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Lessons from the History of Affordable Housing Cooperatives in the United States: A Case Study in American Affordable Housing Policy
American Journal of Economics and Sociology, The, Oct, 2000 by Gerald W. Sazama
GERALD W. SAZAMA [*]
ABSTRACT. Understanding the history of the affordable housing cooperatives in the United States helps us understand the general history of American affordable housing policy. This paper contains a decade-by-decade summary of the history of affordable cooperatives. The affordable cooperative movement has evolved from ethnic and union groups which developed self-help cooperatives in the 1920s, through the federal funding of low-income cooperatives in the 1960s and 70s, to local nonprofit organizations using ad hoc packages of funds to organize cooperatives during the 1980s and 90s. As this history unfolds, it provides answers to contemporary policy questions affecting both cooperatives and affordable housing in general.
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Introduction
THE HISTORY OF THE AFFORDABLE HOUSING COOPERATIVE MOVEMENT in the United States is part of the history of the struggles of working people and the poor for decent housing. Understanding this history helps us to understand the general affordable housing movement, and to develop contemporary policies for both cooperatives and the affordable housing movement as a whole.
Circumstances and methods of the affordable housing cooperative movement vary decade by decade, but the objective of this movement is constant: to obtain for low- and moderate-income families decent housing, at an affordable price, with effective resident control. This movement started with ethnic and union groups developing self-help cooperatives in the twenties. It evolved into federal funding of low-income cooperatives in the sixties and seventies, and then into local nonprofit organizations using ad hoc packages of funds to organize affordable cooperatives during the eighties and nineties. The successes of these historical struggles have resulted in about 376,000 dwelling units in affordable housing cooperatives in the United States. [1] This number equals 17 percent of the total number of rent-reduction housing units owned by the nation's public housing authorities (HUD and Census Bureau, 1995; and Table 1).
The history of affordable housing cooperatives is relevant for today's affordable housing movement because, in a world that is increasingly market driven, cooperative housing provides contemporary housing advocates with an alternative that reinforces joint ownership of property (Hays, 1993). Also, affordable housing cooperatives empower low- and moderate-income families, since under the cooperative structure they own and control their own housing (Birchall, 1988; Cooper and Rodman, 1992; and Heskin and Leavitt, 1995). Finally, affordable cooperatives are contrary to the traditional welfare mentality prevalent in so much of subsidized rental housing because with co-ops, residents not only take responsibility for their actions, but they experience the direct consequences of these actions on the cost and quality of their housing (Miceli, Sazama, and Sirmans, 1994 and 1998).
As this history unfolds, it highlights policy questions relevant for contemporary affordable housing policy. Nine policy questions are examined, each at the end of the historical period when the question first became important. Some examples include: Should housing advocates support a federal or a decentralized housing policy? Should rents and monthly housing charges be collected as flat fees or as a percentage of household income? Should affordable housing be developed as co-ops or rental properties? Should emphasis be placed on providing more housing units, as opposed to the development of resident skills to control their own housing?
The following definitions will be used in this paper: A housing cooperative is a cooperative where member-residents jointly own their building. Ideally, member-residents democratically control the cooperative, and receive the social and economic benefits from living in and owning the cooperative. An affordable housing cooperative is available to moderate-, or low-income families. [2] This "affordability" ordinarily results from private or public subsidy or other government action. Limited equity cooperatives (LECs) are affordable cooperatives that have affordability restrictions on the resale of initial membership shares. Affordability restrictions limit the resale of co-op shares to moderate or low-income households, and/or restrict increases in the resale value of these shares.
In the national debate on assuring the availability of affordable housing, many alternative polices have been offered. Some argue that decent affordable housing is best provided by the private market, or by private charitable and civic organizations. Most, however, argue for some form of government intervention. One form of intervention concerns the debate over government regulation of the private market via rent control, zoning, building codes, and the Community Reinvestment Act. A second form of intervention is via tax policy. For example, some argue that a land tax would reduce the cost of urban housing, and thereby increase the availability of affordable housing. Also, there are tax expenditures which subsidize housing via the deduction of property taxes and interest on home loans, accelerated deprecation of investment in rental housing, the federal low-income housing tax credit, and local property tax abatement. A third option is supply side policies, which directly increase the availability of affordab le housing via capital grants, subsidized operating cost, low interest loans, and loan guarantees. Finally, demand side policies subsidize eligible families to rent housing in the private market.
