Co-ops Could Help Solve San Francisco’s Affordable Housing Crisis


Housing co-ops, largely by the wayside for decades, are getting a second look in San Francisco as the stubbornly high cost of real estate has displaced working-class families, entire communities of color and generations of inhabitants.

Over 40% of the people who work at The City can no longer live here, according to a recent report sponsored by a group of local economic justice groups. An estimate from the Redfin real estate site estimates the current median price of a single-family home at $ 1.8 million and, in October, the median rent in the city for a one-bedroom apartment is $ 2,395 per month and $ 2,771 per month for a two-bedroom apartment, according to the data from the rental company List of apartments.

Co-op housing – which can provide a cheaper way to own home ownership – has been a model used to help combat displacement and gentrification in other cities across the country.

When residents buy a co-op unit, they buy a share of the entire property equal to all other neighbors in the building. They develop equity and manage the building together.

The model has been largely overlooked here in recent years despite worsening inequalities.

The City has not subsidized a cooperative for almost two decades. Staggering construction costs, tighter parameters for federal funding for housing, and crumbling building floors have made the co-op model a less desirable option over more traditional avenues for providing affordable, subsidized housing.

“We have the opportunity to reintroduce radical ways to rebuild San Francisco by stabilizing residents who have been destroyed by the pandemic and racial and economic disparities,” said supervisor Myrna Melgar, who has called a hearing at the Board of Land Supervisors Use and Transportation Committee on November 1 to better understand how the City can invest in cooperative housing complexes.

Which begs the question: what exactly are cooperatives?

Basically, these are buildings owned by residents. As with condominiums, tenants own their units, but what is distinctive is that residents own a share of the building itself, not just a private unit.

Some co-ops are at market rate, which means unit prices are based on regular fluctuations in the local real estate economy.

Others are called capital-limited housing co-ops. These are often subsidized by federal, state, or local dollars to keep the purchase price lower for those with low or moderate incomes. They pay a certain amount of money – similar to a down payment – and then make mortgage payments to the co-op itself. There are limits on the resale values ​​and income of buyers.

“As an ecosystem and as a way of thinking about housing, both (cooperative models) are really important,” said Fernando Marti of the Council of Community Housing, a local non-profit housing organization.

But when it comes to the uncompromising and affordable problem of housing in San Francisco, it’s the limited-capital co-ops that officials say could prove particularly useful because they keep prices low and lower barriers to entry for low and moderate income people.

Funding required

San Francisco operates a number of other below-market housing options, including rentals and property access routes for people who may need additional support. These include first-time buyers, people with very low incomes, or people who earn moderate wages that are always lower than the median household income in San Francisco. But the demand for such units far exceeds the supply, and most people have to access them by lottery.

“We can’t just rely on the traditional affordable housing market,” Melgar said.

There are only 10 co-op buildings with limited equity in the entire city, representing a total of 1,566 units. And the last time the City invested its money in such a complex was in 2009.

A 21 unit building located at 53 Columbus Ave. at the intersection of Jackson Street was leased to low-income tenants and slated for demolition when a coalition of residents and nonprofits stepped in with support from local officials to turn it into a cooperative instead .

Residential tenants have pooled a total of $ 210,000 in equity to purchase the property alongside $ 300,000 from the Asian Law Caucus to occupy the downstairs commercial space. The remainder of the total project cost of $ 7.6 million came from loans from many sources, including the City.

“The success of Columbus United shows how very effective co-ops can be in creating affordable and highly sustainable housing,” said Saki Bailey, executive director of the San Francisco Community Land Trust, which owns the plot of land on Columbus and the rented. to the cooperative.

Realizing these aspirations, however, will take serious work.

Change the ‘bad rap’

Many in San Francisco know that co-ops are a “burning mess” of disorganized leadership, poorly managed financial resources, dilapidated living conditions, and land wars between residents, elected councils, and entrepreneurs.

“Part of the challenge we face in San Francisco is overcoming the hurdle of the bad reputation of co-ops right now,” Bailey said, adding that these properties don’t have to be total drains.

For example, in the first year of Columbus United’s conversion to a limited-capital cooperative, all of the building’s operating costs were covered by the owners.

This case is not just an anecdotal success story. There is research to confirm this.

“The continued affordability of low-capitalized co-ops, security of tenure and control over maintenance also protect residents against rising and falling economic tides that could gentrify or undermine the physical conditions of neighborhoods,” according to a study by Journal of Planning Literature.

Protect “heritability”

Homeownership has long been touted as the American Dream, but many low-income residents, especially people of color, have been left out. The constantly affordable cooperative model democratizes this opportunity, giving communities at risk of displacement the opportunity to create generational wealth and pass it on to their families.

This is happening at 285 Turk Street, in the net.

About 95% of residents identify as people of color, but until this summer they had been subjected to speculative year-over-year rent increases that have prompted many neighbors to move out.

The Community Land Trust purchased the 40-unit property in July with the intention of converting the building into a lower equity housing co-op within five years. This will go a long way in protecting the financial security of residents.

“I can’t afford to buy a property. It’s a point of stability, ”said Mauro Tumbocon, a current resident of the building who plans to buy into the cooperative. “We were able to save the speculative property net. “

Training helps

The beauty of the cooperative model can also be the curse.

With everyone having an equal interest in the property, the financial risk is more dispersed; but without a clear hierarchical structure, it is not uncommon for clashes to arise.

Most co-ops choose to form an elected board to act as a proxy for decisions ranging from budgeting and hiring third parties to landscaping and maintenance. Despite this, many residents lack direct building management experience, which can lead to the kind of capital and operational dysfunction for which many permanently affordable co-ops are known.

This is where training comes in, experts say.

San Francisco has contracted with a national nonprofit organization to provide technical assistance as well as support in the development of leadership tactics, community building, and board development for some existing co-ops. Supporters say this type of investment should be expanded and led by people of color who reflect the neighborhood and have a lived experience similar to that of many of the residents they seek to serve.

The City will begin by dedicating part of a $ 10 million fund included in the mayor’s current budget to fund capacity building programs.

New York City provides an example of how the process might work. The local government pays a nonprofit called the Urban Homesteading Assistance Board to provide a multitude of services to affordable co-ops on a permanent basis to create “strong councils and healthy buildings”. UHAB, which provides resources to residents and tenant councils on its website, recently launched a program dedicated to the rehabilitation of the city’s 262 affordable co-ops determined to be in great distress.

“New York City is investing a huge amount of money in these projects,” said Andrew Reicher of UHAB.

Helping teach people the skills they need not only to manage a building, but also to support and operate an organization, is vital to the future success of co-ops, said Marti. This will not only serve residents better, it is the key to expanding the concept of a co-op and changing the City’s vision of this type of housing from a risky proposition to a stable investment of resources and dollars.

“As with any bureaucracy, if the mayor steps in and says do it, it’s done,” he said. “But as long as The City sees this as a risky side idea, it moves very slowly and becomes a big challenge to innovate.”

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