The Power of Equity: Private Motivations and Public Implications of Dissolving Affordable Housing Cooperatives By Jonathan Tarleton B.A. in Latin American Studies University of North Carolina at Chapel Hill Chapel Hill, North Carolina (2011) Submitted to the Department of Urban Studies and Planning in partial fulfillment of the requirements for the degree of Master in City Planning at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY June 2018 © 2018 Jonathan Tarleton. All Rights Reserved The author hereby grants to MIT the permission to reproduce and to distribute publicly paper and electronic copies of the thesis document in whole or in part in any medium now known or hereafter created. Author _______________________________________________________________________ Department of Urban Studies and Planning May 21, 2018 Certified by ____________________________________________________________________ Professor Justin Steil Department of Urban Studies and Planning Thesis Supervisor Accepted by ___________________________________________________________________ Professor of the Practice, Ceasar McDowell Chair, MCP Committee Department of Urban Studies and Planning The Power of Equity: Private Motivations and Public Implications of Dissolving Affordable Housing Cooperatives By Jonathan Tarleton Submitted to the Department of Urban Studies and Planning on May 21, 2018 in partial fulfillment of the requirements for the degree of Master in City Planning Abstract From 1955 to 1978, New York City and state subsidized the construction of over 67,000 middle- income, limited-equity cooperatives in the city through Mitchell-Lama—a program often considered one of the most successful efforts to produce affordable housing in American history. By restricting the resale of shares and removing the housing from the open market, limited-equity co-ops allow for the long-term maintenance of housing affordability and make the benefits of homeownership accessible to lower-income individuals than those served by stereotypical homeownership. While most Mitchell-Lama co-ops endure as affordable housing, dramatic increases in housing values in New York City increasingly incentivize cooperators to remove the restriction on the sale of their shares through a collective vote. Through qualitative interviews and advocacy material reviews at two case cooperatives— Southbridge Towers in Manhattan's Financial District and St. James Towers in Clinton Hill, Brooklyn—this research identifies factors that influence limited-equity cooperators’ ultimate decision to vote to remain in the Mitchell-Lama program or to convert to a market-rate cooperative. In doing so, I interrogate what leads individuals to prioritize (or not) collective benefits over individual ones. In addition to considering how cooperators develop a feeling of entitlement to profit realized from publicly subsidized housing or a sense of obligation to future potential recipients of this source of affordable housing, I describe the role that cooperators' understanding of ownership, their experience of internal governance and government supervision, and their perspectives on race and class play in their decision on conversion. Drawing from the factors identified and outcomes observed in the two case cooperatives, I recommend strategies to preserve Mitchell-Lama cooperatives as affordable housing for cooperators, public officials, and advocates. Given the observed irrelevance of existing financial incentives offered by government to cooperatives to remain in Mitchell-Lama, I pay specific attention to non-financial approaches that address the varied social processes inherent in these explosive debates about who should benefit from public subsidy and to whom the value of housing should accrue. Thesis Supervisor: Justin Steil Title: Assistant Professor of Law and Urban Planning Thesis Reader: Lawrence J. Vale Title: Ford Professor of Urban Design and Planning 2 Acknowledgments All large works, especially those that require extending beyond the bounds of what one thought was possible, are collective efforts. I am deeply grateful for my community and the well of support that helped bring this thesis, and the much larger project of graduate school, to fruition. I dedicate this work to you. To my advisor and mentor Justin, for your steady guidance, for your unwavering belief in this endeavor, and for embodying the engaged, ethical researcher I aspire to become; To my reader and mentor Larry, for always demonstrating that solid scholarship and good prose should coexist, for giving me the space to realize my ambitions, and for your excitement for this project, enshrined in a poem; To Ingrid and Mariana, beacons of rigor, for the nudges that moved this along; To my thesis working group colleagues Danya, Matt, Phoebe, and Reed, for your incisive and vital feedback on this work in its nascency, and to the many other partners in thought at DUSP that kept me going; To Haleemah, for your grounding presence throughout marked by uncommon kindness, patience, and altruism; To Cassim and Heather, for the deeply affordable housing and, more importantly, the opportunity to live among mentors; To Garnette and Carl, for affirming my dreams for this project and checking in; To Adam and Charles, for turning me on to this conundrum and all its nuances; To the Ross Silberberg (1990) Memorial Fund for Social Justice and Design, for making the field work feasible; To Zach, Summer, Lila, Teal, Jessica, Charles, and Asher, for much-needed dispatches of joy from beyond the bubble and a well-trodden path toward excellence; To Mom and Dan, for the will to finish strong and the humility to identify the gaps; And to Dad and Jai, for your insatiable curiosity and a penchant for audacious undertakings. 3 Table of Contents Abstract ...................................................................................................................................... 2 Acknowledgments ..................................................................................................................... 3 Table of Contents ...................................................................................................................... 4 Chapter 1: Introduction ............................................................................................................. 6 Chapter 2: The Mechanics and History of Limited-Equity Cooperatives and Mitchell-Lama in New York City ..................................................................................................................... 23 The Intersection of Public and Private in Limited-Equity Co-ops ...................................................................... 24 A Short History of Limited-Equity Co-ops in New York City ............................................................................ 28 Chapter 3: Staying In or Buying Out: The Cases of Southbridge Towers & St. James Towers ................................................................................................................................................. 39 A Haven of the Black Middle Class .......................................................................................................................... 43 Southbridge’s Long, Acrimonious March Toward Conversion ........................................................................... 48 When Outsiders Come In........................................................................................................................................... 55 Chapter 4: The Construction of Entitlement to Personal Profit from Public Subsidy ........... 60 Profit, Value, Self-Interest, and Entitlement ........................................................................................................... 63 Profiting from Mitchell-Lama .................................................................................................................................... 67 Right to Profit ............................................................................................................................................................................. 71 Earned Profit ............................................................................................................................................................................... 72 Promised Profit ........................................................................................................................................................................... 72 Arguing for Profit ........................................................................................................................................................ 74 Profit as Natural .......................................................................................................................................................................... 75 Profit for Personal and Familial Purposes ............................................................................................................................. 78 Profit as Cooperative ................................................................................................................................................................. 82 Profit without Responsibility .................................................................................................................................................... 85 Chapter 5: Altruism, Empathy, and Future Beneficiaries ...................................................... 90 Altruism in Theory......................................................................................................................................................