Will Limited-Equity Cooperatives Make a Comeback?

Cooperative housing is not a new concept. Since the late 1800s, people have come together to own and control multiunit housing collectively through cooperative structures. Members purchase shares in the cooperative that entitle them to live in one of the units and have a vote in the governance and management of the building. They pay monthly fees to cover their share of the cooperation’s expenses, like mortgage payments, property taxes, and maintenance.

There are different types of cooperative housing, each with its own set of rules and regulations. Limited-equity co-ops are a form intended to preserve affordability for low- and moderate-income households. Shares in limited-equity cooperatives, or LECs, have restricted resale values, and there are income limits for potential members. LECs tend to offer deeper affordability than other permanently affordable shared-equity housing models, such as community land trusts or deed-restricted inclusionary housing, meaning they can bring the benefits of those models to even lower-income households.

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Before the property at 53 Columbus Ave. converted to an LEC, it had been decades since a new cooperative formed in San Francisco, which is a far cry from the rate at which they were erected in the ’60s, ’70s, and ’80s when limited-equity co-ops were all the rage in San Francisco, New York, and Washington, D.C. In those days there were more financing options, including subsidies and below-market interest rates, that allowed developers who wanted to build LECs to secure affordable loans. Now, limited-equity co-ops are mostly created through conversions of existing buildings, and even then, it’s difficult to secure funding for such a venture.

To go back to the heyday of affordable cooperative growth, there would need to be a program that provides 100 percent, or near 100 percent, financing for affordable housing development, says Herb Fisher, former president of the National Association of Housing Cooperatives. Without that, “potential members cannot come up with the money needed to fund the cooperative’s downpayment and soft-costs requirements.”

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