The thing about co-ops, affordablity and deals with the devil

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NW Co-op
I have a 'fee simple' bias. For myself I don't care for condos and sure as heck don't care for co-ops either. While we're at it, not a fan of HOAs either. Personally, I like owning the dirt that comes along with the structure. Ownership of the dirt (fee simple) allows you to do several things not allowed when you're in a condo or co-op. With a fee simple you can have a 100 lb dog, two of them if you'd like and throw in as many cats as it takes to get labeled a 'cat lady'. You can rent out your home out when ever it suits you without having to get approval from a board. And my favorite, no monthly fee.

However, co-ops, limited equity co-operatives in particular, are probably the best way of keeping affordable housing in a particular spot. There are about 3 such creatures in Shaw that I know of, which have managed to be absolutely unchanged by market forces gentrifying the neighborhood. Because they are limited equity, regardless of the changing fortunes of the occupants (see the 2012 HUD Audit for the 2nd NW Co-op, pdf) that pesky monthly fee/rent is fairly low.

The key is denying owners in the co-op equity. Equity is the key. Equity is that thing that gives owners the incentive to fix up their houses or condos so they can sell at a higher price, probably making what was affordable, unaffordable. Or it allows owners to use their property like an ATM and take out a HELOC or refinance and get extra cash.

Twelve years ago I purposefully chose to buy in DC because of the various and generous first time homebuyers programs. There were the classes taught by a non-profit which were invaluable and then there were the deals with the devil which were helpful. I signed a buttload of papers but one of them was something along the lines of if I sold my house within 7 or 10 years I would owe the city some percentage of the equity based on some odd mathematical formula I could never figure out. It was just easier to stay in place. Thankfully I did not take a HPAP or anything like that which may have had any influence over my ability to refinance so I could fix up the house and deal with 80% of the building's structural issues. I could refinance because I could tap into the house's equity.

However limited equity co-op owners can't do the same. For one as with any co-op you don't really own your unit, you rent it. What you own is ownership in the co-op and the financing is a little bit different than buying a fee simple house or a condo. The funny thing is co-op boards can limit who can buy into a co-op, there are known cases in New York City where famous people weren't allowed to buy certain co-ops because the board disallowed them. They can also restrict to whom you can rent (if they let you rent) your unit. With limited equity co-ops there tend to be income restrictions, which keep the co-op affordable to certain income groups but I can see can be a total PITA for both the seller and buyer. 

As a neighbor, a limited equity anything, has no incentive whatsoever to spruce up the exterior of the property. For the most part the property itself is clean and decent, but never beyond that. There is probably no incentive either to add any amenities or make the laundry room nicer. As long as the equity is limited it won't become luxury.

So that's my solution to gentrification. Limited equity, limited possiblities.

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