How do Affordable Condos Work? (serious question)

escap · December 2006

At least 200 of the market-rate condominiums will be subsidized and made affordable to first-time homeowners.

The above quote is from yesterday's article on the AY project approval. My question is, how does such a subsidy work? It strikes me as paradoxical.

For example, what if I qualify for the subsidy and then buy the condo. Don't I then, by definition, own it, with all the rights granted to an owner? So can't I then just turn around and sell it right away at fair market value and realize an instant profit?

Are there lock-up clauses that prevent flipping it for a period of time? If so, how long? Or is the price forever fixed, so that its first owners can never sell it at above some regulated price? If so, what's the benefit of ownership?

I promise to try and avoid my usual ranting on the subject if someone can just provide an answer to this quandary, as I'm genuinely curious.

ben · December 2006

Subject: Re: How do Affordable Condos Work? (serious question)

escap wrote:
At least 200 of the market-rate condominiums will be subsidized and made affordable to first-time homeowners.
The above quote is from yesterday's article on the AY project approval. My question is, how does such a subsidy work? It strikes me as paradoxical.

For example, what if I qualify for the subsidy and then buy the condo. Don't I then, by definition, own it, with all the rights granted to an owner? So can't I then just turn around and sell it right away at fair market value and realize an instant profit?

Are there lock-up clauses that prevent flipping it for a period of time? If so, how long? Or is the price forever fixed, so that its first owners can never sell it at above some regulated price? If so, what's the benefit of ownership?

I promise to try and avoid my usual ranting on the subject if someone can just provide an answer to this quandary, as I'm genuinely curious.

There is usually a lock-up period during which the property can't be sold and must remain owner occupied. Once that period is over there are no restrictions.

I guess a different program could be created but that's what I've seen in the past.

ben · December 2006

Here are some links that give more info:

http://www.housingpartnership.com/homebuyers/faq.php

http://www.nyc.gov/html/hpd/html/pr1999/newhomes-pr.shtml

escap · December 2006

Thank you Ben!! I appreciate your serious response despite my contentious post in the AY thread. :oops: I guess this type of deal provides a kind of one-time benefit at taxpayer expense to needy first-time owners. After the lock-up period, of course, the units would return to un-affordability and the owners would walk away with a sweet profit. It's not the worst plan I've ever heard--by far and away better than rent control--but it clearly does bring up the problem of fairness (out of a million or so needy 1st time owners, which 200 hundred should be chosen for this gift from above?).

Thanks again.

ben · December 2006

I agree, this is the best type of program that I've seen. Because it gives actual ownership rather than just a handout it allows people to move forward in their lives as opposed to holding them back because they are getting a handout (RC, Section 8, welfare, etc.)

But at the same time, they have to earn the value by taking care of the property and putting in the time.

The change in mindset that these people have is very apparent when you see a block full of these homes vs. a block full of tenants on section 8. No trash, graffiti, stereos blasting out the windows, etc. People take pride in what they have and work to keep the neighborhood nice. This shift in mindset ripples through the rest of their lives and their children's lives.

tracy · December 2006

Ben, you can read people's minds?? You know what's rippling through them? Or maybe you are quoting some research. To me you sound like you are spouting some conservative clap-trap. Perhaps you have been listening to Rush Limbaugh?
Also there have been Mitchell Lama coop's like this for years. Some of them are in Brooklyn Heights, although I think the sale has some restrictions on who may buy.

homeowner · December 2006

The thing is that people who participate in the affordable condo and co-op programs tend to be very motivated. They do a fair amount of research, and put in the time necessary to get all the paperwork filed. So, as a result you get a very particular type of participant. They are employed and have employment histories, have stable families and are truly working-class people. As tracy noted these types of subsidies have existed for a long time and they were what allowed teachers, government employees, and other professional but not highly salaried people to gain owership rights.

One of the sadest things about the responses to AY were the group of folks from Acorn that were out having a celebration after the announcement of the approval. There were a bunch of men interviewed on tv that were talking about how they were going to be getting affordable housing. It was obvious from listening to them that these were a group of men that had little education and I wondered how many of them will ever see the inside of AY either as a laborer or as an owner.

In terms of the fairness question, I think that anyone who is displaced should be given the first opportunity to purchase (assuming that they did not negotiate some other settlement with Ratner). After that, current residents of the communities involved (ft green, prospect heights, etc) and then moving outward from there to the rest of Brooklyn, then the rest of the city and then anyone moving from outside NY. That way the bulk of the benefit goes to those who have shouldered the burden of construction, etc.

How do Affordable Condos Work? (serious question)

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