In our new report, we explore progress, lessons learned, and case studies from our second year of the Co-op Improvement Program: our initiative to stabilize at-risk affordable housing cooperatives. Although the vast majority of HDFCs are democratic, financially solvent, and affordable, around 20% have fallen into distress. Families in distressed HDFC co-ops are at risk of losing their equity and ownership. If these residents don’t get immediate support, their homes will be in danger of foreclosure.
New Yorkers can’t lose this affordable housing. HDFC co-ops are a vital part of the New York City housing landscape that provide a rare opportunity for low-income homeownership. UHAB is working to keep this housing in the hands of the communities who need it. The Co-op Improvement Program offers in-depth technical assistance to address the causes of distress, for free. Now in our second year, we hope to bring hundreds of buildings back to financial and physical health.
Click here for last year’s report on Year One.
Over two years of dedicated technical assistance to HDFC co-ops struggling with high debt and disrepair, our team has identified several factors that create a feedback loop that makes it difficult for distressed buildings to work their way back to financial health.
HDFCs in distress need ongoing support from a provider like UHAB. In addition, the City can make key changes to support these struggling affordable cooperatives:
- Expand and better publicize DEP’s amnesty program for affordable housing. Earlier this year, DEP released a water and sewer amnesty program with great rates for affordable housing to pay down debt. However, the program has received nearly no amplification from DEP or connected City agencies, Councilmembers, and community partners. DEP should extend the program and implement clear, comprehensive outreach including community partners to ensure buildings that need it most don’t miss out.
- Exclude HDFCs from the Alternative Enforcement Program (AEP). HDFCs should not be included in HPD’s Alternative Enforcement Program (AEP) for high levels of HPD code violations. This only adds costs to the low-income shareholders tasked with operating their building, and does little in the way of outreach or technical assistance to help co-ops address underlying issues and get back on track. When HDFCs are fined for building violations they do not have the reserves to fix, it creates a cycle that makes it more difficult to get a loan and address underlying issues. Instead, HPD should work with HDFC co-ops and technical assistance providers like UHAB to address underlying physical conditions through low-cost, easy-to-access emergency city financing and energy incentive programs.
- Expand and reform the DAMP Tax Cap. The majority of HDFC co-ops have a partial DAMP property tax abatement, which is set to expire in 2029. It must be renewed for an additional 40 years and restructured to provide more equitable property tax relief across HDFCs with a deeper level of subsidy to offset rising building costs. UHAB is working with advocates from a member-led group of HDFC shareholders, Affordable Housing is For All (AHIFA) to draft an equitable DAMP tax cap replacement.
- Make it easier for HDFCs to get an Article XI. An Article XI is a common type of property tax exemption for HDFCs. It is one of the primary mechanisms of affordability that allow HDFCs to keep monthly fees for residents low. HDFCs can end up paying full property taxes if their old affordability mechanism (whether an Article XI, J-51, or some other tax exemption) expires. To get a new Article XI, buildings must sign up for an HPD product, like GHPP or another loan. This can take years, especially if the building is already in distress and dealing with obstacles like missing documentation or high violations. Compounding the situation, due to staffing limitations HPD has been unable to process applications in a timely manner. In the meantime, the building will continue to exhaust reserves, accumulate debt, and physically deteriorate. Without an Article XI, it’s extremely difficult for HDFCs to get back on their feet. HPD can remedy this by streamlining the Article XI process for buildings in distress.
- Release HDFCs from 60/40. 60/40 is a piece of the old City security agreement that mandated HDFCs to pay 40% of profits of any sale to the City for the first 25 years of their conversion. To get released from 60/40 after those first 25 years, the HDFC must show a lot of documentation related to sales to the City. This is important because until the HDFC is released from 60/40, they cannot get a loan. This has created an administrative bottleneck for buildings missing old documentation. These distressed HDFCs cannot languish without the proper documentation to move forward to refinance the building. HPD should release these buildings from 60/40 so they can stay exempt from property taxes and take out public or private loans for necessary repairs.