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Housing Cooperatives

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For over 75 years housing cooperatives have been a source of affordable hous- ing. Currently, the 376,000 dwelling units of affordable cooperatives is equivalent to seventeen percent of the rent reduction units owned by publichousing authori- ties. Understanding that affordable cooperatives have been developed under vary- ing historical circumstances provides insights on how they could play a role in the future supply of affordable housing. The history of affordable co-ops starts during the 1920s and after World War II with the ethnic, union, and New York government financed co-ops. Through the 1960s and the early 1970s cooperatives were financed by various federal direct assistance programs. Since the late 1970s co-ops have been sponsored by nonprofit organizations and by federal and mu- nicipal government privatization programs. A workable institutional structure for affordable cooperatives has developed as a result of this historical evolution.

This article develops an economic analysis of the role of limited-equity cooperatives (LECs) in providing affordable housing. Using a model of the user costs of housing that focuses on housing externalities, it examines methods for overcoming externalities in multiunit rental dwellings. Investment in management can reduce these externalities and thereby improve the quality of the housing environment, but the added cost excludes low-income households from housing with a high level of management. LECs can reduce housing externalities without imposing the dollar costs of management on residents. They do this principally by attempting to attract a favorable resident population and by substituting self-management for traditional hierarchical management. Given these findings, the article makes recommendations regarding the structure of a federally sponsored LEC program and draws implications for affordable housing policies in general. Finally, it calls for further empirical research into the desirable (and undesirable) features of self-managed affordable housing.

Limited equity cooperatives (LECs) are evaluated within the following frame- work: 1) the effect of resident participation on operating costs, 2) the disutility of time and effort that members devote to co-op activities, 3) the intangible ben- efits of co-op living, 4) the degree of subsidization, and 5) the financial viability of LECs. As a result of information gathered from interviews of field practition- ers and academic experts, the authors’ personal experiences, and a review of the literature, LECs are seen as an effective way of providing home-ownership oppor- tunities for low-income families the United States.

This article assesses the feasibility of converting public housing developments to limited-equity cooperatives to increase tenants’ control over their living environments. It analyzes the experience of three housing developments converted under the Public Housing Homeownership Demonstration of the U.S. Department of Housing and Urban Development. Obstacles to conversion included the extensive renovations needed before transfer, the prohibition against involuntary relocation of tenants, the work of generating interest in the cooperatives, and the difficulty of financing. Indicators of the cooperatives’ success are mixed. One faces serious financial problems; the other two are financially sound despite substantial amounts of share payments in arrears. One set of cooperators is largely dissatisfied with living in the cooperative; the other two sets are mildly satisfied. Factors inhibiting greater success included inadequate board training, poor commu- nication between board and residents, lack of participation by cooperators, and the need for major repairs soon after purchase.

Home Saving and Loan Association

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Community Land Trust

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The authors have developed this study of the idea of the community land trust because they believe that in our society, if not in much of the world, unsatisfactory institutional answers have been evolved to the questions of allocations, continuity, and exchange. However, there is no claim intended that this one mechanism is a panacea. It is only one idea among many which are needed to restructure our social and economic system in order to produce a world order, not without conflict but without war; not without sorrow but without hopelessness; not without inequality but without inequity.

The First Homes CLT is one tool of an impressive innovative work force housing program in Rochester Minnesota. Incorporated as a 501(c)(3) non-profit corporation in 2001, First Homes was financed by a $4 million grant from the Mayo Clinic Foundation and three annual $1 million matching grants. Beginning with a below market interest gap loan program, First Homes added a community land trust model in 2002. Under the corporate board structure, the interests of the Rochester Area Foundation, the sole member of the First Homes corporation, are predominant commensurate to its financial risk. This board structure skews the balance of the CLT governing body. This paper explores whether First Homes’ deviation from the community land trust model renders First Homes a “hybrid” of the CLT model or something other than a CLT altogether – raising the question of what constitutes a community land trust?

The continued growth of informal settlements constitutes one of the greatest urban development problems affecting African cities. Projects intended to upgrade these settlements have not been highly successful. In Kenya, project beneficiaries receiving land under individual titles sell or lose their land rights. This transfer of property is seen as stimulating informal settlement construction and growth. This paper reviews the use of a community-based land tenure form in an upgrading project in Voi, Kenya. The paper presents the rationale for using community tenure and discusses whether the upgrading approach/tenure form provides a replicable model for informal settlement upgrading.

