In previous decades, the City has supported the creation of tens of thousands of below-market co-ops and encouraged renters to take ownership of their own buildings. These initiatives greatly benefited households of color, as they were more likely to be locked out of market rate homeownership. However, without those programs, sky-high prices have pushed homeownership out of reach for most families.
In the coming months, as federal relief expires, distressed multifamily building owners will look to sell, opening the door to speculative actors. However, market churn can also offer renters the opportunity to purchase their own homes. High-priced cities, like Washington, D.C. and San Francisco, have implemented programs that allow tenants the right of first refusal to organize and purchase the building they live in when their landlord puts it on the market. In D.C., a local initiative included funding for tenant organizing and acquisition. In many instances, the tenants become shareholders in new limited equity cooperatives, creating ownership and long-term affordability that can be passed on to future residents of the building.
While legislation could pave the way for large scale building conversions, a pilot of this program would explore — and encourage nonprofits and government to develop — the necessary social, financial, and regulatory infrastructure to make this a success in New York City.
A Tenant Opportunity to Purchase Pilot would take a three-pronged approach: identifying tenant associations and buildings for viable conversion to limited equity co-ops; providing technical assistance to tenant organizers and tenant groups through nonprofit partnerships; identifying the financial needs of tenants who want to convert their building to a limited equity co-operative; and, finally, using that information to source mission-aligned capital to assist with the acquisition.
Identifying opportunities: To pilot a building conversion that will demonstrate a model that can be scaled up, the right buildings with motivated tenants will need to be identified. Owners must be ready to sell and willing to engage with their tenants.
Technical assistance partnerships: The right nonprofit partners will have tenant organizing and tenant education experience and be capable of navigating a co-op conversion through regulatory hurdles.
Financing: Most buildings eligible for conversion will have some level of rehab needs in addition to the acquisition costs. The pilot program will include the assessment of total costs, development of project scopes, and identification of funding sources.
The Tenant Opportunity to Purchase Pilot would allow public and nonprofit partners to identify strategies for supporting tenant organizing. What buildings are feasible for conversion in terms of size, repair need, neighborhood? What are the requirements of tenants? And critically, what are the financial resources available for acquisitions and what are the gaps? These strategies could feed into legislation to allow for wide-scale building conversions.
The pilot can demonstrate exactly which stakeholders — from nonprofit technical assistance providers and tenant organizers, to attorneys and government administrators — are necessary to make tenant building conversions successful.
Without a carefully studied pilot, it is difficult to project the full cost of a tenant acquisition. The pilot would deliver policy makers and future program administrators an idea of the expenses associated with acquisition, rehab, technical assistance, and legal services.
