For many people, the defining characteristic of a co‑op building is the board’s power to approve or reject prospective buyers at will. That approval power—unique among housing models in the U.S.—has often been the subject of critique, and debate over whether co‑ops are inherently discriminatory, or whether they’re simply private communities exercising their rights.

As readers of this publication know, co‑op residents don’t own their apartments outright; they own shares in a corporation that owns the building, entitling them to a proprietary lease. That corporate structure is what gives co‑op boards the legal right to screen prospective buyers. Boards typically review a buyer’s financials, employment, and references, and sometimes conduct an interview with the person before approving the purchase or not—a level of discretion not afforded to the boards of condos and HOAs.

Between the Lines

In addition to an applicant’s finances, co-op boards also consider more subjective factors, including their character and whether they’re a good ‘fit’ for the building. This subjectivity creates opportunities for personal bias to influence decisions, consciously or otherwise, and co-op critics argue that this invites exclusion. 

For many late 19th and early 20th century co-op boards, that exclusion was definitely conscious. Early co-ops were often formed by socially homogenous groups, and while it may not have been spelled out explicitly in their bylaws or proprietary leases, many of them—particularly on Manhattan’s Upper East Side and along Fifth Avenue—made it clear that Jewish, nonwhite, and Catholic buyers need not apply, using euphemisms and unwritten practices to keep out buyers they considered “undesirable.”

While the Fair Housing Act of 1968 made such discrimination illegal, claims are still brought against boards to this day for rejecting buyers based on race, familial status, or other protected characteristics. The fact that NYC co‑ops are not currently required to provide any reason for rejecting an applicant can leave prospective buyers uncertain whether decisions are based on legitimate concerns or on subjective judgment. 

Business Judgment & the Law 

Co-op housing advocates maintain that the primary goal of boards’ approval powers is to protect their building’s financial health; ensuring that buyers can pay their maintenance fees, meet reserve requirements, and follow rules. Financial screening is standard practice across housing markets, after all, and rejection based on objective financial criteria is a legitimate business judgment, not discrimination.

And, as mentioned above, co‑ops are subject to federal, state, and city fair-housing laws prohibiting discrimination based on race, gender, family status, and other protected categories. Many fair housing advocates feel that more transparency in the approval process would reduce both actual and perceived discrimination without dismantling the co-op system itself, and have proposed legislation to that end—namely New York State Senate Bill S6346, aka the ‘Reasons Bill’, which would require co‑op boards to provide a written explanation for why a given buyer has been rejected. 

Proponents of S6346 argue that requiring transparency will reduce arbitrary or biased decision-making while still preserving boards’ ability to safeguard their building’s finances. Critics—including several co-op advocacy groups and board members themselves—contend that since co-ops already operate under existing fair-housing laws, requiring written explanations for every rejection will create liability risks, exposing boards and individual board members to litigation if someone alleges discrimination, even when the underlying reasons are legitimate. They also argue that the requirement could force boards to handle applicants’ financial and personal details in ways they are not currently structured to do, which in turn could lead to privacy or data breaches. 

Power & Responsibility

The answer to the question of whether modern co‑ops are inherently discriminatory is not a simple yes or no. The same discretionary power intended to give boards the means to protect their building financially also gives them the power to exclude, which can be misused when a board acts in bad faith. The proposed Reasons Bill has been reintroduced multiple times over the last decade, but has yet to pass. So for now anyway, co-ops remain a mix of private governance and legal obligations, with the burden on boards to maintain the balance between community stewardship and fair access.