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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From 1945 through the 1970s, direct federal funding was responsible for virtually the only construction of affordable cooperatives in the United States, except for the affordable cooperative development in New York City discussed in Section IV above. Direct federal funding is responsible for about 50 percent of the current units of affordable cooperatives (see Table 1). Such cooperatives exist in more than 29 states.

A. 1945-1950s: Defeat of a General Federal Co-op Program, Early Conversions to Co-ops, and Guarantees of Market Rate Mortgages for Co-ops

During the early post-World War II period, there was a struggle among progressives, liberals and conservatives to define national policy. Some policies supported by progressives and liberals were enacted. For example, in 1946, Congress passed both the National Employment Act, committing the federal government to achieving the goal of full employment, and in 1949, the National Housing Act, committing the federal government to achieving the goal of "a decent home and a suitable environment" for every family.

By the 1950s, however, private market solutions to our nation's policy problems became more dominant. Progressives in and out of the union movement were restricted by actions like the passage of the Taft-Hartley Act and the McCarthy hearings. Also, the middle class, buoyed by a growing economy, eagerly bought single-family houses to reinforce their new identity. Federal housing, tax, and transportation policy strongly fostered the suburban dream. This suburbanization facilitated the decline of urban neighborhoods, and the extended-family systems and ethnic self-help groups in these neighborhoods. Suburbanization also facilitated the growth of the nuclear family and the further individualization of American society. In short, these trends and policies created an inhospitable environment for federal funding of affordable multi-family housing in general, and affordable housing cooperatives in particular.

The height of efforts toward a comprehensive federal policy supporting affordable cooperatives centered on the proposed inclusion of a separate Cooperative Housing Administration in the 1949 Housing Act. It would have been equivalent to the Federal Housing Administration (FHA) within the Housing and Home Finance Agency (HHFA). The latter is the predecessor to the present-day Department of Housing and Urban Development (HUD) (Leavitt, 1995). Some housing reformers reasoned that cooperatives would serve the growing group of families who could not afford housing in the private market, but were ineligible for public housing (Bailey, 1988). The introduction of subsidized cooperatives into federal housing legislation was supported by labor groups, religious and social welfare organizations, consumer groups, and veterans groups, including the Veterans of Foreign Wars and the American Legion. While these efforts undoubtedly helped passage of the low-income housing parts of the bill, lobbying for co-ops was unsuccess ful. White House support ebbed, and Raymond Foley, head of the Housing and Home Finance Agency pushed for private sector housing for "middle" income families (Leavitt, 1995).