We were recently discussing an upcoming maintenance increase. In truth, the maintenance increase was no longer part of the discussion. An increase was necessary, end of story. What we were discussing in our meeting was how well (or not) the rest of the co-op were going to take this increase.
“They shouldn’t complain,” said one board member. “They are living in apartments that are worth so much more than what they paid for them! The maintenance is so much lower than in regular co-ops!”
This is a case when two truths make a lie: We have indeed all paid way below market rate for our amazing, spacious, pre-war apartments. And it’s true the maintenance is here is much lower than in regular co-ops. But in reality: an apartment is only worth what somebody is willing to pay for it. And our maintenance is low because the income restrictions that have allowed us to buy here dictate how much we can afford in monthly living expenses.
Still, the increase will and must happen. It’s reasonable. But it was a signal of changing times. The co-op is starting to look forward, to the next generation of residents who must inherit a sound building, with sound financials. I mention this because, before we got to the building three years ago, the maintenance hadn’t been increased in nearly a decade. (Or maybe seven years). Meanwhile, oil and water rates have gone up, the building continues to take the wear and tear of life, and old residents have died leaving several embattled estate situations in the co-op.
Apropos of the flip tax: The building has survived all these tumultuous times by levying a hefty 45% flip tax on the profit of any sale of an apartment. Keep in mind: these apartments were sold to the shareholders for $250. So, 45% of your net profit going to the building is quite substantial. And justified, I would add.
Now, the aforementioned change in our community has brought up the question: should we lower the flip tax? A flip tax is set by the co-op, after all. We can change it by resolution. Unless you apply for an 8A loan and have a regulatory agreement hoisted upon you by HPD, dictating a 30-70 flip tax.
That was the quick fix, in our case. For the building, it’s not great. A lower flip tax means less funds to replenish our reserves. And also, the difference may just be enough to encourage buyers who aren’t really sincere about living in an HDFC, but like the prices enough to go for a 30% loss on their profit. It may encourage people in the building to sell up and leave. Worse, it may encourage MANY people the sell and leave.
But maybe that’s where are headed anyway. If the future is all about mobility, then a coop like ours needs to remain agile.