Last Thursday, David Thompson, a specialist in developing limited-equity housing cooperatives (LEHCs), gave a presentation to a handful of people wearing socks under their sandals at the Faulkner Gallery. Thompson, who resides in Davis, had spent the day sharing his experience with the Affordable Housing Taskforce at the behest of affordable housing advocate Mickey Flacks.
Cooperative arrangements are rare on the West Coast, but they offer a housing model that helps circumvent the astronomical cost of private home ownership in places like Santa Barbara. In a cooperative arrangement, residents do not own their individual dwellings, but buy shares in the coop which is the sole owner of the entire property. The property may be an apartment building or en entire community of single-family homes.
Buying into a co-op is a little like shopping with your college roommates at Costco. Let’s say a box of 10 granola bars costs $10 at the grocery store, but you can get a box of 80 at Costco for $20. Splitting the Costco box among four roommates gets each of you 20 bars for five dollars—a much better deal than the grocery store price. (Then you can live in the box.)
Buying in bulk saves you money because it cuts down on overhead charges: Less packaging, less labor, etc.
The same principal applies when real estate is owned cooperatively. There is only one mortgage. Because the property never changes owners, it never loses the equity it builds. There are none of the fees related to property transfers. It is easy to refinance when market conditions improve. And once a co-op has existed for a while, one can buy a share at a significantly lower price than it would cost to put a down payment on a new home. The share-owners’ shares go up in value as the property builds equity.
In a cooperative community that Thompson designed in Davis, California, called Dos Pinos, it costs a mere $30,000 to get into a three-bedroom unit.
There are social benefits to co-operative housing as well. All dwellings are occupied by share-owners. That means the money a person invests in a coop stays in their community; the money saved by living in a co-op likewise enriches the immediate community.
By contrast, in Davis for example, 60 percent of dwellings are rental properties, whose owners typically live elsewhere, frequently out of town. So the people collecting rents and building equity are not putting it back into the local economy. The majority of residents in Santa Barbara are also renters.
Flacks is looking into possibilities for cooperative housing properties in the Santa Barbara area. To establish one requires some preconditions, namely an organization that has a) land and b) trouble getting members or employees who can afford to buy homes in the area otherwise. Cooperatives can be sponsored by unions, religious organizations, companies, hospitals, or school districts. For instance, the Santa Clara School District manages a 60-unit building for young teachers. School districts often already own sufficient property in the form of defunct schools.
Thompson is President of the Twin Pines Cooperative Foundation, which provides funding for housing co-ops and other cooperative ventures such as food co-ops, credit unions, and cable television cooperatives. He also co-authored with business partner Luke Watkins—an expert in financing cooperatives who accompanied him to his presentation last night—Davis’s Affordable Housing Ordinance. The city now embraces 20 cooperative communities.