Urgent National Update for Cooperatives

By Randall A. Pentiuk, Esq.

Unless Congress miraculously acts in a bi-partisan manner, the federal government will be forced to have automatic 8.4% across the board spending cuts beginning January 1, 2013.

All government assisted cooperatives should start to plan for the likely event that these cuts become a reality. What HUD will do and how HUD will handle the cuts is not known at the moment. If the cooperative has a project based section 8 contract, there is a possibility that individual members’ participation to rent (carrying charges) will rise from 30% to 35%. This possibility and the possible short funding, which we experienced a few years ago, would require Boards with a HUD subsidized or a HUD insured cooperative, to make difficult decisions. It is important for these Boards to begin to plan NOW.

Please note that the 8.4% cut equals 1/12 or one month of annual subsidies. What will your cooperative do if it loses one month’s worth of subsidies? Members should start planning now for the worst case scenario and hope to not to have to use it.

Some ideas your cooperative  may want to consider are: Drafting an alternative budget; start assessing your members now to cover the difference and build a nest egg fund; look for non-essential services that may be reduced or eliminated; research alternative funding possibilities; or a combination of the above.

Please note that the above are a few key suggestions.  It is strongly recommended that you work with your            cooperative’s professionals, regional associations or a competent attorney, to draft your own plan.

You should also reach out to your Senators and Representatives (especially since this is an election year!).  Tell them what traumatic harm these cuts will have on your cooperative. To find out who represents you, please use the link to “Contacting the Congress”


Please quickly e-mail your Senators and Representatives and tell them to protect HUD from severe budget cuts to the specific programs that currently help your cooperative (e.g., Project based Section 8, 236, 202, etc.)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: