A new bill in the House of Representatives would make cooperatively owned units, or co-ops, eligible for mortgages backed by the Department of Veterans Affairs.
Congresswomen Carolyn Maloney (D-NY) and Eleanor Holmes Norton (D-DC) on Tuesday introduced the bill, known as Fair Access to Co-Ops for Veterans Act. It would resurrect a five-year pilot program that expired in 2011 that allowed the VA to guarantee mortgages for co-ops.
Co-ops are the dominant type of housing in some markets such as New York. When you buy a co-op, you’re buying shares in a corporation that entitle you to a proprietary lease for a unit in a building. Typically, new buyers have to be approved by a board of residents who run the co-op.
“In New York City, co-ops are ubiquitous, and our veterans shouldn’t be priced out of these housing options because they’re excluded from the VA’s loan program,” said Maloney. “Wherever veterans want to buy a home – whether in rural or urban areas – they should have equal loan support from the VA.”
During the pilot program, there wasn’t much demand, but that could have been due to the housing crash and recession that began during that time, said Chris Birk, director of education for Veterans United, the largest VA lender.
“There could be a hunger and demand for this, but it’s a question mark at this point,” Birk said in an interview with HousingWire.
Last year, Congress passed a bill that eradicated loan limits for VA-backed mortgages starting on Jan. 1. That might help to boost demand for co-op VA mortgages in New York, where home prices are much higher than most of the U.S., Birk said.
Before the elimination of the loan limit, “anyone buying in New York above that would have been on the hook for a down payment,” Birk said. “That’s a huge factor that changes the conversation as it relates to co-ops.”
The median price of a co-op in Manhattan was $795,000 in the fourth quarter, according to Miller Samuel. That’s almost triple the median sale price of a home, including condominiums and co-ops, for the nation, based on data from the National Association of Realtors.