FEMA will not aid Co-Ops - from the NYT

Why FEMA Still Won't Aid Co-Ops In Wake Of Sandy

Almost 20% of the homes in the storm surge area were in co-ops, and 8% more were in condos.

By Lauren Passell

NYT

May 9, 2013

Since the hurricane, thousands of homeowners have been startled to discover that co-ops are largely barred from federal disaster assistance. The rules have stirred growing criticism from members of Congress from the region, who contend that the system fails to take into account how people live in New York City, where co-ops have flourished.

The lawmakers are calling for the rules to be changed, saying that as severe weather becomes more common, the region will be increasingly shortchanged in disaster aid.

Under the longstanding policy of the Federal Emergency Management Agency, co-ops are considered businesses, even though they are essentially nonprofit entities set up by property owners.

As a result, co-op boards are prohibited from obtaining grants for common areas, and individual co-op owners cannot seek money for damage to their apartments’ walls and floors because those are usually the legal responsibility of the building.

“How can they do that?” asked Josephine Scarnato, 83, secretary-treasurer at the Beverly Hills, in the Sheepshead Bay neighborhood. “We’re not in business. We don’t make a profit. We’re not providing a service. I think they don’t realize what co-ops are.”

FEMA officials said there was nothing they could do unless the law authorizing aid was changed.

The agency also does not provide aid to condominium and homeowners’ associations. But individual condo owners can receive assistance for their units, even as individual owners of co-ops cannot.

The disparity hinges on this legal distinction: 

In a co-op, owners sign leases for the rights to their units, rather than owning them as real property, as the owners of condominium units do.

Co-op owners can receive federal assistance for damage to furniture or other items in their apartments; the aid is similar to that available to renters for uninsured losses.

Nearly 20 percent of the housing units in the storm surge area in New York City were in co-op buildings and an additional 8 percent were in condominiums, according to the Furman Center for Real Estate and Urban Policy at New York University.

The city’s Office of Housing Recovery Operations said that at least 120 co-op buildings, with 13,000 apartments, and 368 condominiums, with 7,000 units, sustained flooding and damage to ground floors. Many have boilers and utility rooms that now need extensive repairs.

This dispute over FEMA’s rules has flared in the past. After Hurricane Wilma in Florida in 2005, condominium and homeowners’ associations lobbied for assistance to pay for removal of storm debris, to no avail, said Donna D. Berger, executive director of Community Advocacy Network, which represents them.

Ms. Berger said homeowners later faced assessments from the associations that pushed some into foreclosure.

“It kind of put communities in a hole, and some never recovered,” she said.

While neither Congress nor FEMA has responded to such complaints in the past, the issue seems to be coming to a head because New York has such a high concentration of co-ops.

Members of Congress from the New York region said the agency was essentially discriminating against a class of homeowners by interpreting the federal disaster law, called the Stafford Act, too strictly. They said that they would introduce legislation to allow co-ops and condos to obtain aid, but that in the meantime, they were pressuring the agency to relent.

“There’s nothing in the Stafford Act that prohibits condos and co-ops from applying for FEMA aid,” said Senator Charles E. Schumer, Democrat of New York. “To deny this is wrong.”

Mr. Schumer said he had successfully appealed to the federal housing secretary, Shaun Donovan, to ensure that co-ops and condos would receive money from the $50 billion disaster package approved by Congress. This pool of money is separate from FEMA aid. (Mr. Donovan is a former commissioner of the New York City Department of Housing Preservation and Development.)

But it is not yet clear how much of that money, to be distributed by the states and localities, will go to co-ops and condos.

Representative Steve Israel, Democrat of New York, said he had failed to persuade the homeland security secretary, Janet Napolitano, who oversees FEMA, to change the policy.