Co-ops within the Time of Covid

Co-ops in the Time of Covid

Of the hundreds of thousands of New Yorkers who left the city in the early months of the pandemic, there are a few that Lori Levine van Arsdale won’t miss.

“One I told directly, if we never meet again, it would be all right,” Ms. Levine van Arsdale, the board president of a five-unit co-op near Gramercy Park, said to a departing neighbor — one of three who sold in her small, self-managed building in the last year.

In the haze of almost a full calendar year with the virus, one of the overlooked aspects of life amid Covid is how it is reshaping one of the city’s most enduring vertical villages, the cooperative.

In co-ops big and small, where term limits are rare and lifers often make the rules, the sudden departure of even a few residents can have an outsize effect on governance, longstanding policies, even the vibe of a building. And while the virus might not have caused the shake-up, residents said, it has almost certainly hastened the change.

“Covid has really brought a lot of things to the surface,” said Christopher Totaro, a Warburg Realty agent and co-op board member. “It’s kind of like splinters that were festering.”

Cooperative housing, a corporate structure in which residents own shares of the property, is often considered a more affordable route to New York homeownership, in part because the buildings are generally older and have more restrictions than condos, with rules established by the shareholders.

Estimates vary because of the variety and corporate structure of co-ops, but citywide there are more than than 7,100 co-ops, according to the commercial brokerage Ariel Property Advisors, and many are entering a busy season of board meetings delayed by Covid. Their votes might determine if a hike in maintenance or other fees are needed; if a wave of new pandemic puppies can stay; if financing rules should be eased to improve sales; if subletting should be allowed; if parents can co-sign or pay toward an adult child’s down payment, and countless other quirks of shared homeownership in a slumping market.

The types of issues facing co-ops citywide can be vast and varied, from half-empty, white-glove buildings on the Upper West Side where many shareholders have decamped to vacation homes, to income-restricted walk-ups in Brooklyn and the Bronx, where some buildings’ financial reserves are nearly tapped.

Here are some of the changes happening beyond the socially distanced lobbies, from the residents and building staff on the ground.

The recent sale of three out of the five apartments in Ms. Levine van Arsdale’s Gramercy Park brownstone has completely changed the mood in the building.

“I’ve been here 15 years, and only since February or March have people been nice to each other,” said Ms. Levine van Arsdale, who runs Flying Television, a talent booking firm. Having a majority of the units switch ownership in recent months also created an opportunity to revise the building’s bylaws, which previously required only three people to be on the board; now every unit gets an equal say.

Cheryl Brinkman, a longtime shareholder who works in digital design, said “there was some bad blood” between former residents, in part because not everyone was doing their fair share, from filing routine paperwork to shoveling snow.

The newest arrival, Lilia Levine, an interior designer and first-time buyer, who closed on a two-bedroom apartment in July after renting for several years in Clinton Hill, Brooklyn, thinks the new mix of owners will be more collaborative.

“There’s a very strong women-in-the-workplace presence,” in the building, Ms. Levine said. Each apartment has a woman who works in a managerial position or who owns her own business. “Nobody feels too stuffy or entitled,” she said.

Yet relationships are being tested in co-ops across the city, as sellers adjust to downward pressure on pricing that began before Covid and has been exacerbated by the virus, said Steven Sladkus, a partner at the law firm Schwartz, Sladkus, Reich, Greenberg, Atlas.

“Some people are trying to get out of co-ops at bargain-basement prices, and that’s making the boards apoplectic,” because they fear the deals will hurt other owners’ resale value. (In most co-op sales, the board can reject an offer for reasons that are not always clear to potential buyers.)

Many co-ops are also facing lost income from ground-floor commercial tenants, like restaurants and retail shops that have fallen behind on rent, said Michael Tortorici, an executive vice president of Ariel Property Advisors, a commercial real estate firm.

About 1,136 co-ops citywide, or roughly 16 percent, recently had a commercial tenant, according to their analysis of public records. Some of those buildings, mostly in Manhattan and Brooklyn, may have to charge residents a temporary monthly fee or a permanent increase in maintenance to shore up lost funds. Big fees can be a major concern for older residents on fixed income, as well as sellers trying to compete in a crowded market.

Turnover has been high in parts of Queens, as well, but shareholders there can have very different concerns about pricing.

Regina T. Rice, the board president of a 135-unit co-op in Rego Park, said there have been 18 sales in the last two-and-a-half years, which is more than they’ve had in the previous 10 years. The biggest reason, even before Covid, was quickly climbing home values, spurred by buyers priced out of other parts of the city seeking relative affordability, which has encouraged shareholders to sell and cash out. A two-bedroom that would have listed for $200,000 three years ago, she said, could now sell for around $275,000, a 37.5 percent jump. (Two-bedroom co-ops in Manhattan sold for a median $1,245,000 last quarter, according to Jonathan Miller, a real estate appraiser.)

The prices have been eye-popping for longtime owners like Ms. Rice, a former information technology consultant, who arrived 24 years ago, when units sold for about an eighth of today’s value.

“There are a lot of people up-and-leaving, but by the same token, I think there’s a lot of promise,” she said, noting that apartments don’t stay vacant for long, with an influx of recent East Asian buyers and a number of out-of-state newcomers, including people from Texas and Florida.

