Co-ops in the city

by Steve Van Derodar

Apartment with the Empire State View | Photo from Pinterest via Steve Derodar

In the heart of Manhattan’s bustling streets,
Where towering skyscrapers meet,
There lies a world of co-op living rare,
A community beyond compare.

Thousands of would-be co-op owners constantly search for the perfect co-op to be their domicile in New York every year. It is one of the trendy options if you do not live in a condo, rental building, or a single-family house. Believe it or not, there are more co-op buildings in Manhattan, about 70-80%; the combination of historical precedent, land use regulations, ownership structure, and community dynamics has contributed to the prevalence of co-op developments in New York City’s real estate market. While condos are popular in specific neighborhoods, co-ops remain a dominant and enduring feature of the city’s housing landscape.

Co-ops have a long history in New York City, dating back to the early 20th century. Many of the city’s iconic buildings were developed initially as co-op housing, and the cooperative ownership structure became ingrained in the city’s real estate landscape. New York City’s zoning regulations and land use policies have historically favored cooperative development. Co-ops are often seen as a more efficient use of limited urban land than condos, as they allow for higher density and more extensive development.

In a co-op, residents collectively own shares in a corporation that owns the entire building. This ownership structure is well-suited to the dense urban environment of New York City, where large-scale multifamily buildings are common. Condo developments, on the other hand, involve individual ownership of units within a building, which can be more complicated to manage and maintain.

Amidst the city’s vibrant throng,
Co-op dwellers hum a different song,
In brownstones, old and high-rise towers tall,
They find a haven, a home for all.

Getting approved for a cooperative apartment (co-op) in New York City is often more challenging than purchasing a condominium (condo) due to several factors inherent to the co-op ownership structure and the approval process. Co-op boards have significant discretion in approving or rejecting potential buyers. Unlike condos, where approval is generally straightforward, co-op boards review detailed applications and conduct interviews with prospective buyers. They may consider financial stability, employment history, creditworthiness, and personal references. This subjective approval process can lead to more stringent requirements and a higher likelihood of rejection.

Within these walls, a tapestry we weave,
Of diverse lives that interleave,
From artists to bankers, young and old,
Each story is a treasure, a tale untold.

Co-op boards often impose strict financial requirements on prospective buyers, including minimum income thresholds, debt-to-income ratios, and liquid asset reserves. Buyers must provide extensive documentation of their financial status, including tax returns, bank statements, and credit reports. This level of financial scrutiny can make it more challenging for individuals with irregular income or financial issues to get approved.

As mentioned, co-op buildings are governed by a cooperative corporation, and shareholders collectively own and manage the property. As a result, co-op boards may prioritize maintaining a cohesive community and ensuring that new residents align with the building’s culture and values. This emphasis on shareholder consensus can lead to a more thorough evaluation of prospective buyers and a higher standard for approval.

Though the city’s pulse beats loud and strong,
In our co-op haven, we still belong,
A sanctuary amidst the urban sprawl,
Where community reigns and hearts enthrall.

Co-op boards may require larger down payments from buyers than condos. While condos typically require down payments of around 10-20%, co-op boards may require down payments of 20-50% or more. This higher upfront investment can pose a barrier to entry for some buyers.

Compared to condos, co-op buildings often have stricter rules and regulations regarding subletting, renovations, and other use restrictions. Co-op boards may limit or prohibit subletting altogether, require board approval for renovations, and enforce different policies that can impact a buyer’s flexibility and autonomy.

Co-op apartments make up a significant portion of the housing stock in New York City, particularly in Manhattan. As a result, buyers may face limited options if they are exclusively focused on purchasing a co-op. This constrained market availability can make the approval process more competitive and challenging.

So here’s to co-op living in Manhattan’s embrace,
A symphony of souls in this bustling space,
Where dreams take flight, and spirits soar,
In our co-op haven forevermore.

But wait, there’s also a Condop, described as a building (or a complex of buildings) that is part co-op and part condo. Usually, the entire residential portion of the building (which contains co-op apartments) is legally one condo unit. At the same time, the commercial and professional spaces are owned as one or more additional condo units. With the legal ownership of the building divided that way, the residential condo is essentially a co-op that owns its building. Apartments in such a building are managed, marketed, bought, and sold as co-ops. Condops are always called “co-ops with condo rules” since they have flexible house rules, especially regarding financing and subletting.

Perhaps the greatest advantage of Cooperatives is their price. They are often less expensive than condominiums, even though they may offer similar apartments and amenities. If you are looking for an investment lower than required for a condominium, this could be perfect for you. In some cases, co-op apartments may be more affordable than condos, particularly in prime Manhattan neighborhoods. Co-op buildings may offer greater stability and security for residents as they are less susceptible to investor speculation and rapid turnover.

Overall, the combination of co-op board discretion, stringent financial requirements, and a community-focused governance structure makes it more difficult to get approved for a co-op in New York City than purchasing a condo. However, for buyers who are willing to navigate the approval process and meet the requirements, co-op ownership can offer unique benefits and opportunities in the city’s competitive real estate market.


ABOUT THE AUTHOR: Stevenson’s experience in Philippine Real Estate spans over 15 years. He has been involved in horizontal, vertical, vacation, and commercial properties. He has worked as an International Property Specialist for markets in Asia, Europe, and North America with Ayala Land, Federal Land, and Century Properties. Through PhilHouseHunters, he offers real estate investment opportunities, marketing, and consultancy with a critical focus on Metro Manila and Mega Cebu areas. Visit www.philhousehunters.com. Email at derodarsales@gmail.com.

In New York City, Stevenson is affiliated with Elegran Forbes Global Properties as a Real Estate Advisor and licensed Real Estate Salesperson. Forbes Global Properties is a global network of elite real estate professionals, including brokers, developers, and agents, who specialize in luxury properties. Through Forbes Global Properties, members can connect with affluent buyers and sellers across the globe and showcase their high-end properties on a global stage. Stevenson is both a member of the Real Estate Board of New York (REBNY) and the National Association of Realtors (NAR). Email him at svderodar@elegran.com.

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