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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The above groups are voluntary associations, therefore they do not have the right to intervene with troubled cooperatives. In contrast, the Vermont Cooperative Housing Federation, as a secondary co-operative (a co-op of cooperatives), has the legal right to intervene in the affairs of member co-ops. Community organizers employed by the City of Burlington found that many of their small co-ops required frequent technical assistance (Colburn, interview, 1992). Private financial institutions were also more willing to participate in financing LECs if assured that some formal oversight of the individual LECs existed. Given this experience, and a dialogue with the Toronto, Canada, co-op movement, a secondary co-op was formed. As a secondary co-op, the Federation develops new co-ops, and intervenes in the internal affairs of a member LEC, if that LEC is having substantial financial or interpersonal problems. To assure resident control, a majority of the Federation's board must be resident-members of member co-ops.

This historical experience introduces policy question 9: How can technical assistance be provided more effectively for existing affordable cooperatives and for the development of new affordable cooperatives?

Most residents of affordable cooperatives do not have the professional skills or experience to run their co-ops completely on their own, and frequently need outside technical assistance. The National Association of Housing Cooperatives, the Institute for Community Economics, and some of the regional associations and local nonprofits provide some technical assistance for the development of housing cooperatives, but in the contemporary affordable housing environment their resources are limited, Their effectiveness also is restrained by the limitations on voluntary membership organizations discussed above. On the other hand, the Vermont model of a secondary co-op is very effective for resolving these problems. Member co-ops pay sufficient dues, and the federation has successfully intervened in the affairs of troubled member co-ops.

Finally, the National Cooperative Bank in Washington, D.C., and the Institute for Community Economics based in Springfield, Massachusetts, provide some technical assistance for the development of co-ops, but again funding is limited.

IX

Summary and Conclusions

THIS BRIEF HISTORY of the affordable cooperative housing movement in the United States is a case study of an alternative affordable housing movement. The affordable cooperative housing movement started with the pooling of funds by ethnic groups, and with the availability of financing from union pension funds in the 1920s and then again in the 1950s. With the weakening of these institutions in the 1960s through the 1980s, cooperatives had to rely on public subsidy programs as the major source of funds. Affordable housing advocates did succeed in obtaining federal funding for low-income, but not for moderate-income housing during the "War on Poverty" of the 1960s. By the 1980s, however, the emphasis on private market solutions to our nation's affordable housing problems resulted in the virtual end of federal direct funding for the supply of all low-income housing, including co-ops. In the 1980s, local nonprofits used grass roots organizing and ad hoc packages of funding to sustain the development of the next ge neration of affordable housing cooperatives. In the 1990s, funds for nonprofit housing from state and local governments, as well as from federal community block grants, are being cut. As a result, the pace of the development for all affordable housing including cooperatives has been reduced to its lowest level since the 1950s.