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Co-ops might assist clear up San Francisco’s reasonably priced housing disaster

Cooperative living, which largely fell by the wayside for decades, is getting a second look in San Francisco as stubbornly high real estate costs have displaced working-class families, entire colored communities, and generations of locals.

More than 40% of the people who work in The City can no longer live here, according to a recent report sponsored by a group of local economic justice advocates. An estimate by real estate website Redfin puts the current average price of a single family home at $ 1.8 million, and in October the median rent for a one-bedroom apartment in The City is $ 2,395 a month and $ 2,771 a month for a two-room apartment – bedroom, based on data from the landlord Apartment List.

Cooperative housing – which can provide a lower cost home ownership option – is a model used to combat displacement and gentrification in other cities across the country.

When residents buy a cooperative apartment, they acquire a share of the total property equal to all other neighbors within the building. Together they develop the ownership structure and manage the building.

Despite increasing inequality, the model has been largely neglected here in recent years.

The city has not subsidized a cooperative in nearly two decades. Sky-high construction costs, stricter frameworks for federal housing finance, and dilapidated layers of buildings have made the cooperative model a less desirable option compared to the more traditional ways of providing subsidized affordable housing.

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

The question arises: what exactly are cooperatives?

In essence, these are buildings that belong to the residents. As with condominiums, the tenants own their units, but what makes it special is that the residents own a stake in the building itself and not just a private unit in it.

Some cooperatives are in line with the market, which means that the prices of the units are based on the regular fluctuations in the local real estate economy.

Others are so-called limited equity housing associations. These are often subsidized by federal, state or municipal funds in order to keep the purchase price low for low and middle earners. You put in a certain amount of money – similar to a down payment – and then pay the mortgage payments to the cooperative itself. There are limits to resale value and buyer income.

“Both (co-op models) are really important as an ecosystem and a way of thinking about housing,” said Fernando Marti of the Council of Community Housing, a local nonprofit housing association.

But when it comes to San Francisco’s intransigent, affordable housing problem, it’s the limited joint-stock cooperatives that officials say could prove particularly useful as they keep prices down and lower barriers to entry for low and middle earners.

Funding needed

San Francisco operates a number of other below-market housing options, including rents and home ways for people who may need additional assistance. These include first-time buyers, very low earners, or people who earn moderate wages that are still below the median household income in San Francisco. But the demand for such units far exceeds supply and most people need to access them via lottery.

“We cannot rely on the traditional market for affordable housing alone,” said Melgar.

There are only 10 limited-participation buildings across the city, making a total of 1,566 units. And the last time The City put their money into such a complex was in 2009.

A 21 unit building on Columbus Ave. 53 at Jackson Street’s intersection was rented to low-income tenants and was about to be demolished when a coalition of residents and nonprofits, supported by local officials, stepped in to turn it into a cooperative.

Residents have pooled a total of $ 210,000 in equity to purchase the property, along with $ 300,000 from the Asian Law Caucus to occupy the first floor commercial space. The remainder of the total project cost of $ 7.6 million came from loans from numerous sources, including The City.

“The success of Columbus United shows just how effective cooperatives can be in creating affordable and highly sustainable housing,” said Saki Bailey, executive director of the San Francisco Community Land Trust, which owns and leases the property on Columbus. to the cooperative.

However, some work is required to make these aspirations come true.

Change the “bad name”

Many in San Francisco know that cooperatives are a “hot mess” of disorganized leadership, poorly managed financial resources, shabby living conditions, and turf wars between residents, elected officers, and contractors.

“Part of the challenge we face in San Francisco is getting past the hurdle of bad reputations that cooperatives currently have,” said Bailey, adding that these properties don’t necessarily have to be dollar deductions.

For example, Columbus United was converted into a Limited Equity Coop in the first year, with all building operating costs borne by the owners.

This case isn’t just an anecdotal success story. There is research to back it up.

“The long-term affordability of lower equity co-operatives, the security of ownership and control over maintenance also buffer residents against rising and falling economic tides that could enhance or undermine the physical conditions of the neighborhoods,” according to a study by the Journal of Planning Literature.

Protect ‘inheritance’

Homeownership has long been billed as an American dream, but many low-income residents, especially those of color, have been excluded. The permanently affordable cooperative model democratizes this opportunity and gives communities threatened by displacement the opportunity to build generational wealth and pass it on to their families.

That happens at 285 Turk St. in the Tenderloin.

About 95% of residents identify as colored, but until that summer they were exposed to speculative rent increases year after year that drove many neighbors out.

The Community Land Trust bought the 40-unit property in July with plans to convert the building into a housing association with lower equity in five years. This largely ensures the residents’ financial security.

“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 tenderloin from speculative ownership.”

Training helps

The beauty of the co-op model can also be the curse.

Since everyone has an equal share in the property, the financial risk is more diversified; But if there is no clear hierarchical structure, it is not uncommon for collisions to occur.

Most cooperatives choose to have an elected board of directors to act as a proxy for decisions ranging from budgeting and hiring third parties to landscaping and maintenance. Even so, many residents lack direct facility management experience, which can lead to the type of capital and operational disruptions that many permanently affordable cooperatives are known for.

This is where training comes in, say experts.

San Francisco has signed a contract with a national not-for-profit organization to provide technical assistance, leadership tactic development, community building, and board development assistance to some existing cooperatives. Proponents say this type of investment should be expanded and led by people of color who reflect the neighborhood and have a similar life experience as many of the residents they wish to serve.

The city will begin allocating a portion of a $ 10 million fund, included in the current mayor’s budget, to fund capacity-building programs.

New York City provides an example of how the process could work. The local government pays a nonprofit called the Urban Homesteading Assistance Board to provide a range of services to permanently affordable cooperatives to create “strong boards and healthy buildings.” UHAB, which has resources for residents and tenants’ councils on its website, recently launched a program dedicated to rehabilitating the 262 affordable cooperatives across the city that are in dire straits.

“The city of New York is investing a huge amount of money in these projects,” says Andrew Reicher from UHAB.

Helping people impart the skills they need to not only run a building but also support and run an organization is critical to the future success of cooperatives, Marti said. Not only will it serve residents better, it is key to expanding the concept of co-op and changing the way the city sees 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 it will be done, it will be done,” he said. “But as long as The City sees this as a risky side idea, it moves very slowly and becomes a major innovation challenge.”

cgraf@sfexaminer.com

Affordable HousingSan Francisco

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