Projects to secure land rights for the urban poor have been implemented in Sub-Saharan Africa for over 30 years. A recurrent issue in such projects is the provision of sustainable land tenure for beneficiaries. Commonly, individual titles with restrictions on resale have been used. Despite these,recipients often sell their land rights to more affluent city dwellers exacerbating the growth of slums (Habitat Int 11 (1987) 173). Policymakers are investigating alternative tenure forms, including community- based institutions, which they hope will make ownership of land more affordable and sustainable for the urban poor. The paper presents an analysis of an informal settlement upgrading project in Voi, Kenya in which the Community Land Trust (CLT) model was used to provide tenure security (Land Use Policy 14(3) (1997) 215). The paper reviews why the CLT model was entertained as a tenure alternative and evaluates how the model has performed in a 6-year period of operation in meeting various objectives including providing affordable, sustainable land ownership and preventing absenteeism. The implementation experience of a sister project in Kilifi, Kenya that utilized individual leasehold tenure as an ownership form is presented as a counter example to the Voi experience. The paper shows that despite provisions for strong community control, the CLT model has not been able to achieve the above goals. A variety of reasons are given for the model’s poor performance, including the legal complexity of the model, a lack of on-going governmental support for the model and the project, and the divisive issue of land allocation for remaining parcels of land within the settlement. The paper concludes that on-going experimentation with the CLT model is not advisable at this time. Rather, the paper recommends that planners involved in informal settlement upgrading need to understand and recognize informal or customary institutions and try to incorporate them into de jure institutions in order to enhance tenure security and better manage urban land (Reforming urban land policies and institutions in developing countries.

Continous Mortgage Workout

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The mortgage in a Continous Mortgage Workout is tied to the housing price index. Typically transnational families are spread in different areas, so business cycles and macroeconomic shocks cannot affect all household members instantly. The risk pooling in mortgage repayment is efficient here for individual families. It is much more efficient for transnational housing cooperatives or community land trust.


Continuous Workout Mortgage (CWM) balance and payments are indexed using market-observable house price index in an economic environment with prepayments. Our main results include: (a) explicit modelling of repayment and interest-only CWMs; (b) closed form formulas for mortgage payment and mortgage balance of a repayment CWM; (c) a closed form formula for the actuarially fair mortgage rate of an interest-only CWM. For repayment CWMs we extend our analysis to include two negotiable parameters: adjustable "workout proportion" and adjustable "workout threshold." These results are of importance as they not only help in the understanding of the mechanics of CWMs and estimating key contract parameters, but they also provide guidance on how to enhance the resilience of the financial architecture and mitigate systemic risk.

This paper models Continuous Workout Mortgages (CWMs) in an economic environment with refinancings and prepayments. CWMs are home loans whose balance and payments are indexed using a market-observable house price index of the pertaining locality. Our main re- sults include: (a) explicit modelling of repayment and interest-only CWMs; (b) closed form formulæ for mortgage payment and mortgage balance of a repayment CWM; (c) a closed form formula for the actuarially fair mortgage rate of an interest-only CWM. For repayment CWMs we extend our analysis to include two negotiable parameters: adjustable “workout proportion” and adjustable “workout threshold.” These results are of importance as they not only help in the understanding of the mechanics of CWMs and estimating key contract parameters, but they also provide insight on how to enhance the resilience of the financial architecture and mitigate systemic risk.

We model Continuous Workout Mortgages (CWMs) in an economic environment with refinancings and prepayments by employing a market-observable variable such as the house price index. Our main results include: (a) explicit modelling of repayment and interest-only CWMs; (b) closed form formulae for mortgage payment and mortgage balance of a repayment CWM; (c) a closed form formula for the actuarially fair mortgage rate of an interest-only CWM. For repayment CWMs we extend our analysis to include two negotiable parameters: adjustable \"workout proportion\" and adjustable \"workout threshold.\" These results are of importance as they not only help understanding the mechanics of CWMs and estimating key contract parameters. Our results also provide guidance on how to mitigate systemic risk.

Housing Price Index

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