Until recently, NYC co-ops were subject to a federal law requiring them to generate no more than 20 percent of their income from non-shareholder sources, such as potentially lucrative ground floor retail. Many artificially drove down prices at street level in order to retain the tax benefits that came with co-op designation. Some gave up retail spaces altogether to avoid the headache of being a landlord.
Now that the tide has turned and the 80-20 rule abolished, co-op apartments in prime real estate locations like SoHo and Madison Avenue have started returning dividends to their owners.
Helping to offset maintenance fees, the extra income is often reflected in initial asking prices that exceed market value by up to 20 percent, but the savings are worth it, say real estate experts.