Can the limited-equity co-op relieve the American affordable housing crisis?
In recent years the appeal of suburbia has declined and cities are once again booming. But while new residential towers are rising in Manhattan and San Francisco, it’s increasingly difficult for anyone not working on Wall Street or in Silicon Valley to find a place to live. As economics reporter Shaila Dewan wrote recently in The New York Times Magazine:
The developed world’s wealthiest cities are facing housing crises so acute that not only low-income workers, but also the middle and creative classes, find them increasingly difficult places to afford.Dewan points out that the problem is made thornier still because some of the usual solutions — subsidizing rents, constructing new buildings, improving public parks, schools, and transit — can actually intensify unaffordability; they can make the city even more desirable and ultimately push out the very people they are trying to help. All of which raises a telling question: Why aren’t policy makers in the United States embracing housing models that avoid this unvirtuous cycle — models outside the private market? Why aren’t American policy makers pursuing diverse forms of housing ownership and financing, from new lending and tax policies to housing trust funds to community land trusts? More specifically, why aren’t they encouraging non-profit, limited-equity cooperative housing? Some of the priciest cities in Europe, including Zürich, Vienna, and Munich, have successfully embraced the non-profit cooperative, and as a result these cities benefit from housing that is not only more affordable but more innovative as well. The failure of U.S. policy makers to respond more creatively to the growing crisis is yet more puzzling when we recall the vital legacy of alternative housing that played such a strong role in the urban revival of recent decades.
What follows is a series of reflections on cooperative housing — and on what American cities might learn from other parts of the world, and more, from the rich history of non-profit cooperative housing right here at home.
Berlin, Montevideo, New York: an education in cooperative housing
Full disclosure: I have never lived in or been a member of a cooperative; at least not yet. My first exposure to non-market housing was at architecture school in Berlin, in the mid-1990s, where we studied the famous central European reform housing, or Siedlungen, of the early 20th century. From the distance of decades, it seemed practically an historical inevitability that no matter the style — from the traditional garden cities of Paul Schmitthenner to Mies van der Rohe’s variations on the international style — many of the settlement houses were developed as Genossenschaften, or cooperatives. As such they were common interest and non-profit: each resident purchased a share; participated in decision-making on the basis of one vote per household; and paid monthly fees to support both regular maintenance and periodic capital investments. The resale value of a share was determined by the cooperative’s statutes and adjusted for inflation; but it was not subject to market speculation — the whole point of the cooperative model was to keep costs reasonable and housing affordable. Which it did; and at the turn of 21st century, in post-Wall Berlin, I discovered that non-profit cooperatives continued to flourish. As they still do; some are municipally supported housing corporations, which often take the form of high-rise versions of the early modernist housing estates, and others are smaller upstart projects, some organized by architecture students who claimed formerly state-owned tenements in order to secure their affordability and have a say in their redesign. Thus did my education form my vision of a cooperative: a non-profit housing venture with below-average costs and above-average architecture. 1A few years later I relocated to North America, where my education in cooperatives has continued. Though at first it was hard to figure out exactly what “cooperative” meant on this side of the Atlantic — the term seemed to be used almost interchangeably with “condominium.” Certainly in the real estate listings, the prices of “co-ops” and “condos” were comparable, as was the housing stock. Only in time did I discover that New York City has an especially rich heritage of cooperatives, market rate as well as non-profit: the city’s first stock co-op, The Rembrandt, was built in 1881, in response to the growing demand for upper-middle-class multi-family apartment buildings (the developers marketed the property as a “home club” that sought “people of means and good social standing”); the limited-equity model would follow in the early 20th century. Only in time did I discover that Co-op City — that rampart of 35 residential towers in the Bronx, begun in the late ’60s along Interstate 95 — was a functioning non-profit development, and in fact the largest in the world, with more than 15,000 households owning shares in a limited-equity cooperative and thus agreeing that apartments could be resold only at a set price, not at market value. Only in time did I learn that many tenements on the Lower East Side and in the South Bronx were also limited-equity co-ops, owned by their former tenants; the city, which had repossessed numerous tax-delinquent properties in the recessionary ’70s, had been eager to sell them back to occupants, and it even established the Urban Homesteading Assistance Board to facilitate the self-help process. And only in time did I learn that the mysterious term “Mitchell-Lama” — which you often hear when someone confesses to a miraculously low rent for a spacious apartment in a nifty postwar high-rise — was a state and municipal program launched in 1955 for the construction of middle-income rental and cooperative housing.
So there it was: the cooperative model I had gotten to know in Berlin and Montevideo, at work in New York City, in an equally broad range of shapes and forms.
