Owners in a debt-saddled Brooklyn Heights affordable co-op complex are getting city help unlocking the power to generate cash when apartments sell — infuriating people who’ve spent years on the waiting list for one of the highly coveted units at Cadman Towers.
The City Council on Thursday approved a tax break that will help Cadman Towers become the first Mitchell-Lama cooperative to convert to a city-sponsored affordable housing co-op known as an HDFC.
Cadman, which comprises 421 apartments, is burdened with $62 million worth of debt coming due and unable to take on additional loans to pay for tens of millions of dollars more for needed repairs.
The complex’s board of directors says going from a Mitchell-Lama building to an HDFC sponsored by the city Department of Housing Preservation and Development will generate revenue to pay for much-needed repairs by allowing current shareholders to unlock equity in their apartments by selling at a gain. The co-op ownership corporation could capture some of that money during sales, preventing the board from continuing to raise maintenance fees.
“It’s to make sure we’re affordable for the next 50 years and beyond,” said Toba Potosky, the board president.
More than three-quarters of shareholders voted for the conversion, but others remained skeptical that this unprecedented step will meaningfully address the financial woes.
The opponents say the move erodes the most deeply affordable housing model in the city and cheats hundreds of people who have been sitting on a waitlist for a chance to buy into the building.
Councilmember Lincoln Restler (D-Brooklyn), who represents Brooklyn Heights, supported the conversion but acknowledged the hard decision.
“This is a transition from one type of an affordable housing cooperative to another type of affordable housing cooperative,” he said “We have a choice to make between hurting the existing low-income residents at Cadman or hurting future low-income residents who want to live at Cadman.”
Mitchell-Lama Legacy
Both Mitchell-Lama buildings and HDFCs are forms of subsidized affordable housing and require income limitations for potential applicants, but they work differently.
New York state lawmakers created the Mitchell-Lama program in 1955. When Mitchell-Lama shareholders sell their apartment, they don’t make much more than what they originally paid. One-bedroom apartments in Cadman Towers go for around $45,000 and three-bedrooms are about $80,000, according to property manager Mary Egrie.
HDFC shareholders can sell their apartments for an appreciated value, though are still limited in the profit they can make. When HDFC shareholders sell their units, they pay a flip tax, meaning a percentage of the profit they get from the sale goes to the HDFC to pay for building needs.
In the case of Cadman Towers, shareholders who sell their units will do so at prices pegged as affordable to households earning 80% of the area median income, equivalent to about $100,000 in income for a family of two. Sellers must give 50% of their profits back to Cadman to cover building needs and existing debt.
The board projects it could take in $1 million per year based on the expected turnover rate of apartments, and that would prevent continued hikes in maintenance fees, which have increased about 50% since 2018, according to the board president.
Carrolyn Minggia, 69, a resident of Cadman Towers, backed the conversion and said the new plan would provide her stability in the wake of ever-rising costs.
“There’s been increases that I can’t believe. I’ve been on permanent disability since 1998. I don’t make any more money,” she said. “I intend to live here until they carry me out, and I want this place to be here so the new generation will come and live in affordable housing.”
But Greg Paquette, an artist, doesn’t think the new financial structure of the building will support the kind of working people like himself and his neighbors. Paquette, 77, and his wife, a retired teacher, purchased their apartment for about $6,000 more than two decades ago, he said.
“Now people will have to buy their condos for a considerable amount of money and that would limit a whole group of people,” he said. “It’ll change the composition of the people. It’ll be more affluent, less racially diverse. It’s really nice here. It’s a nice mixture.”
HDFCs are popular buys for people with relatively small incomes but access to family money, as Bloomberg Businessweek reported in 2021.
Potosky, the board president, said the makeup of the building wouldn’t change because the income eligibility would remain the same — capped at 125% of area median income, or just over $150,000 for a family of two — and buyers could take advantage of a forgivable down payment assistance program.
Hitting a Wall
For the people on the waitlist, the conversion dashes their hopes for stable, affordable housing. With the conversion, the old list gets wiped out and a new one will be created by lottery through Housing Connect, run by the Department of Housing Preservation and Development.
Amna Ahmad is one of them. She’s been on the Cadman Towers waitlist for about five years, hoping it would get her into a better living arrangement. Over the 15 years she’s been in her one-bedroom apartment in Kensington, her rent has nearly doubled, but her salary as writer and editor has not. She shares a room with her 9-year-old daughter, who is increasingly agitating for her own space.
Securing a spot in Cadman would mean “for as long as we live here, we never have to stress out about housing,” Ahmad said.
Mary Wade, a shareholder in her 70s, said she felt like she was “saved” when she got off the waitlist after a dozen years, and moved out of a dark studio a few blocks away. She still can’t get over the skylight in her kitchen — she said she sometimes mistakenly moves to flip a lightswitch that’s not on because it’s such a bright space.
Wade said she’s “not about” being able to make a profit from selling her apartment, which she purchased more than two decades ago for about $16,000.
“I’m for the people, the people who are waiting to get in,” she said.
Restler said he felt “great sympathy” for someone on the waitlist, but didn’t think “we can afford to make decisions for the future stability of affordable housing developments based on a waiting list.”
