Low Income [ was Affordable Cohousing]
From: Rod Lambert (rodecovillage.ithaca.ny.us)
Date: Thu, 24 Sep 2015 07:05:53 -0700 (PDT)
Re: keeping it affordable/building equity,

Curious about how Philip's group limits equity.
Perhaps they are already doing this, but wondering if using local median
income as a benchmark for affordability could work, at least in part. What
if a number of units were built to be sold such that someone earning say,
80% of median income (statistics kept by local government) could afford it.
The requirement from this buyer in return would be that it had to be resold
in perpetuity for 80% of median. That would allow for some gain in equity
but it would presumably keep it "affordable". The financial logistics for
initial build could be as suggested by earlier posts. Not sure if/how condo
docs could reflect this restriction but I think it can work in a coop legal
structure.

Had to smile at Philip's mention of management challenges. Our human
quality of hating to see someone getting a better deal than we are creates
many difficulties. Perhaps at least the fact of not being able to
participate in equity at the same level as the others will stimulate the
"undeserving" to move on to units that allow unlimited equity and pass the
unit on to the more "deserving"?

Rod Lambert
EcoVillage at Ithaca, NY

>Date: Wed, 23 Sep 2015 10:34:17 -0400
>From: R Philip Dowds <rpdowds [at] comcast.net>
>To: Cohousing-L <cohousing-l [at] cohousing.org>
>Subject: Re: [C-L]_ Low Income [ was Affordable Cohousing
>Message-ID: <C0EB96F9-F950-478F-9E85-535FB49FD59E [at] comcast.net>
>Content-Type: text/plain; charset=utf-8

















*>There are various low income ownership models out there. For instance,
some involve long-term, low interest loans of lenient qualification
standards.  Most, however, try to deliver a house for significantly less
than the "fair market? price.  The price of this ?bargain? house is low
because somebody subsidized part of the cost of delivering the unit.  Maybe
it was the government using public money or donated land; or maybe it was
an internal transfer (either voluntary or forced) from market units to the
subsidized unit.  In any event, the "market rate" unit may get sold for,
say, $200,000, and the identical ?affordable" unit right next to it for,
say, $130,000.  Not to just anyone, but to a certified low income,
pre-qualified buyer. >So where does limited equity kick in?  What good does
it do?  Part of it is related to preventing "windfall? profits; nobody can
feel good about the low income buyer getting the unit for $130K, then
selling it for $210K six months later.  But in the bigger picture, most
hope that affordable units will stay affordable over time, doing a
consistent, reliable job of supporting income diversity in the community.
So when the affordable unit goes back on the market five, ten, or fifteen
years later, it should go back on at a written-down price, not at a market
rate price. >So how do we do this?  Well, one way is for the government to
pony up public money at each transfer, permanently keeping the price of
this designated unit artificially low.  The government, needless to say,
remains very wary of assuming a permanent unfunded and uncontrollable
obligation of this sort.  The other way is limited equity:  Upon selling,
the beneficiary of the subsidized unit can collect a small profit, but not
a big one.  The artificially constrained sale price of the affordable unit
now benefits a new certified low income household.  The overall idea is
that limited equity ownership is not a plan for life, it?s a stepping stone
into the housing ownership market.  Ideally, limited equity units are
turning over with some regularity, as households prosper and move on to a
better solution. >At Cornerstone, we have four limited equity units.  I
must mention two on-going management challenges worth keeping in mind.
First, we have no communal way of influencing the transfer of these units,
and sometimes they have been occupied by households seeming to have little
interest in the cohousing culture.  Second, it sometimes appears that the
households living in the affordable units have more financial flexibility
than some of the market rate households ? so it?s difficult for our
community to give consideration to operating discounts (e.g., reduced
annual >assessments) for the affordables. >Philip Dowds >Cornerstone
Village Cohousing >Cambridge, MA >> On Sep 23, 2015, at 9:46 AM, Sharon
Villines <sharon [at] sharonvillines.com <sharon [at] sharonvillines.com>> 
wrote: > >
The problem with non-ownership, restrictions on resale prices, and
subsidies is that low income people also need to build a sustainable
future. We had a family move to Takoma Village as renters from a community
in California (not cohousing) that was a non-ownership model. They had
physically built their home themselves and helped others build theirs. But
unless they stayed, they had no financial benefit from that. In their late
50s they had no equity to purchase anywhere else.  When they moved closer
to a better musical education for their daughter, they had a much lower
standard of living and were having difficulty providing the musical
education their daughter for which they had moved. > > The best way to
limit prices is to build to the price. Still everything that goes up, goes
up. It?s called capitalism. Why shouldn?t low income people have the same
ability to become self-sustaining as other households?*

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