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The 411 On housing Co-ops! And Why We Need Their Growth!

The Smart Way To A high Quality of Life When Rents Are Higher Than Mortgages!



In broad terms, affordable housing refers to housing that costs up to 30% of a household’s income. It isn’t a fixed amount but rather a cost that changes based on an individual’s or a family’s earnings. No matter how high your income is, or if you rent or own, if you’re spending more than a third of your earnings on rent or mortgage payments, your housing isn’t affordable—at least not for you. But what alternative do moderate-income families have? Perhaps a movement that peaked in the 1970s might be one solution: co-operative housing.


In most American cities neighborhoods are increasingly segregated by income, why aren’t we looking at affordable housing alternatives that have proven successful in the past?


Co-operative housing is often referred to as the “third sector” of housing, as tenure is neither public nor private. In a continuing housing co-op, residents become members of the organization when they buy a share upon moving in, which entitles them to their unit—they don’t actually purchase the unit, they purchase part ownership in the whole property which means they share the costs of upkeep. (In NYC a co-op housing share costs, on average, $1,500 and maybe an extra $500 once a year for maintenance depending on how many units are occupied; whether units are Townhouses or Apartments or even row houses the costs are shared so no one is ever hit with an expense they can’t afford.)This democratically managed model allows affordable units to remain in the Quality living housing stock.

So instead of rent, co-op members pay a monthly housing charge determined by the members themselves. “We pay that “rent” to ourselves, effectively,” said Richard Harris, co-op resident for 10 years “Most people keep their coops and pass them on to children after death; it becomes a legacy investment…When I’m talking to my neighbor, I’m talking to my tenant. When I’m talking to my neighbor, I’m also talking to my landlord,” Harris explained.

Despite the success of the model, federal funding for new housing co-ops was cut in the 1990s. (Some say the model was too effective and that is why we have the housing problems we do today; it was created on purpose! In Fact The National Association of Housing Cooperatives (NAHC) has been in a battle for years with the Federal Government over Veterans rights to Coop Housing alternatives. NAHC continues to seek support for legislation to allow veterans to use their VA home loan guarantee benefits to purchase shares in a housing cooperative. In fact many are hopeful that Biden appointee to HUD Martha Fudge will support expansion of Coop Housing across the country to keep families from ending up homeless!


Marcia Fudge was confirmed under the Biden Administration as first Black woman to lead HUD in more than 40 years.The former Ohio congresswoman has pledged to address systemic racial inequities and social injustice in housing! Fudge, who entered Congress in 2008, won bipartisan approval to lead the embattled agency, where the morale among civil servants had plummeted under the leadership of Ben Carson, who betrayed his public housing beginnings and weakened fair housing enforcement and other civil rights protections.


Many see support of Co-ops as the answer to the country's housing woes. The key to a successful cooperative is long term financing that keeps the mortgage low. Another way is to purchase foreclosure property and using the combined purchasing strength access a loan to refurbish the property. Many are opting for this because it allows the introduction of net zero energy saving options like hemp insulation, triple pane windows LED lighting and solar/ wind energy generation and low watt appliances. But the appeal of housing co-ops isn’t just the cost—they offer more than affordable housing.in Co-ops families can live within their means and have something most renters don’t: a sense of ownership.“[Co-op housing] gives you pride in your home, pride in membership. You’ve got less of the independence of sole homeownership but you have more rights than a renter.


There is that whole sense of, ‘Let’s pool our resources,’” Harris said. “Let’s share what we have, and all of us prosper.” “We have a member involvement committee that makes sure that people are participating; we have an education committee that tries to educate people about co-ops, recycling and green living.” “The only opposition we have or any Coop owner has had in the past is the federal government; they don’t like options that allow people to save money and not have it taxed away.In fact market rate rental housing—is illegal in most parts of the U.S. Local zoning laws prohibit structures other than single-family detached homes on the majority of land across cities and suburbs.So you have to seek properties already built and upgrade them despite what mainstream media tells you affordability is a bad word, and free is downright sacrilege in a society that worships money over families.”


That is an irony because from an investment angle co-ops are a great way to utilize your money.

Co-ops are often less expensive than rental apartments because they operate on an at-cost basis, collecting money from residents to pay outstanding bills. In areas where the cost of living is high, such as New York City, co-ops may be the only truly attractive option for the urban middle class from a financial perspective. Furthermore, the right to stay in a housing co-op without needing to stay below a certain income threshold is an advantage that results in diverse communities in terms of income, background and age groups—people are able to live where they want, as opposed to where they can afford.


Because coops don't get governmental support many run into problems that can be easily solved with a little forethought. Cooperatives tend to be undercapitalized because the primary source of equity is members, and members may not always be in a financial position to invest the necessary capital. A lack of capital may translate into inadequate compensation of managers. By rotating on an annual schedule certain managerial responsibilities among members you can save the costs of hiring. By utilizing a space for a commercial venture such as a convenience store (if you are zoned for it) as an “anchor tenant” you could wipe out a significant percent of your annual costs and set up an account for emergencies such as repairs and general upkeep. Extra money can be used for rooftop gardens, landscaping, shade trees and seating, or weatherproofing.


Remember this one thing…A housing cooperative is similar to a housing association, in that it is a legal entity which owns real estate, but differs in that it is managed by its tenants, either fully or the majority. Each member of the cooperative is granted the right to occupy one housing unit, acting as a share purchase in the legal entity. All members make collective decisions on maintenance requests, approving new applicants, and more. Most co-ops embrace the model of limited-equity units, meaning that co-op members are limited in how much they can profit from the cooperative. This model decreases the likelihood of displacement by keeping properties affordable for community members who otherwise may be priced out.


If a shareholder sells their share (their unit), they are allowed to remake the amount they initially put in, but they can’t charge more than they paid—and they can’t sell to, say, developers who might increase the prices of the unit. Cooperatives are practically immune to Inflation, increased housing demand, rising property taxes, and a recent pullback on pandemic-related rental support.The history of the co-op did not begin in the 70s after World War I, as the nation endured housing shortages and increased rent prices. Many upper-middle-class white residents owned co-ops because they wanted to enjoy home ownership at a cheaper price and “handpick” their neighbors. Homeowners want to avoid situations that bring communities down by focusing on content of character and integrity. But discrimination based on race, color or creed can be very damaging to a co-op.


As in the case of South Shore native Deborah Harrington who returned to Chicago in the 1970s after working as a government researcher in Washington, D.C. She was in her twenties and wasn’t interested in moving back into her parents’ home. Buying her own house was too expensive, and her mother, suggested that she look into housing cooperatives as an alternative. A friend who lived in a co-op in South Shore invited Harrington to check it out in person. Harrington was drawn to the “splendor” of the environment, especially the lakefront views. Although the co-op was majority white, she could envision herself living there as a Black woman. When a vacancy opened, Harrington jumped at the opportunity.


Harrington, who would later go on to get her real estate license, said she drafted a lease agreement and paid for the unit in cash. While she had the funds and the qualifications to become a shareholder in the co-op, Harrington said the board denied her request to join. “I really didn’t expect that,” said Harrington.


By that time, South Shore had become a majority Black community, but the neighborhood’s co-ops still reflected the mostly white makeup of its original shareholders from sixty years prior and the all-white board wasn’t interested in changing that. She resolved to join the co-op whether they wanted her or not so she sued the co-op for discrimination, won, and moved in.




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