New York’s Special Deal for Non-Profit Landlords is Still a Bad Idea

Revisions to the Community Opportunity to Purchase Act don’t fix the bill’s fundamental problems.

Courtesy Goh Rhy Yan/Unsplash.

For the past month, the New York City council has been busy drafting and amending the Community Opportunity to Purchase Act (COPA). The bill would give city-approved nonprofit groups the first opportunity to bid on, and the last opportunity to purchase, certain residential buildings whose owners put them up for sale. On Friday, the council updated the bill with a revised “B” version; it’s poised to receive a vote as soon as tomorrow.

While this most recent version makes some welcome changes, the essential elements remain the same: COPA is an attack on fundamental private property rights that will exacerbate the city’s housing crisis merely to benefit nonprofit allies of the City’s progressive leadership.

In its latest version, COPA would grant “qualified entities” both a right of first offer and a right of first refusal. A “qualified entity” is defined as a not-for-profit (or joint venture with an unrelated for-profit controlled by such an entity) certified by the city’s Department of Housing Preservation and Development (HPD), based on factors in the bill and determined by a future HPD rule.

Prior to taking any action to sell, owners of properties with four or more units that are subject to certain distress or affordability criteria would have to notify HPD and all certified entities listed on HPD’s website of their intent.

Upon receiving this notice, nonprofit groups would have 25 days to submit a statement of interest to purchase the property—before the owner could put it on the open market. If the nonprofits submit such a statement, the owner would be required to enter into a confidentiality agreement with the nonprofit and disclose information about the building.

Nonprofit groups that submitted a statement of interest would then have an exclusive 80-day period to submit bids, during which time the owner could not accept any private-market offers.

If the owner rejects the nonprofits’ offers after the 80-day window, he may then receive private bids. But if he wishes to accept one within a year after such rejections, he must share its terms with HPD and the first nonprofit that previously made an offer, which would then have 15 days to match the deal and purchase the property on identical terms.

Bottom line: nonprofit groups would have the first look and last word in these sales. If they suspect an owner broke the law, they’ll have a private right of action in court to enforce it.

The most recent version of COPA signifies an improvement over earlier drafts, as it only applies to a smaller subset of buildings. Last month, it essentially covered all buildings with three or more units—the vast majority of the city’s housing stock. The bill now applies to residential buildings with four or more units that are in financial distress, with housing code violations, or affordability restrictions that are set to expire.

These concessions reflect an implicit acknowledgment of the potential for delays and compliance costs to put further financial pressure on already struggling owners. As Adam Lehodey recently explained in City Journal, Washington, D.C. was forced to pare back its version of COPA after its harmful effects on investment became too apparent to ignore.

While New York City’s bill now also includes more exemptions—such as for certain small, owner-occupied buildings—the ultimate determination of which properties are subject to COPA rests largely with HPD’s future rulemaking. That would make Mayor-elect Mamdani’s still-unknown pick for HPD commissioner more important.

But even in its pared-down form, COPA remains an attack on private-property rights and potentially an illegal overreach of city government’s authority. It rests on the flawed premises that nonprofit ownership is inherently superior to private ownership and that city government should tip the scales in favor of nonprofit ownership. Somehow, landlording moves from rapacious to virtuous the moment it’s done by a nonprofit.

Yet there is little reason to think that nonprofits would be better at addressing cold boilers, leaky roofs, and other maintenance needs. Nor would they be more merciful with tenants: Nonprofit property managers file nonpayment cases in housing court and, when necessary, pursue evictions.

Nonprofit owners that qualify as tax-exempt organizations will, however, enjoy a built-in advantage over private owners, who must pay taxes. But that just provides an effective subsidy paid by remaining taxpayers. Imagine if corporate America suddenly reincorporated as tax-exempt nonprofits. Their workers and executives would still be paid, but the country would still need to fund entitlements, defense, debt service and everything else—just without corporate taxes.

The same is true of NYC rental property, one of the largest and most dependable sources of revenue for the city. In one sense, tax-exempt ownership is a workaround for the city’s irrational property-tax code.

Putting aside the obvious political advantages to building a constituency of nonprofits, a more rational policy approach would be indifferent to whether the owner of rental housing is for-profit or nonprofit. After all, so long as the owner is following the law, why should lawmakers care about whether it’s a private individual, for-profit entity, or nonprofit?

Instead of shifting ownership to nonprofits and depriving the city of property-tax revenue, the better way would be to reform NYC’s property-tax code so that large rental buildings are treated roughly equal to other classes of property. This would also have the effect of giving distressed rent-stabilized owners some breathing space (though only temporarily).

Given COPA’s 31 sponsors, it’s expected to pass. That would send it to Mayor Eric Adams’s desk. The outgoing mayor has lately signaled a willingness to veto far-reaching bills. If he vetoes COPA before leaving office, however, the council would have 30 days to override his veto, which could be after Mamdani takes office on January 1.

Whether to do so would represent one of Julie Menin’s first acts as new council speaker. If she does, COPA would sharply restrict how and when private owners can sell covered apartment buildings.

If it becomes law, COPA’s broader effect will deter the kind of private investment New York needs and open the door for creeping incrementalism in the future. If the city is to build its way out of its supply crunch, it can only achieve that by attracting private capital.

Yet COPA sends precisely the wrong message—for-profit parties are not welcome. The market will respond accordingly.