Of New York City Co-ops and Condos
Consumers looking to purchase a home in New York City face a choice that those interested in other real estate markets don’t have to consider: Condos or Co-ops?
Each choice offers its pluses and minuses, but many new to the city’s real estate market often ask themselves, “Why on earth do co-ops even still exist?” Those that already own property in the city – whether it be condo or co-op – however, don’t have such a flippant attitude. The coop ownership structure in the New York City Real Estate market effectively added another layer of regulation to the city’s housing industry, thus saving it from the subprime crisis to an extent experienced by no other city in the union.
In all, somewhere between 85% and 90% of all housing in the New York City real estate market is co-op housing. While that share is falling steadily, it is a relatively slow trend, and the market will continue to be dominated by coops for some time to come.
That being said, the coop ownership structure did not exactly rise from the best of traditions: It was a mechanism for large apartment buildings to screen out unwanted applicants of various types, usually along class or social lines – or even racial lines, though never explicitly.
Co-op boards continue to be rather snooty, especially the wealthier ones. The process of applying to live in such a place is often more rigorous than trying to get into an Ivy League college.
Fortunately – and perhaps ironically – this snootiness curbs demands for coops, and so their prices are, on average, ten percent less than the typical condo in terms of square feet, according to recent estimates.
Another barrier to entry that keeps the average price of coops lower than condos is that they often require more money to be put up up front. Sometimes there are even clauses saying this money can not be money from a bank loan, but has to be the buyer’s pre-existing cash reserves.
One good thing about co-ops, though, is that the money you pay on your share of the building’s taxes and mortgages are deductible from your income taxes.
Also, once you are actually in one, the arduous admissions process that you went through will have to be completed by all other potential neighbors, thus saving you from the possibility of living next to Kid Rock or some other similarly lovely character.
Also, some of the oldest, most prestigious buildings in Manhattan are coops. Of course, the same can be said about condos, but the point is that many coops have a certain old-money flare to them that condos often eschew.
Other than those benefits, though, there’s little to say in the way of coops. Condos are especially better as investments. They are easier to sell, and thus are a considerably more liquid asset.
