COPA Passed, Leaving Brokers to Manage Seller Expectations

It finally happened.

COPA passed the City Council Thursdays after six years of legislative battles. But the final bill is decidedly narrower in scope than its predecessors after industry-minded tweaks, watered down compared to a version passed last year that ultimately fell at the hands of an Eric Adams veto.

Under the new law, nonprofits and joint ventures designated by the city have the first chance to buy buildings with 100 or fewer units that have regulatory agreements managed by the Department of Housing Preservation and Development. The window for those transactions was trimmed from 160 to 145 days, and the final bill excluded larger affordable multifamily buildings with 485x and 421a as-of-right tax abatements or other city zoning enhancements.

Despite the tweaks, brokers are still concerned about the law’s impact on transaction timelines and compliance that landlords will need to ramp up in order to stay off the shortened list of COPA-eligible properties. And owners are still trying to figure out what this means for their buildings.

The legislation now covers an estimated 2,100 buildings, down from approximately 10,000 that previous iterations would have captured, that average three Class B or C violations per unit or participate in certain distressed programs.

“I had one person reach out to me this morning and say, ‘so my building’s not affected, what do I do?’” Peter Mancini, a Brooklyn-based broker at Douglas Elliman, said of an owner who learned that their property would no longer be subject to the narrower version of COPA. “I asked if they were thinking about selling and said ‘look, this is a home run for you right now.’”

Still, both the immediate and long-term effects aren’t clear. “There’s a lot of uncertainty because of the timelines of transactions, and we’re really going to see how it’s going to play out now,” Mancini said. “The reality of New York is that we do have a housing issue. This is one way that can help, and I hope that it can, but I think many of us are skeptical because of the timelines and restrictions being put on the industry.”

And the law is yet another hurdle facing the already-beleagured affordable housing space. “Everyone is dealing with so much now already in terms of compliance,” said Mancini. “They’re already up to their eyes in alligators, so it’s going to have an impact down the road for buildings that have been neglected and need to sell for one reason or another.”

Mancini sees his task now as encourging landlords to proactively work to avoid surprises and manage their expectations for the sale process under the new COPA dynamic, which HPD has one year to formalize into rules and determine the list of qualified entities eligible to make first offers.

Some in the industry are thankful that the bill is less sweeping than previous versions. “It will have less far-reaching effect, due to the narrowed scope, focused on ‘distressed’ buildings with higher violation counts,” Ron Cohen, chief sales officer at Besen Partners, said.

“Perhaps that turns into a small silver lining, that building owners are more attentive to avoiding violations piling up,” Cohen said. “That said, one or two calls to 311 is a very easy catalyst [to lead to] HPD coming and writing up numerous violations, so I think it still puts owners between a rock and a hard place. It will slow, if not impede, transaction activity by virtue of stoking fear and adding another layer of regulation.”

Some remain skeptical of nonprofits’ ability to navigate the sale process efficiently and question whether they can manage distressed buildings better than private owners. Organizations across the city like RiseBoro Community Partnership and Fifth Avenue Committee, along with community land trusts, have track records of taking over buildings for preservation and managing newly built housing with varying degrees of success.

“I have worked on some transactions where there’s a first right of refusal and it typically does slow things down, it can gum up the works,” Cohen said. “Nonprofits are not real estate professionals and I think a looming future question is if tenants will truly be better served by a nonprofit as their actual landlord.”