Mandate fair housing in co-ops, too

In New York City alone, more than 7,000 housing cooperatives, from large and opulent buildings along Park Ave. to small walk-ups that dot the five boroughs, tightly control access to roughly 300,000 housing units. In a region where the cost of housing puts traditional homeownership out of reach for many New Yorkers, co-ops — where technically, each apartment dweller owns shares in a corporation that owns the building — represent a more affordable option.

But co-op apartments are not always available on an equal basis to all qualified buyers, and evidence strongly suggests that illegal housing discrimination continues to be practiced by many housing cooperatives.

Existing fair housing laws apply to housing cooperatives, but proving that illegal discrimination has occurred is particularly challenging since co-op boards are not required to disclose a reason for rejecting buyers. Applicants seeking to purchase a co-op typically submit an offer to purchase and provide substantial personal and financial information. Often co-op boards conduct interviews of prospective buyers as well.

Before deciding whether to okay a sale, many co-op boards or board committees meet in secret to decide who they will or will not admit to their communities.

Co-op culture frequently seeks to create a specific type of community by cherry-picking among qualified applicants and rejecting those who do not comport with the characteristics of the existing shareholder population. This is where co-ops often run afoul of anti-discrimination laws.

Several years ago, two predominately white co-ops in the Bronx were sued for maintaining and enforcing a discriminatory policy which stated that prospective buyers would only be considered if they obtained three letters of reference from existing shareholders. Not unlike segregated private clubs in the South from many decades ago, decisions about who to admit too often turns on whether the board perceives the applicant will “fit in” or is “recommended” by other shareholders or members of the community.

Presently, New York State law does not obligate co-ops to provide a reason for rejecting an otherwise financially qualified applicant. As a result, rejected buyers are left wondering what it was about their application that caused them to be denied.

Protecting consumers from illegal housing discrimination requires more transparency and disclosure.

It is, of course, reasonable for co-ops to assess the financial qualifications of prospective buyers, but when co-op boards turn their attention to “compatibility” issues, qualified homebuyers of different races and national origins, people with disabilities, gay and lesbian and trans people, families with children, and other populations protected by fair housing laws are too often summarily screened out without any explanation.

And, unlike in other segments of the housing market, a fair housing testing investigation is rarely possible because only bona fide buyers with verifiable information even make it to the interview process and are not in the room when the decision to reject them is made.

It is time for legislators in Albany to show some collective resolve and enact long-overdue coop disclosure legislation that will shine a bright light on the exclusionary practices of housing cooperatives by requiring that they provide prospective buyers with a specific reason for their rejection.

Armed with that information, a buyer can better assess whether the reason provided appears to be valid or whether it may be pretext for illegal housing discrimination. Greater disclosure would be welcomed by the real estate industry as well, since too many real estate agents and brokers lose commissions because of this continuing discrimination.

The painful events of 2020 make it clear that we must dismantle all systems that lock racial disparities in place, including policies that allow illegal discrimination to thrive in secrecy. We need a strong state-wide coop disclosure law that will help to eliminate illegal housing discrimination by co-op boards and protect the fair housing rights of all home buyers. And, we need it now.

Mckenzie is the policy coordinator and Freiberg is the executive director of the New York Citybased Fair Housing Justice Center.