Co-ops Are a Good Housing Choice 2019 Prosperity Indiana conference Jan. 30, 2019 Deb Trocha Executive Director Indiana Cooperative Development Center

Who we are… 501(c)3 nonprofit which provides development services for new and existing co-ops Our mission is to foster community economic development through the cooperative business model We provide Technical assistance Education Advocacy, referrals and access to resources

A Cooperative Is….. An enterprise formed by a group of people who join forces and work together to solve a common problem or to reach a shared goal

Member Ownership Member Control Member Benefit Three Ways Cooperatives Are Differentiated from Other Business Entities… Member Ownership Member Control Member Benefit OWNERSHIP: When you make a financial investment in the cooperative, you’re not only a customer or user, you’re an owner CONTROL: As members you run the cooperative; elect its board of directors which oversees the property and selects the management company; determine when improvements need to be made BENEFIT: The co-op exists to meet the needs of its member owners. As members you benefit not some absentee landlord; profits are returned to the members

Guided by Cooperative Principles Voluntary and open membership Democratic member control Member economic participation Autonomy and independence Education, training and information Cooperation among cooperatives Concern for community

Basics of housing cooperatives

History 1857 – first recorded housing co-op created in New York City (artists) 1916 – first full residential housing co-op begun by Finnish immigrants 1930s – expansion of co-op enterprises including housing co-ops including the first student housing co-ops 1950s – another growth spurt in response to post-war housing boom 1970s-80s – Many new housing co-ops created with assistance from various government programs

Statistics Population: 312,913,872 Total housing stock: 130,599,000 dwellings Total social (rental) housing stock: 1,200,000 dwellings Total co-op housing stock: 6,400 housing co-ops Housing co-ops account for 1% of all housing units 2010 statistics from NAHC (National Assoc of Housing Cooperatives)

How Does a Housing Co-op Compare with Other Housing? In a condominium association, each individual owns a divided piece of the property. In a housing co-op, all members combined own an undivided share of the property. In a rental apartment, tenants own nothing.

Types of Housing Co-ops Market rate Limited equity Mobile home parks or manufactured housing communities Student housing Senior housing Market rate: Usually sponsored by for profit real estate developers Directed to households with middle to high income Limited equity Sponsored at first by labor unions and ethnic immigrant societies, now sponsored by non-profit organizations purpose to prevent speculation, encourage long term residency and preserve affordability targeted to low and moderate income families government financial assistance can be used to maintain affordability Mobile Home Coop owns the land and any common utilities and amenities members own their mobile homes or manufactured homes and have complete control over management of the home members joints own the park Special Interest Senior Housing Incorporate design and service features appropriate to senior residents Most limit all units to 55 or older most developments are in Minnesota with some in Iowa and Michigan; gaining in popularity with many having very long waiting lists, i.e. 10-15 years Artist housing combine housing and workspace needs goal is permanent affordability Student housing housing for student on or near university campuses could be dorm, house or apartment building minimal membership fee is charged

Wide Variety of Housing Co-ops Traditionally located in urban areas Increasingly seen as a way to meet rural housing needs Can be structured as: multi-family or apartment type dwellings single family homes located close together manufactured housing parks townhouses, garden apartments scattered site   Vary in size from very large to very small Can be new construction, renovated or existing housing

Benefits of Housing Cooperatives

Individual benefits Affordability Accessible home ownership Flexible housing model Financial advantages Home ownership Supportive community Affordability: Operates cost: because coop is owned by residents, it operates at cost; no third party profit motive. Members have no reason to increase monthly charges unless taxes or actual operating costs increase; members control budget Joint purchasing: achieve economics of scale when purchasing goods and services such as appliances, carpet, etc. Accessible home ownership Low transaction costs: buying a share in a coop is usually less expenses than purchasing a single family home or condo; because no actual real estate is changing hands title work and other closing costs are lower; Can borrow collectively for unbudgeted expansions or additions Flexible housing model Lots of different building types and populations Intergenerational living Financial Advantages Tax deductibility of interest: members enjoy benefits of conventional home ownership including mortgage interest deduction, favorable property tax treatment and homestead tax classification Equity accumulation: depending on by-laws, coop members accumulate equity in the same way as traditional homeowners Protection from predatory lending: coops provide a natural barrier to predatory lending; loans to housing co-op residents are a specialized product and offered by only a few lenders thus making the loans unattractive candidates for predatory practices such as flipping Home ownership: Makes it possible for owners from all income levels to achieve home ownership Supportive Community Leadership Development: running for and serving on the board; skills transferrable to work in other organizations Skills development: allows for participation on committees, learning the democratic process; transferrable to participation in the larger community Civic participation: not only of the coop itself, but also individual members; leadership skills translate into civic participation Enhanced security: one of the most important benefits of cooperative living; residents know their neighbors; often have hired security; ; Encourages strong intra-coop relationships; residents often look after each others

Social benefits Self management Community control Leadership development Democratic participation Enhanced security Lower rates of mortgage delinquency and default

Community Benefits Engine of economic growth Stabilization of changing neighborhoods Stabilizing out-migration in rural areas: retaining an important asset base Engagement Growing popularity ensures financial health Economic growth: help ensure property can be affordably developed; breaths new life into neighborhoods; can lead to neighborhood economic growth and development Stabilization: in gentrifying neighborhoods creates supply of affordable housing; stabilizing housing costs allows people to remain in their home neighborhoods Stabilizing out migration rural: Rural areas face out migration of seniors who are looking for affordable, accessible housing; allows seniors to age in place and keeps their financial wealth to remain in the community; frees up former housing for younger families Engagement: seniors especially become engaged in committee structures; running the co-op; remain active; allows families to engage with neighbors of all ages Ensures financial health: as co-ops become more well known, waiting lists have grown; ensures financial health of co-op by providing ready supply of potential owners

Challenges of Housing Co-ops…. Tenant mindset Desire for single-family housing Desire for sole ownership Restrictions on resale Submitting to group decisions Close living Complexity of organizational process Tenant mindset: those who have lived in rental housing a long time may find it difficult to adjust to being their own landlords Desire for single family housing: for many the American Dream is owning a single family detached home. This ideal is not always within the reach of everyone. Coops provide an alternative Desire for sole ownership: co-ops are jointly owned. Title or ownership of buildings rests with the coop corporation. Requires an education process to informs residents about this structure Restrictions on resale: growth in resale or transfer value may be limited, especially in limited equity coops; may been seen as a negative for some Submitting to group decisions: some may not be comfortable with the democratic decision making process. Members must view their own needs in relation to those of the whole group; again an education process often needed Close living: residents of multi family housing must have consideration for their neighbors; some may consider the rules governing behavior, pets, etc. as infringing on their freedom Complexity of organization process: planning, financing, construction as well as becoming familiar eith cooperative way of operating has unique challenges and often requires outside help. COOPERATIVE LIVING IS NOT FOR EVERYONE.

In Summary….. Co-op model is proven Offer many advantages to individuals and their communities Wide variety of housing co-op models Can provide the answer to both urban and housing shortages

THANK YOU! Deb Trocha Indiana Cooperative Development Center 225 S. East St., Suite 737 Indianapolis, IN 46202 317.692.7707 Fax: 317.692.7787 dtrocha@icdc.coop