Re: equity caps
From: David L. Mandel (dlmandelrcip.com)
Date: Sat, 14 Aug 1999 20:25:21 -0600 (MDT)
        This response to Don Lindemann's comments on equity caps is in
addition to my previous comment regarding the initial query, though both may
actually go out at the same time.
        I understand and agree with most of Don's point, which boils down to
the assertion that regular people like us shouldn't take individual
responsibility, at the cost of adversely affecting our own economic security
through equity caps, for providing others with affordable housing. The
adverse consequences in the context of our economic system can indeed create
unnecessary hardship, and it's unfair that some should bear it while others
don't.
        Now, two buts:
        1) Sometimes it's a reasonable tradeoff in the context of a deal
that enables people to obtain desirable housing in the first place. For a
very low-income resident who otherwise couldn't have come close to buying
into my community, it wasn't a bad option -- and in our deal, if there's a
lot of appreciation caused by a hot housing market, the low-income person
who sells shares that bonus with the housing authority, according to a
formula that we spent a long time negotiating.
        It may be that for Berkeley cohousers it wasn't worth the price,
that you negotiated a bad deal. I don't know how much of a tax break you got
in exchange for accepting limited equity. Perhaps there was no choice and if
it's what made the project possible, would you not do it again? ... And if
the housing market there hadn't taken off, as you describe, perhaps it
wouldn't look so bad. 
        As long as housing is treated as a commodity in our society, the
decision to "invest" in a home is a sort of gamble; one could decide instead
to rent and put the other resources into stocks or bonds, not into home
equity. Any special conditions that come along with the investment need to
be weighed among the other considerations. It's not fair that the rich are
much more likely than I to become even richer by investing in stocks. I
devote energy to overthrowing that system. But meanwhile, I still have to
make decisions about housing and about where to invest the little surplus I
may have.

        2) The other option is to create a different type of housing, one
that could demand far fewer financial resources from the residents both
initially and onwards and that creates little or no equity. 
         I'm disappointed that more cohousing communities don't choose to
become cooperatives, for which a limited equity option could be easily
applied for all -- and which, I would argue, are much more in tune with the
cohousing idea. Again, part of the blame is the lending market and laws in
the country, which discourage co-ops. But there are a lot of them, there is
a co-op bank, and many cohousing groups -- including mine and the Berkeley
folks -- have considered the idea but backed off. Too bad.

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