Cohousing-L Mailing List: Re: Low Income [ was Affordable Cohousing

[R Philip Dowds (rpdowds]

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> 
> 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?