State Budget Lowers Bar for Rental-to-Condo Conversions

A little-noticed provision tucked inside New York State's recently passed $254 billion budget could cause history to repeat itself — with a twist.

The provision allows residents in large, newer apartment buildings across the city to vote to convert their rental buildings into condo buildings and buy their units — if just 15% of tenants or would-be buyers agree, Brick Underground reports. The provision could spark an echo of the co-op conversions that swept the city four decades ago.

If that 15% number sounds familiar, that’s because rental buildings could be converted into condos if 15% of tenants voted in favor of the move before 2019, when the Housing Stability and Tenant Protection Act, in an effort to protect renters, raised the portion of tenants who had to agree from 15% to 51%, a far higher bar. This law, the Affordable Housing Retention Act, brings back the old 15% margin for certain properties.

But not all properties. Eligible properties must have 100 or more units, be built after 1996, and contain rent-stabilized apartments because the developer benefited from state or local tax breaks in exchange for those units, such as the 421-a program or the federal Low Income Housing Tax Credit program.

Under the law, a non-profit would need to buy the building’s rent-stabilized units for a conversion to go forward, and those apartments would become permanently rent-stabilized. Or, regulated tenants could buy their units to create a limited-equity housing cooperative, such as a Housing Development Fund Corporation, within the same building.

There's even an echo of the "non-eviction" clause that was part of the wave of co-op conversions in the 1980s. “For tenants who are living in those low-income units, if the building is converted to condominium, those units would remain protected forever, so they would be able to stay in their home,” says Erica Buckley, a partner at Nixon Peabody who leads the law firm’s cooperative and condominium team.

Elderly and disabled tenants, even those that don’t live in rent-stabilized apartments, also receive additional protections against eviction and rent increases under the law similar to those under the state’s new Good Cause eviction law. 

If rent-stabilized tenants choose to create an HDFC within the condo building, both have to be managed by the same property management company, and all residents need to have equal access to the building’s amenities, Buckley adds.

In a time of record high rents and a chronic shortage of affordable housing across the city, the new law could help New Yorkers address both problems by becoming homeowners.