The New York City region has a high concentration of cooperative apartments (“co-ops”), a method for creating owner-occupied, high-density housing with a longer history than the condominium model that now prevails throughout much of the country. A large subset of New York’s co-op stock is held under a limited-equity arrangement, a unique framework that combines the benefits of home ownership with long-term affordability. As the cost of housing continues to soar in regions with strong economies, this idiosyncratic model deserves a fresh look nationwide.
Like market-rate co-ops, limited-equity buildings are owned by residents whose shares represent equity in a business association. The association owns the buildings and grounds, and the resident-owners elect a board that sets policy. What distinguishes limited-equity buildings from market-rate co-ops is that the initial purchase price and the subsequent resale value of a unit is limited. In other words, the value of a unit does not float with the city’s land markets. Instead, when a resident leaves, the co-op repurchases his or her initial investment (plus some modest, formulaic measure of appreciation); it then charges the next resident, essentially, what the previous resident had been paid.
In New York, most limited-equity developments are now regulated by the state’s Mitchell-Lama affordable housing program, making them subject to income guidelines and other measures. Such oversight is not strictly necessary, and some do not participate. Significant tax benefits are also available for maintaining affordability. Presently, there are about 70,000 limited-equity units in the city , but, despite their value and viability , their number has been declining . The temptation of windfall appreciation has caused some boards—particularly in Manhattan—to reorganize as market-rate co-ops. At the same time, a shortage of cheap land, even on the city’s outskirts, makes it costly for new co-ops to be established. Finally, a general lack of knowledge about its merits has probably kept the limited-equity model from being a more prominent part of today’s affordable housing proposals. This is unfortunate, because limited-equity co-ops can work; and many American cities now have shortages of good housing for middle-income residents.
Cooperativism and New York City’s Early Housing Co-ops
The limited-equity framework is closely related to the modern cooperative, more generally, whose roots can be traced to Rochdale, England , in the mid-19th century. In 1844, a group of tradespeople pooled their buying power to form a food co-op, allowing them to source high-quality ingredients at lower costs. In the course of forming their association, the group developed a set of seven basic principles that have since guided the framework of most cooperatives: open membership; democratic control; dividend on purchase; limited interest on capital; political and religious neutrality; cash trading; and promotion of education. By the turn of the 20th century, the Rochdale vision had achieved a leading role in the reform currents of Europe and North America. In England, the planning visionary Ebenezer Howard proposed a Rochdalian cooperative structure for his Garden City in his 1899 classic, To-Morrow: A Peaceful Path to Real Reform . In Germany, Theodor Herzl relied on a similar model in his blueprint for Israel in Old New Land. In the United States, Edward Bellamy had already envisioned a similarly utopian future age in his novel, Looking Backward. But while cooperativism took root in the visionary writings of the Victorian period, it remained limited in its practical applications, particularly in the world of housing. In practice, co-ops only became a component of New York City housing once the labor movement gained traction in the early 20th century .
Early in the 20th century, labor in New York was at the forefront of cooperativism. The 1911 fire at the Triangle Shirtwaist Factory, in which 146 people—mostly young women—died, marked a turning point. The ensuing outrage about dangerous working conditions fueled labor activism, and demands for better housing were made a priority. The convergence of a powerful labor movement with the city’s uniquely apartment-oriented housing stock made the phenomenon of limited-equity cooperative housing possible.
But it is an irony of the changing nature of politics that cooperativism was championed by many on the Left in the early 20th century, yet in today’s politics its principles dovetail nicely with a more conservative approach. This is because cooperativism is essentially a self-help solution from a time when the role of the state was presumed to be limited. As a result, it does not require much public-sector involvement to work. In practice, establishing and managing a co-op has much more in common with starting a business or governing a small town than it does with subscribing to an ambitious political ideology.
Abraham Kazan was the central figure in the early narrative of American co-ops. He grew up on Manhattan’s Lower East Side; his parents had brought him to New York from Russia as a child. By the 1920s his career was already entwined with the Amalgamated Clothing Workers (“ACW”) union, where he served as president of its cooperative credit union. Perhaps as an outgrowth of that role, he sought to apply a version of the Rochdale principles to the need for better housing in New York. Kazan and other labor leaders lobbied the New York State legislature to enact a framework that would facilitate construction of affordable new apartments, and in 1926 their efforts yielded the Limited Dividend Housing Act (LDHA). This law granted 20-year tax abatements to new buildings aimed at low-income tenants and whose profits were capped at just six percent. Although the legislation was not as strong as the initial proposal, it provided a new opening and ACW leaders quickly established the Amalgamated Housing Corporation (AHC), a new entity to take advantage of the new law; Hillman appointed Kazan as its president. The AHC was charged with developing housing for union members and others who qualified under the guidelines of the LDHA.