Zürich: Genossenschaft Kalkbreite
Zürich is, like New York, a prosperous and expensive city, an international banking center with an ample share of the global 1 percent. Yet unlike New York, it has sought successfully to maintain a range of residential options: since the early ’90s, the municipal government has been promoting mixed-income housing — especially large apartments suitable for families with children — in the formerly industrial west side. Cooperatives are particularly popular, and they are being founded by diverse groups — building trades interested in generating work, artists seeking to convert former factories into long-term creative communities, activists intent on keeping neighborhoods diverse. Cooperatively owned non-profits now constitute 22 percent of housing in the Swiss city; and while the majority were built from the 1920s to the 1970s, approximately one-third — about 5,400 apartments — have been constructed just since 2000.The Kalkbreite cooperative, which opened to residents in spring of this year, is a recent and remarkable example. Located in central Zürich, the 1.5-acre parcel in Kreis 4 — bounded on two sides by busy thoroughfares and on another by below-grade train tracks — had been occupied by a tram depot, and had long been considered too noisy for housing. But in 2006 a group of activist citizens and housing experts held a series of public workshops, and together they took a new look at the old site. Soon the Cooperative Kalkbreite was incorporated, and by 2007 the group had submitted a proposal to the city. This time the authorities were convinced; and what persuaded them was the broad and generous vision. As presented by the cooperative board, Kalkbreite would encompass 54,000 square feet of commercial space and 80,000 square feet of residential space. The project would feature 97 apartments and would accommodate 250 residents of diverse income, ethnicity, and age; it would include a new tram depot with a public park on its roof; it would be socially inclusive and environmentally sensitive.
This programmatic mix is an achievement in itself. Within a single building it addresses the kind of demographic diversity and programmatic flexibility that U.S. municipalities have struggled to foster across entire cities — with only fitful success — through initiatives that encourage accessory dwellings, shared housing, or micro-units. 4 And at Kalkbreite the social vision is complemented by a commitment to resource conservation. To this end the cooperative made several key decisions: to optimize the excellent on-site transit connections and forego car parking entirely, instead providing ground-floor storage for several hundred bicycles; to adhere to Switzerland’s rigorous Minergie-P-Eco standards for passive housing construction; and to limit the floor area per resident to 344 square feet, much lower than the 485 square feet now typical in Swiss housing. This last decision allowed Kalkbreite to offer an unusually large number of multi-bedroom apartments — a notably family-friendly approach compared with the current trend toward pod-like micro-units in many high-priced cities.
Demand has been strong. By spring 2014, almost 900 people had paid the refundable membership fee of 1,000 CHF (again, about the same in U.S. dollars) and joined the cooperative — the first step in applying for residence. Res Keller, a member of the development team, described this to me in a phone conversation, with obvious satisfaction, as “an ur-form of crowdsourcing.” 5 When I visited the nearly completed project, earlier this year, the first residents had been selected according to criteria stipulated in the cooperative’s statutes — an ethnic, gender, age, and income mix. A glance at the overview of apartments and prices on the walls of the management office — where I saw, for instance, that a three-bedroom, 1,020-square-foot unit required an equity deposit of 25,000 CHF and monthly payments of 1,854 CHF — made it plain that Kalkbreite is indeed meeting the goal of providing below-market-rate housing. And it is attempting to advance broader ideals of social inclusion: while the majority of apartments are targeted to middle-income occupants, the statues allow 20 percent to be rented to high-income residents and permanently reserve eleven units for low-income households. All are full members of the cooperative. 6
Back to New York … and back to the future?
So what can the United States learn from this project in Switzerland? What can the famously freewheeling American housing market learn from a European project organized around public transportation, dedicated to resource conservation, and unafraid to engineer a mix of residents? What can New York City, the historical center of the American limited-equity co-op movement, but today one of the world capitals of inequality, learn from a city one-twentieth its size?I would argue that the lessons are at once practical and philosophical. The practical lessons are relatively straightforward. City, state, and federal entities need to establish or strengthen the financial and legal frameworks that encourage not just the establishment but also the durability of non-profit cooperatives like Kalkbreite — frameworks that would enable diverse funding sources, encourage programmatic and design innovation, and provide access to land (e.g., by requiring cities to lease rather than sell their properties). The philosophical challenges are clearly more difficult. To reinvigorate the tradition of non-profit cooperative housing will require that we shift our attitudes about the complex relationship of housing to the market. Which is to say we need to rethink longstanding political and cultural biases: that the goal of home ownership is to accumulate wealth, and that cooperative living and public subsidies are somehow “socialistic.” We need once again to embrace what is known in social activist circles as “permanent affordability,” and thus encourage ownership and financing mechanisms in which housing is understood as a bedrock component of stable and diverse communities rather than as a source of speculative profit or the basis for arcane financial innovation. 7
In High Life: Condo Living in the Suburban Century, historian Matthew Lasner provides a fascinating history of multifamily home ownership in the United States, from the rise of cooperatives in the late 19th century to the more recent “condo-mania” that began when condominiums were legalized in the 1960s. Lasner reminds us that co-ownership has long been a vital option of American housing — even in the “suburban century” that saw the idealization of the single-family house. 8 Whether to ensure that decent affordable housing can endure through the cycles of the real estate market, or to allow apartment dwellers to participate in the management of their buildings, many Americans have chosen what Lasner calls this “third way” between renting and owning; as he says, for much of the 20th century it was widely recognized as a useful means to the ends of “affordability, control, and community.” About the origins of the non-profit model, he writes:
For … housing reformers in the 1920s, the coop proved not just a third way between the suburban house and the city rental, and between the “public” apartment and the “private” home, but between the laissez-faire real-estate market and full state ownership of real property. 9By the mid 1970s, non-profit developers had built almost 250,000 limited-equity co-ops in the United States, three-quarters of which were in metropolitan New York, “a solid legacy of well-built, well managed housing,” as Lasner says. 10 Yet despite its impressive record, this housing model has in recent decades all but disappeared from the American housing scene. Recently built examples of “affordable cooperatives,” such as the much-discussed Via Verde project in the South Bronx, effectively function like condominiums in management and resale. And after the crash of the housing market, in 2008, banks have been especially hesitant to lend to cooperatives, given the more complicated mechanisms associated with collective management. Earlier this year New York Mayor Bill de Blasio, who campaigned on the promise to end the “tale of two cities,” announced that he would commit public funds to build more affordable housing — but as The New York Times reported, so far his plans contain “few ideas that would rattle real estate developers.” And to date the non-profit model does not emerge as a significant option in his administration’s plans.
