Limited Equity: Why It Matters

Penn South, NYC.

The Times has a two-page piece on the financial challenges facing Penn South, the last of the big limited-equity (LE) co-ops remaining in Manhattan.  The LE developments– championed by local labor unions and left-wing organizers– filled a crucial gap in the New York City land economy, providing decent housing at a price-point between the public housing projects for the poor and the market-rate units whose price tags predictably soared with every boom-time economy.  The LE co-ops sold their units to middle-income buyers at reliably low prices, with two major caveats: (1) Buyers were required to meet the co-op’s household income guidelines (which tended toward union wages), and (2) co-operators who moved out were only permitted to sell their stake back to the co-op board for a comparable price to what they had paid; there were no opportunities for boom-time windfalls.

In the mid-20th century, the LE co-op model was big in NYC.  Men like Abraham Kazan, Sidney Hillman, and Herman Jessor championed the cause and built prolifically throughout the city.  In Manhattan, the LE model included Penn South, in Hell’s Kitchen, with nearly 3,000 units; a couple of large developments known together as Co-op Village, on Grand Street; and the smaller, adjacent Amalgamated Co-op.   In the boroughs, even larger LE co-ops would come to dominate the skylines of far-flung neighborhoods like Coney Island, Jamaica, and Baychester by the early 1970s.  The LE’s created large, stable, affordable communities of middle-income stakeholders in a city whose vacillating real estate landscape was anything but friendly toward middle-income workers.  In context, the LE co-ops were the vanguard of the NYC labor movement that took off in the heady years after the Triangle Shirtwaist fire, and lasted until the NYC financial crisis and the US-left meltdown of the 1970s.

Twin Pines, symbol of co-operative principles, can be found at many NYC LE complexes.

Today, with Manhattan housing having become a costlier proposition than ever, an experiment like Penn South seems almost preposterous.  And yet, it has survived for more than 40 years, representing a viable private-sector alternative to the disastrous public housing projects of the same period.  Its units– when they become available– remain priced at the unbelievable value of just $12k per room.  Much credit is due the Penn South co-operators, who (mostly in their 70s, according to the NYT article) are still refusing to convert their priceless Chelsea complex into a market-rate windfall.

Penn South and the other remaining LE co-ops of Greater New York are the legal remnants of a fading past, when middle-income Americans were able to leverage their collective clout into a meaningful economic stake.  They stand as massive, brick-and-mortar testaments to what once was possible, even in the mad real estate marketplace of 20th century New York; and to the occasionally realized ideal of the inclusive American city.  Their dwindling numbers stand as a counterpoint; a sad illustration of the economic trajectory of the US middle classes over the last two generations.