Privatizing government housing a win-win situation.

During the last few years, the nation has lost thousands of affordable housing units, including many in the New York City area.

The reason for the loss in subsidized residential property ranges from housing abandonment to the inability of low and moderate income residents to afford the improved neighborhoods. In addition, the land on which to build housing is now scarce, construction costs continue to escalate and the higher wage earners, who are able to pay elevated rents, displace the long-term residents of buildings.

While there is certainly nothing wrong with neighborhoods improving and landlords maximizing their income, it is not healthy for the city to deplete the amount of housing available to those on fixed incomes.

In the short term, the loss of affordable housing increases real property taxes, which ultimately benefits the city. However, in the long run, the loss of middle and low income wage earners will have an inflationary effect on our economy and result in the loss of income and jobs, as businesses look to move elsewhere to fill labor shortages.

Despite the Mayor's desire to build 60,000 units of affordable housing and proactive actions taken by nonprofit organizations, the loss of private sector affordable housing is exacerbated by diminishing governmental support for housing; particularly with the potential changes to the Department of Housing & Urban Development's (HUD) Section 8 program and the buying out of existing apartment buildings from the Mitchell Lama Program in New York.

The attempt by HUD to convert the Section 8 program to block grants to the states, ultimately results in less money being available to subsidize rents, just at the time when the spread between market rent and the rent subsidized recipients can afford, will be increasing dramatically. As seen with other transitions from federal programs to block grants, the states take 15 percent of the funds for their administrative expenses and then establish their own criteria for distributing the balance. The block grant approach also allows the federal government to reduce the level of funding with less political consequences.

Locally, this trend is happening in New York State's Mitchell-Lama Program, now coming to an end as landlords buy-out the properties. In the last two years, we have seen buy-outs of Ruppert Yorkville, Phipps Plaza West, Glenn Gardens, Waterside, among others while currently such complexes as Independence Plaza, West Village Houses and others are in the process of being bought out.

However, the buy-out process does not need to decrease the amount of affordable housing.

The Ruppert Yorkville is an excellent example of how the buy out and conversion to condominiums can preserve affordable housing, while still maximizing the landlord's return without displacing long-term tenants.

As part of a negotiated settlement between the landlord and tenants at the 1,260 unit Ruppert-Yorkville complex on the Upper East Side of Manhattan, the landlord left the Mitchell-Lama Program, and converted the properties to condominiums.

More than 70 percent of the tenants in the formerly subsidized buildings purchased their apartments, one of the most successful conversions to-date, demonstrating that many affordable housing residents would opt to own their units. These were not inexpensive apartments--inside prices ranged from $350,000 to $800,000--requiring tenants who were traditionally renters to finance substantial amounts of money.

Ultimately Ruppert-Yorkville was a win-win situation for all parties: the tenants became owners and began building equity in their homes; the landlord received a substantial financial wind fall; and the city was able to start collecting full real estate taxes from the property, which increased by more than 100 percent.

Most importantly, the Ruppert-Yorkville and the city Did not lose 1,260 families, Most of whom were moderate Income and had lived in the neighborhood for more than two decades. For landlords contemplating the buy-out option from city, state and federal government programs, the conversion of properties to cooperatives or condominiums should be strongly considered.

In addition to providing tenants the opportunity to become homeowners, the government can exit the housing business and real property tax revenues can increase.

At the same time, private lending institutions can fund improvements and provide financing to existing tenants, who are, after all the lifeblood of the City.

BY STUART M. SAFT BOARD CHAIR, NATIONAL COOPERATIVE BANK