The 1920s land market presented a practical challenge: in neighborhoods like the Lower East Side, where new housing was most badly needed, scarce land was available for construction. Echoing Sir Ebenezer Howard’s strategy to make Garden Cities affordable by building them on inexpensive rural land, the ACW selected a site for its first co-op far from its home base on the Lower East Side. Kazan chose a canvas in the northwest Bronx—on the suburban outskirts of the 1920s city. The development was financed by combining a down payment drawn from ACW funds with a $1.2 million loan from Metropolitan Life Insurance. Meanwhile, a separate pool was established by the owners of a community newspaper, the Forward, to finance the upfront equity payments that would be required of cooperators. Herman Jessor, a young architect who supported the goals of the labor movement, came to work on the AHC project . Jessor and Kazan formed a strong bond that would result in a lifetime of collaboration.
Jessor’s site plan comprised a cluster of six mid-rise, Tudor-style apartment buildings, with spacious rooms and landscaped grounds. Alexandra Hans, who grew up in the Amalgamated Housing Cooperative, described  the key elements of its design:
Each apartment had hardwood floors throughout and ceramic tile bathrooms with marble thresholds. The kitchen was eat-in, and there was a foyer and a living room. The apartments to be selected had one, two, or three bedrooms. They all had cross-ventilation and sunlight. Some of the larger apartments had three exposures, depending on where they were located in the building.
When the Amalgamated opened in November 1927, with 303 original cooperators , the one-time purchase price for a standard two-bedroom apartment was $2,000—or around $28,000 in 2017 dollars. This amount constituted the cooperator’s limited equity in the cooperative—while the market value of the complex was presumably greater than the sum of shareholders’ investments. Carrying charges, or “maintenance fees,” for such a unit in 1927 were pegged at $44 per month—or about $600 in 2017 dollars. In addition to housing, the Amalgamated arranged for a number of community services for its cooperators. Milk and ice deliveries were purchased on the co-op model, and several cooperatively-owned stores were established in the immediate vicinity, including a pharmacy, a barber shop, a tailor, a shoe repair, a grocery store, and a butcher.
The LDHA had opened the door for groups other than its active sponsors to begin raising the necessary capital for limited-equity developments and created a legislative blueprint for them—and other players in the city’s real estate market perceived opportunities. Notably, the rush that characterized the early history of the limited-equity housing sector was marked by ironies: Although it was sponsored by one of the key stakeholders that had pushed for the LDHA, the Amalgamated was beaten to the market by another limited-equity development, the Bronx Park East Co-ops, on Allerton Avenue. Similar co-ops that opened for occupancy around the same time included the nearby Shalom Aleichem Houses, on Sedgwick Avenue, and the Farband Houses, near Pelham Parkway. All were sponsored by various labor or left-wing groups.
So, while early limited-equity co-ops grew out of the activism of some of the most radical political organizations in the city, they also brought members of the city’s workforce into homeownership, giving them a stake in the private economy. And despite its early support from radicals, the limited-equity housing arrangement provided a framework that was in many ways compatible with a conservative, market-based approach to real estate: a tax credit for developers and owners was the primary form of government support. As a result, even today, the limited-equity model has the potential to transcend some of the most controversial political subjects that may present obstacles to other affordable housing proposals.
In 1927, trouble for any new business venture was just around the corner. Yet how the Amalgamated survived the Depression illustrates the genuinely cooperative nature of the community in its early days. Kazan’s personal involvement was certainly an important factor. To save money, he met with residents and devised a plan to share custodial and grounds-keeping work on a volunteer basis. Undoubtedly, the residents’ ownership stake in the community made these sacrifices easier to elicit. The co-op also enjoyed a degree of leeway with its creditors, because it remained solvent and continued to perform on its debt at a time when many debtors were bankrupt. Kazan used the co-op’s stability to negotiate more favorable mortgage terms with Metropolitan Life. Most critically, the co-op implemented a proactive plan to generate needed cash while keeping its apartments occupied and its membership growing. Hans describes the approach :
Vacant apartments were rented out for a higher carrying charge than $11 [per room], and a lowered per-room investment of $200. The new residents could stay on for two and a half years. If the new family liked living [there], they could remain and apply the excess rent they had already paid in to bring their investment up to the $500 per room level.
Following this approach, in one of the worst years of the Depression, the co-op generated a surplus, and the board used some of the revenues to purchase an adjacent parcel.
