a reserve fund,” says Sage. The reserves, along with a low-interest $650,000 city loan and a J-51 tax abatement that roughly matched the loan, were added boosts to the co-op’s success. The money has allowed the board to tackle some major capital projects, including roof and parapet work, brick repointing, selective window replacements, Local Law 11 facade repairs, replacement of all water lines and a fire escape, and installation of a dual-fuel boiler that can burn natural gas or B-20 biodiesel. There’s a new laundry room plus free storage lockers and bike storage in the basement, where a concrete slab has replaced the dirt floor. The ground-floor commercial tenants – an art gallery and a tattoo studio – provide additional income and help keep monthly maintenance between $350 and $525. As a bonus, the healthy reserve fund also makes the building more attractive to mortgage lenders.
Elephant in the Room
Despite all these admirable achievements, there’s still an elephant in the room: the lack of a cap on resale prices for apartments. Some units, purchased for $250 in the bad old days, are now selling in the $400,000 range. “I think they’re doing very well at keeping the maintenance low and keeping the building healthy,” says Ann Henderson, the former associate director of co-op preservation at the Urban Homesteading Assistance Board, who helped the co-op secure the $650,000 city loan. “But their sale prices are not affordable to people in their income range. It’s always been a problem with HDFCs – ever since the real estate market took off and we started seeing these crazy resale prices.”
Ciaramella, for one, fears that today’s insane prices could spell doom for affordable housing. “I think the HDFCs are going to melt away,” he says. “A lot of people just want to cash in.” But this co-op board’s president, who spoke on condition of anonymity, is a bit more sanguine about the future of HDFCs. “These buildings are like a gift,” he says. “If an HDFC co-op is run properly, it makes it possible for people of limited means to live in New York City. But it’s a fragile ecosystem that needs to be respected, not plundered. I think we have an obligation to try to maintain that. Affordable housing can be done. We’re proving it.”