Cohousing-L Mailing List: Re: Cohousing is based on home ownership

[John Faust (wjfaust]

 "In general, cohousing is set up for home ownership. This means it will
exclude those people who do not have the income, credit, job history and
down payment ability to qualify for a mortgage from a bank. ..."

Since we're conflating cohousing with homeownership, maybe we should look at
homeownership more carefully so we can understand why it pulls at us so
strongly.

We seem to have two common models of homeownership. The traditional view is
owning a piece of land and a house on that land. A more recent view is
represented by a condominium where you have an undivided interest in the
land and all the physical structures but exclusive rights to occupy a
specific enclosed space within. There may be other models but my immediate
interest is in the advantages conferred by homeownership.

I would think the primary advantage is that you have solved one of life's
basic problems; you have a secure shelter. As long as you pay your mortgage
and don't engage in unlawful acts, there is little threat to this sense of
security. There are some threats. The local government might condemn your
land for a freeway or (more recently) for economic development. These are
generally rare and mostly visited on society's powerless, low income
neighborhoods.

The second advantage is the right to transfer ownership to whomever you
wish. It can be deeded or willed to heirs, responding to a familial urge to
enrich your progeny. It can also be transferred through sale on the open
market. As we will see in a moment, there is a strong motivation to do that.


The third advantage is the freedom to modify it (e.g., add rooms, remodel)
to suit your needs. Less so with a condominium since you really don't own
identifiable structural elements.

The fourth advantage is that homeownership can confer some status of
ownership. Whether this is much of an advantage is hard to say. Depending on
how it was acquired, it might represent a sense of accomplishment in which
the owner takes pride.

The fifth advantage is deducting mortgage interest payments from your income
tax liabilities. This is an inducement that thrills lenders and developers.
Those lost tax revenues are either paid for by non-homeowners or your
children and grandchildren. Alternatively, we can choose to offset the loss
in tax revenues by cutting social programs like low income housing.

The sixth advantage is that you can take up to $500K (for couples) in
capital gains exclusions every time you sell a house.
This<http://www.bankrate.com/brm/news/real-estate/20041018a1.asp>was
instituted in the Taxpayer Relief Act of 1997. Prior to that, you
could
take a one-time exclusion of up to $125K if you were over 55. Now, there are
no age limits and it can be done as often as you like. Houses are now become
wealth-building mechanisms and lenders and developers are overjoyed by that
as well.

So homeownership seem to offer the following advantages:

   1. Secure shelter: you have shelter with little fear of losing it,
   2. Transferable: you can transfer that right by sale it or bequest to
   anyone,
   3. Modifiable: you can modify your home to accommodate changes in
   circumstances or tastes,
   4. Ownership status: you can feel a sense of accomplishment in owning a
   home,
   --------------------------------
   5. Income protection: you can protect your income with mortgage interest
   and property taxes,
   6. Wealth building: you can build financial wealth through selling your
   house and keeping the capital gains.

The first four address what I think of as basic and secondary human needs.
They have been part of homeownership from the beginning. The last two are
economic controls put in place by a government whose only accepted (even if
misguided) measure of general welfare is economic growth as measured by GDP.
In this case, it is growth in the housing and financial sectors. These
factors have probably played a large role in how we view housing today. If
homeownership appears to be an easy way to build wealth, then, in all
likelihood, many will use it that way and seek housing that has the
potential for appreciating. Consequently, it isn't difficult to see why
developers and lenders aren't particularly interested in affordable housing.
The system just isn't steered in that direction. And, this probably explains
why most existing cohousing communities tend to be largely upscale
communities.

So how do you get affordable cohousing with these economic distortions in
place? Good question but this post is already too long.

John Faust