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

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In the years immediately following the passage of the 1937 Housing Act, real estate interests and advocates of free market policies fought public housing, and were almost successful in repealing the bill (Leavitt, 1995). The housing needs of World War II defense plant workers saved public housing during the War, However, Senator Lanham (D. Texas) led initiatives for public housing to be sold to private investors at the end of the War, and in 1942, he succeeded in enacting such an amendment to the 1940 Housing Act.

After the War, homelessness among veterans, combined with the general housing shortage, prevented the extensive sale of federal public housing on the private market. Instead, by 1945, a disposition policy was developed amending the 1940 Housing Act, ensuring that those public housing projects not converted to low-income housing, would first be sold to veterans, then to residents, and, lastly, to private realtors (Bailey, 1988). Some of these sales would involve conversion to co-ops. Lessons from this period include the importance of conservative fiscal practices and of the co-op spirit for the survival of specific co-ops, and the difficulty of housing advocates obtaining federal support for a national multi-family affordable housing policy, in spite of its broad-based coalition support.

IV

The Early Post World War II Housing Cooperative Tradition in New York City

ALTHOUGH AFFORDABLE HOUSING COOPERATIVES WERE VIRTUALLY EXCLUDED from the early post-World War II federal housing legislation, trade unions in New York City sponsored affordable cooperatives (Siegler and Levy, 1986). In 1951, under the leadership of Abraham Kazan, these groups formed the United Housing Foundation (UHF). This formation spurred enough activity that by 1965 the UHF and its predecessors had created 23 cooperative housing projects in New York City, ranging in size from 124 to 5,860 units. In 1965, with the support of the mayor of New York City and the Governor, UHF started construction of Co-op City which eventually contained 15,382 units (UHF, 1970). [4] A total of approximately 40,000 units were built in New York by the UHF and by similar programs (Table 1). While the UHF still exists, it has not directly developed any co-ops since the early 1970s.

Activists also succeeded in getting the 1955 New York State Limited Profit Corporations Law passed. This law, popularly known as the "Mitchell-Lama Act," encouraged the development of moderate-income housing through property tax exemptions and through low-interest loans (financed by state revenue bonds) to developers who agreed to restrict their dividends (Sullivan, 1971). As shown in Table 1, about 60,000 units of affordable cooperative housing were organized under this statute, mostly in the 1950s and 1960s.

A lesson from this New York experience is that while strong regional organizations were able to obtain state government sponsorship of multi-family housing for moderate-income families, advocates of subsidized housing were unsuccessful at this on the national level. Again in the 1980s, a housing movement based in the local community development corporations succeeded in obtaining some state and local government funding at a time of federal cutbacks for affordable housing.