Kazan’s second limited-equity co-op was the Amalgamated Dwellings, also underway when the Depression struck, located back on the Lower East Side, at Grand and Columbia Streets. The Dwellings brought the limited-equity housing model to the geographic heart of the ACW’s membership base. Partially financed by a loan from the nearby Bowery Savings Bank, residents began to occupy the new units in the fall of 1930. The 231-unit complex was arranged around an open courtyard, with lower lot coverage ratios than the tenements that comprised the surrounding urban fabric. In a 1994 Times article, Christopher Gray interpreted its architecture :
[The architects] worked in a romantic side of European modernism in a way rarely seen in New York, with rich brickwork patterns and colors following Austrian, Belgian, and Dutch designs of the 1920s. The red- and salmon-colored brick veers around in wild angles and staccato soldier courses, interrupted by occasional stucco panels, and voluptuous cast-stone door surrounds and curvy iron decoration. New York 1930, [a highly regarded book] by Robert A. M. Stern, Thomas Mellins, and Gregory Gilmartin, calls it “a major achievement in American housing.”
Along with his efforts to maintain solvency in the Bronx, Kazan employed similar approaches to shepherd the downtown Dwellings through the Depression years, working with resident-owners to control expenses and make good management decisions. The Dwellings, like its precursor in the Northwest Bronx, survived the 1930s and remained an affordable co-op for decades. However, in 1997, the Amalgamated Dwellings board traded the myriad benefits of limited-equity for the windfall to current owners, whose neighborhood had been absorbed by the astronomical real estate universe of Manhattan.
Both Amalgamated cooperatives were thoughtfully designed and built on a traditional neighborhood scale. These were not simply utilitarian housing blocks; they were planned communities. In addition to their spacious, modern rooms, they provided residents with landscaped grounds and attractive architectural details, grounded in the traditions of European town planning. The Amalgamated Co-op and the Dwellings expressed, respectively, the broader Tudor and Art Deco styles that predominated among the city’s private multifamily buildings in the early 20th century. Accordingly, the cooperatives themselves comprised political communities that allowed for broad and direct participation by resident stakeholders.
Robert Moses and Transformation in the Post-War Era
The success of early labor-sponsored co-ops attracted new political interest in the period immediately after World War II. The original co-ops became a template, however, for a notably different approach to urban housing. Returning veterans had fueled a surge in local housing demand. In addressing this need, the infamous New York planner Robert Moses saw a new opportunity to remake the city: He began to promote a supercharged version of limited-equity cooperativism.
In 1945, Moses met with Kazan and obtained his support for a new development. Much larger than the adjacent Amalgamated Dwellings, Moses’s Hillman Houses represented the start of a collaboration with Kazan that would yield increasingly massive limited-equity cooperatives that, unlike the leading lights of the pre-war period, benefited from strong government support. Not only would public money flow to these developments, but in many cases the power of eminent domain would be used to clear a canvas that was unhindered by existing urbanism. Kazan and Moses held differing political philosophies, but shared two critical beliefs about urban housing: first, the demolition of tenements was a clear benefit to the city; second, large-scale, high-rise developments could address the modern city’s housing needs.
In 1949, the Federal Housing Act authorized slum clearance for housing developed under its auspices; Moses and Kazan took this as a green light. By 1951, they had transformed the AHC into a new, larger entity: the United Housing Federation (UHF). Jessor was appointed chief architect, and with the added support of the state’s new Mitchell-Lama Act, the UHF became the most prolific builder of middle-income cooperative housing in U.S. history.
The stark new developments fostered a reduced degree of intimacy, with buildings that vaguely resembled Le Corbusier’s concept of A Machine for Living In. This was a time of modernity and state action. Although these middle-income buildings were more well-appointed than low-income housing projects of the same era, and although they enjoyed the benefits of being owner-occupied, they exhibited some of the same questionable design choices that characterized contemporary public housing for the poor.
The most salient of these problems centered around a radical departure in scale, form, and layout from the cultural traditions of town planning that had shaped urban development down to the eve of World War II. And yet, these novel qualities also represented a previously impossible efficiency that produced more units; a materialist approach that defined success by the gross number of people who received a benefit. In Working-Class New York, Joshua Freeman delineates the order of UHF priorities:
[The developers] placed the highest value on building comfortable housing at affordable prices, with exterior appearance secondary. Apartments in UHF projects were thoughtfully laid-out, with plenty of light, cross-ventilation in most rooms, eat-in kitchens (with windows) and parquet floors.
In the post-war period, new UHF limited-equity cooperatives included the Hillman Houses (1947-1950); East River Houses (1956); Seward Park (1957); Penn South (1962); Rochdale Village (1963); and Co-op City (1968-1972). Together, these six developments added more than 28,000 new units to the New York City housing stock. During the same period, other, non-UHF-sponsored co-ops were also organized or expanded, amplifying the total number of new units.