So the question still presses. Given the strong legacy of non-profit cooperatives and the ongoing appeal of the few that have persisted — Lasner calls Penn South one of the “isolated reminders of the great possibilities of the cooperative commonwealth” 11 — why aren’t politically engaged citizens and housing organizers joining together to lobby for renewal of the old model? Why aren’t we all looking to the past, and looking across the ocean, to build a better future for urban housing?
Author's Note
Thanks to Jesse Keenan, Alan Mallach, Andrew Reicher, Tony Schuman, and Bea de la Torre for conversations on the prospects of limited-equity cooperatives in the United States; to Fabian Furter, Anne Kockelkorn, and Kathrin Siebert for a joint reading group that put the issues into a broader framework, internationally and historically; and to Juliette Spertus and Jacob Moore for insightful comments on a draft of this article.
Notes
- For a history of social housing in Germany, see Ulfert Herlyn, Adelheid von Saldern, and Wulf Tessin, eds. Neubausiedlungen der 20er und 60er Jahre. Ein historisch-soziologischer Vergleich (Frankfurt: Campus, 1987). ↩
- FUVCAM’s work with squatter communities was inspired by Brazil’s Landless Workers Movement, the Movimento dos Trabalhadores Sem Terra. ↩
- Seward Park and Penn South, as well as Co-op City, were designed by architect Herman Jessor. For a history of Jessor’s non-profit projects, see Tony Schuman, “Labor And Housing in New York City: Architect Herman Jessor and the Cooperative Housing Movement.” Unpublished paper, New Jersey Institute of Technology, undated. For a broader history of cooperative housing in New York City, see Richard Plunz, A History of Housing in New York City (New York: Columbia University Press, 1990); and for a history of the role of labor unions in housing, see Hilary Botein, “Solid Testimony of Labor’s Present Status:” Unions and Housing in Postwar New York City. (PhD Dissertation. Columbia University, New York, 2005). ↩
- The Kalkbreite employs a density calculation which is based on the number of people, and not (as is typical in Europe and the United States) on the number of dwelling units or gross square feet per acre. This is a smarter and more accurate way to quantify and accommodate the range of lifestyles that might actually develop in a particular building. On efforts to achieve housing diversity in New York City, see Making Room, an initiative organized by the Citizens Housing and Planning Council and the Architectural League with the goal of reforming zoning and building codes to expand the range of housing options. ↩
- For those with additional equity to invest, the cooperative has set up a version of a savings bank (Depositenkasse) for deposits between 5,000 and 100,000 CHF, and offers an annual interest rate of 1 to 1,5 percent, more than currently paid by commercial banks. To help those with short-term financial difficulties, the cooperative has also set up a solidarity fund (Solidaritätsfond), where members can place extra equity to help others. ↩
- In an email, Res Keller notes that some older cooperatives with many housing units have significantly lower equity requirements. Swiss law allows individuals to use their pension savings, at no penalty, to purchase a share in cooperative housing, which helps to make this a viable option for low-income households. Keller also points to the central role played by pension funds in the financing of new cooperative developments; the city of Zurich’s employee pension fund provides the critical funding to bridge private bank loans and the residents’ equity. ↩
- For reflections and historical case studies on the fundamental shift in housing policy from a broadly public to a largely market-based system in the mid-1970s, as well as its impacts on architecture discourse, see Candide: Journal for Architectural Knowledge, 07 (October 2013), co-edited by Anne Kockelkorn and the author. ↩
- For more on the complicated history of American housing, and the mutual interdependencies between policy, finance, and design, see the exhibition “House Housing: An Untimely History of Architecture and Real Estate in Nineteen Episodes,” co-curated by the author and Jacob Moore. This is part of the ongoing research on the topic at Columbia University’s Buell Center for the Study of American Architecture, directed by Reinhold Martin. ↩
- Matthew Gordon Lasner, High Life: Condo Living in the Suburban Century (New Haven: Yale University Press, 2012), 91. ↩
- Lasner, 162. ↩
- Ibid. ↩
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