The rising home values could encourage shareholders to vote with their wallets at the next board meeting, with plans to renovate the hallways and pay for other capital improvements. It’s possible that the board could also vote to lower the cash down payment required of buyers to 20 or 25 percent of the sale price, down from 30 percent, which would make it easier for first-time buyers to qualify.

Across all price points, many boards are facing pressure to liberalize their policies in response to the changing demographics of shareholders and competition from condos that have more relaxed rules, said Melissa Leifer, an agent with Keller Williams NYC.

Just last year, a client from California had to fly to New York for a co-op board interview, with no guarantee of acceptance. Now, she said, the necessity of Zoom and other video conferencing during the spring lockdown has softened many buildings’ policies toward in-person interviews.

Changing the status quo is often contentious in co-ops, but one crisis after another has had a way of smoothing over outright animosity, said Emanuela Lupu, a partner at the law firm Smith, Buss and Jacobs.

“The courts are pretty much inaccessible at this point,” she said, because of case backlogs, so litigious shareholders have been somewhat muted. “The pandemic has just chilled out everyone — people are just less obnoxious.”

Thousands of porters, supers and other building staff kept co-ops safe during the worst days of the pandemic, and now they are pressing for changes.

“We’re a union of majority Black and brown workers who live in communities of color, who have obviously experienced inequalities in this pandemic,” said Kyle Bragg, the president of 32BJ SEIU, a multistate building service workers union with more than 175,000 members. The group said 138 of its members have died from Covid, many from the New York area.

“It’s been an anxiety that hasn’t gone completely away,” said Julio Davila, the live-in super at a large, Mitchell-Lama co-op for middle-income residents in Brooklyn Heights, where he has seen his workload balloon.

With the explosion in online shopping since March, the staff might handle 100 packages in just a few hours, triple what used to arrive.

But it has also been rewarding work — in April, he comforted an older resident who had fallen in her apartment, and helped convince her to go to the hospital at a perilous time in the city. “It’s like I was taking care of one of my aunts,” he said. “She told me I owe her a dance.”

Ardist Brown Jr., a concierge at a luxury co-op on the Upper West Side who is known as Butch, tested positive for Covid in March and experienced severe fatigue and other symptoms. Within three weeks, he said he was back to work. “I felt like I was going back into a war zone.”

At the spring peak of the virus, he estimates that at least half of the residents left for other homes, and now the share of absent residents is closer to 40 percent. Those that stayed, some of them seniors without regular access to home health aides, because of Covid restrictions, relied more on Mr. Brown. From April to July, he said he would gather extra boxes of food supplies from a friend who works for a nonprofit, and distribute them to some residents.

“If Butch didn’t do this for quite a few shareholders, they would have gone without, and they may not be here today,” said Yelena Sverdlova, a senior property manager who oversees the building. There are co-ops all over the city, even in affluent neighborhoods, she said, where at least a few older residents have no local family or support.

“I did it because it was the right thing to do,” he said. “I slept good at night.”

Mr. Bragg said the union is already eyeing changes to their contract, which could include a push for hazard pay for its members. “I certainly hope that when we come to bargain the next contract, which is in April 2022, that the industry doesn’t forget this moment.”

The co-op residents who stayed in the city far outnumber those who left, and they are often the ones with the most to lose in an economic downturn.

Citywide there are roughly 1,300 Housing Development Fund Corporation co-ops, income-restricted buildings converted mostly in the 1970s and ’80s, when the city was in dire straits and many of the buildings were abandoned.

Many tenants bought their rental units for a nominal fee from the city, rejuvenated the buildings, and have remained for decades. Two-thirds of the buildings report having a high number of senior residents, said Rania Dalloul, a staff member at the Urban Homesteading Assistance Board, a low- and moderate-income housing advocacy group.

Now some of those co-ops face an economic crisis not seen since their inception, Ms. Dalloul said. “This feels like a real threat to their survival.”

David Calvert, 67, is an original H.D.F.C. shareholder who squatted in his Manhattan Valley building until 1983, when he bought his apartment for $250. Now units in the building can sell for more than $300,000. About half of the residents in the 10-unit walk-up are original residents.

Keeping the building current on various expenses has always been difficult — in fact, this was the first year in which every resident regularly paid their maintenance in full.

“We all came in here either homeless or completely under-housed,” he said of the original shareholders. “You care so much for your neighbors that there’s a lot of tolerance.”

While their building remains on solid financial footing, some H.D.F. C.s are teetering on financial distress. In some cases, longtime residents have felt forced to sell for financial reasons and move to lower cost cities; they have been replaced at times, critics say, with wealthier buyers who meet the income criteria on paper, but have access to more cash, from family or reserves, than many previous residents.

Some buildings facing foreclosure could potentially be transferred to a developer and converted back to rent-stabilized apartments, stripping the shareholders of their ownership stake, and years of equity.

Even so, Mr. Calvert sees flashes of the resilience that revived his building and co-ops like it back in the 1980s.

“So many of us are not thinking about leaving the city, but redoubling our efforts to make it a great place,” he said. “But it’s built block by block, people by people, and that is our formula.”

For weekly email updates on residential real estate news, sign up here. Follow us on Twitter: @nytrealestate.