Spacious, modern housing in stable, owner-occupied neighborhoods had long been a tall order for middle-income families—and post-war limited-equity cooperatives offered many New York City residents a measure of economic and social stability. Kazan and his team appeared to subscribe to the conservative adage that private property is the cornerstone of democracy. In fact, their radicalism was the belief that the base of people who lived by this truism could be so broadly expanded, even amid the challenges posed by a crowded, expensive, and increasingly regulated city.
But some of the design choices that were used to facilitate greater unit quantities in these behemoth, post-war developments eroded several of the pre-war cooperative model’s inherent strengths. The sheer size of the post-war cooperatives was an affront to any intuitive sense of human-scaled community. The massing and layout elements—towers in the park, superblocks without street life, and a near absence of humanizing aesthetic considerations—manifested all the prominent mistakes that Jane Jacobs identified in the urban planning orthodoxy of post-war America. Finally, the formalization of the co-ops under the state’s Mitchell-Lama program, combined with their attenuated connections to the grassroots labor and community organizations that had been so important during the pre-war period, watered down the character, independence, and autonomy that had contributed to a sense of purpose and community.
The largest and—not coincidentally—the last of the large limited-equity developments was Co-op City. Begun in 1968 by the UHF team, its monotonous 32-story towers would dwarf the detached houses and small apartment buildings that characterized the surrounding neighborhoods of the East Bronx near the Westchester County line. Co-op City was car dependent. It was located far beyond the last subway stop, and its only public transportation was a bus. Worst of all, its builders discovered, much too late, that the marshland on which it was being built was too soft to support the massive towers—and the structures immediately began to subside. More than even the other large post-war developments, Co-op City was lacking in good design. While its location along Eastchester Bay and Pelham Bay Park provided a natural counterpoint, it remained the starkest and most institutional of the limited-equity developments. After several expensive engineering feats, Co-op City’s units began to come onto the market in the fall of 1968.
In 1971, Kazan died from the effects of a debilitating stroke while Co-op City remained in development. In the absence of his leadership, a series of allegedly broken promises led the UHF-allied management to be sued by cooperators, who accused it of fraud. The case marked a sour turning point: Some of the plaintiffs were longtime New York City labor activists who had shared Kazan’s beliefs in self-help and participatory communities, but at Co-op City, the UHF had become an adversary, rather than an advocate for their interests. In 1975 and 1976, a yearlong “rent strike” followed, in which residents withheld their maintenance payments, citing a litany of overlooked complaints. Ultimately, the UHF-backed candidates withdrew their names from a board election and were replaced by a slate that represented the strikers. The new board negotiated more favorable terms for cooperators for its state-backed mortgage and other expenses. The UHF was effectively finished.
Since the 1970s, the dearth of new limited-equity developments, along with soaring market housing costs in New York City, has resulted in years-long or suspended waiting lists—or sporadic “housing lotteries”—for units in most of the remaining limited-equity buildings. Frustrating as this situation may be, it illustrates the continuing value and viability of limited-equity co-ops in a highly competitive, heavily regulated real estate market. In his later years, Kazan criticized co-op residents whom he perceived to take little interest in the spirit of cooperativism, and instead seemed narrowly interested in UHF communities because of the value they provided as affordable housing. Be that as it may, it is interesting to consider how the various post-war changes to co-ops—greatly increased scale, radical site planning, and a supplanting of a literal community by its proxy, the state—may have diluted the benefits, beyond simply affordable housing, from an approach that once also created strong communities.
When implemented on a smaller and more traditional scale, and when integrated into established neighborhoods, the results had been, and remain, meaningfully different from those which Kazan lamented. If it is true that the dysfunction that characterized Co-op City was partly a product of the same types of urban-planning mistakes that Jane Jacobs and the New Urbanists have identified in other aspects of post-war American planning—and if it is also true that some of the other large developments of the post-war period were less lovable than they might have been because of their sheer size—then there may be space for a revival of limited-equity cooperatives on a more human scale.
Such an approach would likely be closer, in essential ways, to the original housing co-ops that were sponsored by labor, political, and community organizations. Many of these organizations, at their time, were aligned with the specific labor or left-wing organizations that had pioneered cooperative housing; yet in practice, their organization is very compatible with philosophies across the political spectrum. At a time when both affordable housing and stable communities are increasingly difficult to find in a growing number of regions, the story of New York City’s limited-equity communities deserves to be told again.
Theo Mackey Pollack practices law in New Jersey, is a consultant on urban-planning projects, and has worked on Hurricane Sandy recovery projects in New York City. He blogs at Legal Towns , and has also written for the Metro New York Transit-Oriented Development Newsletter and the Steven L. Newman Real Estate Institute’s white papers series.
Copyright 2017 Theo Mackey Pollack