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WASHINGTON - Thanks to the efforts of Congressman Charles B. Rangel, hundreds of housing cooperatives boards in New York City will now have greater flexibility in the rent they charge commercial tenants.
Included in a recently passed Mortgage Forgiveness Debt Relief Act of 2007 (HR 3648) is a measure that allows co-ops to determine commercial rents without the fear that the additional income would disqualify owners from deducting their proportionate share of the building's mortgage interest and taxes. Under current law, co-ops are limited to charging commercial tenants rents that do not total more than 20 percent of the building's total income from rents and cooperator maintenance payments.
Rangel was happy to see that Congress could come together to resolve such a longstanding issue.
"I am extremely pleased that the tax code will treat people who live in co-operative housing the same way as homeowners and condo owners are treated when it comes to their renting out part of their property," said Rangel, Chairman of the House Ways and Means Committee. "I hope that this will provide relief from for some from the high housing costs in New York."
Co-ops would be allowed to pass through applicable tax benefits if they meet one of three requirements:
If 80 percent or more of the co-op's gross income is from the tenant stockholders.
If 80 percent of the total square footage of the building is used or for residential purposes.
If 90% of the costs of operating the building are for the benefit of the tenant stockholders.
Rangel thanked a number of groups, including the Council of New York Cooperatives and Condominiums, for their support and assistance in helping to tackle this issue.
"By working with advocates and industry groups, we were able to craft legislation that made sense to both sides of the political aisle," said Rangel. "Thanks to the hard work of many, the federal government will be able to provide some relief to families as they struggle with the rising living costs."
The co-op provision included in HR 3648 is part of a larger piece of legislation that was crafted as part of a response to the current subprime mortgage crisis. The legislation would provide relief by permanently excluding debt forgiven under these circumstances from tax liability. It would also help would-be homeowners secure their investments through an extension of the tax deduction for private mortgage insurance, and would ease restrictions for qualifying as housing cooperative corporations.
Amended by the Senate last week, The Forgiveness Debt Relief Act of 2007 is expected to be signed by President Bush later this week.
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