![]() Privatization may be a lengthy process Privatization is not a quick process and can take years of heated debates, studies and even litigation to complete. For example, the market rate for a three bedroom co-op apartment in FiDi is well north of $1 million, which means a gain of 100x or more on the initial investment. Given that the owners of the 1,607 unit complex purchased their apartments decades ago for $10,000 or less, the act of privatization is expected to bring enormous increases in the net worth of the residents. In late 2014, slightly more than two-thirds of the residents voted to privatize after an often heated, lengthy debate over the merits of doing so. The Southbridge Towers complex in the Financial District goes private The Southbridge Towers is a great example of a Mitchell-Lama limited equity housing cooperative that has voted to privatize in recent years. However, unlike a regular co-op building which may levy a 1% or 2% flip tax on the net sale proceeds, a Mitchell-Lama co-op may decide to levy a much stiffer flip tax in order to offset increased monthly charges by the remaining residents as a result of privatization, and perhaps simply because the co-op board feels like the building is owed some of the outsized gains due to privatization. Hefty flip taxes may be levied post privatization Just like in HDFCs and co-ops in general, a flip tax can be levied by the coop board to both raise revenue and to discourage “flipping” or trading by investors. Most Mitchell-Lama owners covet their properties, especially in NYC where property values have exploded in recent years.” David Reischer, Esq. The owner gets a small amount of money back in the form of their original purchase price plus some interest expense on any mortgage payments. When a Mitchell-Lama owner sells the property, the property go back to the co-op. I have been contacted by tenants to circumvent this rule but it is not possible as it is written into the law when Mitchell-Llama apartments were created over 60 years ago. ![]() The owners of a Mitchell-Llama apartment can’t profit when they sell the unit but can pass the unit to a successor if the person has been living in the unit for at least 2 years. To buy or rent a Mitchell-Lama apartment a person must pass an income test. The apartments were built for middle income residents. at who had the following to say about the Mitchell-Lama program: “The Mitchell-Lama program is named after the 2 senators that spearheaded the program and was conceived over 60 years ago so as to offer affordable housing in blighted neighborhoods. That’s why New Yorkers dream about Mitchell-Lama apartments! We recently interviewed David Reischer, Esq. Yes, you heard that right, a 2 bedroom apartment in New York City for under $20,000 to buy, and $1,100 a month to maintain. Monthly maintenance fees? Around $1,100 a month. For example, 353 Beach 57th Street in Far Rockaway, Queens became open for applications recently for two bedroom co-ops which could be purchased for approximately $17,000. Furthermore, monthly maintenance will be significantly lower than average due to special property tax abatements, subsidized mortgages and outright government grants. Why? Because they’ll be able to buy an apartment for well under $100,000, or even just a few tens of thousands of dollars or less. Why are Mitchell-Lama coops so attractive? Getting to the top of the wait list for a Mitchell-Lama co-op is akin to winning the lottery for New Yorkers.
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