Queens Based President’s Coop & Condo Council (PCCC) Lead National Effort to Include Coops in the Paycheck Protection Program
By: Geoffrey Mazel, General Counsel & Executive Member of the PCCC
The President’s Coop & Condo Council, a Queens based Coop advocacy group is leading a national effort to have Coop residents included in the payment protection program.
The 1.5 million Cooperative residents in this country were devastated to learn on April 2, 2020, the U.S. Small Business Administration (SBA) issued an Interim Final Rule stating that businesses deemed ineligible for Paycheck Protection Loans (PPP). These loans would provide much needed relief to Coop residents who have been hit hard by the Covid crisis.
Cooperative residential housing also employs a range of individuals or contracts with local small businesses including, for example, superintendents, office staff, porters, landscaping services, and handymen. Consistent with PPP, it is imperative that housing cooperatives can continue to employ these essential workers and maintain contracts with local businesses. These employees also ensure the safe operation and maintenance of the residential corporation.
Co-ops are facing the same severe revenue problems as other business concerns. Among the immediate issues are declining revenues due to member-owners that have lost their jobs and will fall into arrears and spikes in the usage of water, fuel, and electricity due to the fact that many member-owners are now home all day in accordance with state and local ordinances.; Like other small businesses, access to PPP loans are necessary to ensure that the housing cooperatives can continue to keep employees on their payroll.
Coop advocacy groups took clear and decisive actions to ensure that Coops would be eligible for these loans. The focus is two-fold: 1) to work with elected officials to raise their awareness of the importance of this issue and 2) to contact the US Treasury Department and Small Business Administration to urge them to change their Regulations to include Coops..
On June 1, 2020, the PCCC and the National Association of Business Cooperatives submitted a letter to the United States Treasury Department and Small Business Administration, urging them to change their regulations to include Coop in the PPP program. Over 35 Coop and business groups from across the United States signed this letter. This would be a so-called “Administrative fix” and would obviate the need to change the legislation to include Coops
The response from the elected officials have been swift and positive. The New York City Congressional Delegation lead by Congresswomen Nydia Velasquez and Grace Meng and Congressman Tom Suozzi has strongly advocated for the Coops inclusion in the PPP.
The result is The Heroes Act, passed in the House on May 15th, explicitly includes provisions to extend PPP eligibility to housing co-ops. “Co-ops are an integral part of our communities in Queens and New York City, serving as homes for many hardworking middle-class New Yorkers,” said Congresswoman Meng. “Last month, I urged Secretary Mnuchin and Administrator Carranza to make them eligible for loans under the Paycheck Protection Program, and today, I renew my call in this latest effort to secure relief. Like many other entities, co-ops are being impacted by the COVID-19 outbreak, and Secretary Mnuchin and Administrator Carranza must act to ensure their future stability.”
The matter is now before the US Senate, where NYS Charles Schumer is a strong advocate on behalf of Coops. “Housing co-ops are part of the fabric of New York and deserve to be included in COVID-19 relief programs,” said U.S. Senator Charles Schumer. “The administration must issue clear guidance on housing co-ops’ eligibility for the Paycheck Protection Program. PPP support is critical for many housing co-ops to weather this crisis and maintain their buildings and employees – as member-owners struggle to pay fees. I will continue to prioritize and fight for expanding PPP eligibility to cover housing co-ops, including pushing for the HEROES Act provision I worked on with Congresswoman Velázquez to expand eligibility if , from across the United States, have contacted the Treasury Department and the Small Business Administration for guidance on this issue and to include Coops in the PPP program.”
The 1.5 million families that live in Coops are hoping that the Administrative fix and/or the legislative route solves this critical issue
The Real Estate Board of NY (REBNY) and many others think the bill may not come up for a vote until 2021. Others are concerned that it might get passed in a late 2020 end of session rush. The bill which is commonly known as the “Good Cause Eviction Bill” essentially introduces rent regulation throughout the State of New York without the ability for co-ops and condo buildings to increase rents, maintenance or other fees to cover rising property taxes and Major Capital Improvement (MCI) renovation costs.
The legislation caps common charges, assessments and maintenance fee increases to 3% annually. With the anticipation of property tax increases, crushing “green energy” building costs and retrofits, capital improvements, facade and lead law requirements, increases in labor and other operating costs, this law would make it impossible for Boards of Directors to effectively maintain their buildings. In addition to capping increases to 3% per year, the draconian bill provides no assurances that an owner who sublets an apartment will be able to regain possession of it at a later date in a timely manner.
Essentially, the bill would materially affect co-ops and condos by:
1. Limiting the ability to enforce common charge or maintenance increases of more than 3% or 1.5x the Consumer Price Index (CPI) in any calendar year.
2. Making it impossible for co-op and condo owners to sublease their units for limited periods of time with the knowledge that they could regain possession in a timely manner. Under the legislation, owners may be required to offer renewal leases.
3. Exempting owner occupied co-op and condo buildings that are fewer than 4 units, many of which are valued in the millions and NOT exempting owner occupied co-ops and condo buildings that are larger than 4 units many of which have valuations of $500,000 or less. Basing exemptions on size instead of value is the essence of inequity.
This bill is currently sponsored by 24 senators and 58 assembly members. We think many of them may not fully understand the effects of this legislation on co-ops and condos and we are requesting that they have their names removed from sponsorship of the bill. This bill is an onerous piece of legislation that will abridge the rights of co-op and condo owners. We will seek to have this bill amended to exclude co-ops and condos