A Brooklyn co-op and the future of affordable housing

A Brooklyn co-op and the future of affordable housing


I’ll start by jumping to the end of this story.

This past August 31, shareholders at Cadman Towers, a city-supervised Mitchell-Lama (middle-income-affordable) co-op in Brooklyn, voted overwhelmingly to exit the well-known program, but it’s not what you think.

Unlike previous properties that left Mitchell-Lama to become private co-ops — such as Manhattan’s Southbridge Towers and Columbus Park — Cadman Towers took a radically different approach.

Rather than going private, our residents signed a new 99-year commitment to remain affordable under a little-known affordable housing initiative called Article 2 to 11.

Established in 2013, the program is designed to restore financial stability and preserve affordability for aging Mitchell-Lamas at no additional cost to the city, the state, or existing residents.

Yes, a pathway to sustainable, affordable housing is real. 

The Mitchell-Lama program was created in 1955, the same year Averell Harriman was elected Governor.

Over the following two decades, more than 100,000 apartments were built, providing quality, affordable housing for working-class New Yorkers.

The massive Mitchell-Lama project Co-Op City has 15,000 apartments; embracing Articles 2 to 11 could potentially yield the Bronx development $10 million in extra funding each year. Christopher Sadowski

Today, many of those aging properties are surrounded by scaffolding, and the program is mired in outdated rules and regulations.

Some co-op apartments still sell for as little as $3,000, returning little or no money back to the co-op, which is a problem for properties needing major repairs.

To complicate matters, the Mitchell-Lama program lacks a provision for funding big-ticket maintenance projects like new boilers, window and roof replacement, etc.

As a result, residents spend decades arguing over the astronomical costs of structural and mechanical upgrades while their properties continue to deteriorate.

Southbridge Tower in Manhattan is one of many Mitchell-Lama co-ops that have left the program and opted out of its “affordable”-housing model. Google Maps

Co-op City, for instance, deferred repair work on their crumbling garages until 2003, when one collapsed, and the rest were shuttered by the Department of Buildings, citing safety issues.

Although Co-op City gets the most attention because of its size (15,000 units), structural and mechanical failures are common in Mitchell-Lamas citywide.

Here’s where it gets complex.

The city and state offer an assortment of market-rate, below-market-rate, and, in some instances, zero-interest-rate loans to help keep Mitchell-Lama properties afloat.

However, loans on top of loans still build up to gargantuan debt. Now, imagine all of this has been going on since the 1970s.

Mitchell-Lama debt can run between ten million to several hundred million dollars, depending on the complex.

At some point, the money must be repaid, impacting their affordability.

Cadman Towers currently has six loans totaling more than $60 million, $18 million of which it has been carrying since 1977.

All this debt recently forced a 43% monthly maintenance increase on residents, many of whom are retired city workers and teachers whose pensions or salaries cannot keep up with the cost of maintaining these old properties.

But remember, this is a positive story. 

In 2013, Cadman Towers was approached by the NYC Department of Housing, Preservation and Development (HPD) and invited to participate in a new initiative. Recognizing the coming storm, HPD presented a plan to blend aspects of Mitchell-Lama (Article 2 of the New York Private Housing Finance Law) with another affordable housing program, Housing Development Funding Corporation-HDFC (Article 11). 

Over the next few years, a plan materialized between city agencies, city lenders, legal experts, the NY Attorney General’s Real Estate Finance Bureau, and Cadman Towers residents that bundled the most cost-effective elements of Article 2 and Article 11 — hence the new program name “Article 2 to 11.”

Here’s how it works: Article 2 to 11 depart from the antiquated apartment pricing from the 1960s and resets apartment prices for new applicants at 80% of the area median income — $79,000 for an individual/$165,000 for a family of four –  considered the sweet spot of affordability for city workers.

It imposes a 50% flip tax on an apartment’s first sale (3% thereafter).

The city holds that tax money in a reserve account to finance large repair projects or pay down debt.

In addition, the city will cover the down payment and closing costs for applicants who qualify for the Home First program.

The debt is forgiven if they live in their apartment for 10 years.

The author in front of Cadman Towers, which spent years — and nearly 100 meetings — debating the merits of embracing the Article 2 to 11 model. Stefano Giovannini

Based on an average 3% annual turnover rate, Article 2 to 11 are expected to generate $1 million annually for Cadman Towers’ 421 units.

For larger Mitchell-Lamas like Co-op City in the Bronx, it could mean $10 million, at no cost to the city, the state, or current residents. 

HPD had shopped Article 2 to 11 to several properties.

But Cadman Towers is the first to make it happen, though that shouldn’t surprise anyone — we’re a tight-knit community.

We still have our annual softball game (residents and maintenance staff), end the year with a blowout holiday party, and host gatherings like art shows and an annual tag sale. 

The Mitchell-Lama program still keeps homes for many New Yorkers affordable, but many of its rules and regulations are outdated and work against the long-term financial security of many co-op developments. NYS HCR / X

True, not every co-op is ideally suited to implement Article 2 to 11 as a workable solution to their economic challenges.

“But the conversion to Article XI gives…New Yorkers an opportunity to realize the benefit of building equity in their homes, which is one of the hallmark advantages of homeownership,” says HPD Deputy Press Secretary Natasha Kersey, “while at the same time guaranteeing long-term affordability for all residents of Cadman Towers.” 

Article 2 to 11 was not a simple decision and required some 80 town hall and cooperator workshop meetings to get it approved.

Although some co-op members were vocally opposed, 77% of shareholders voted yes to support Article 2 to 11 — and the New York State Attorney General Letitia James provided a letter of no objection to our plan.

New York State Attorney General Letitia James has provided a letter of no objection to Cadman Towers’ Article 2 to 11 conversion plan. Susan Watts/Office of Governor Hochul

Within days of the August 31st vote, I received emails from four other Mitchell-Lamas wanting to discuss Article 2 to 11 for their own Mitchell-Lama co-ops.

Call it audacious or auspicious, this is precisely how good government is meant to function.

All sides working together.

It should be the rule, not the exception.

Hopefully, this is just the beginning for other Mitchell-Lama buildings across New York seeking to preserve their affordability. 

Toba Potosky is the President of the Board of Directors at Cadman Towers

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