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Never has there been a more appropriate moment'

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Title: Never has there been a more appropriate moment'


1
Never has there been a more appropriate moment.
2
Background Home Ownership on the Southwest U.S.
Coast Today
Many Californians consider themselves Middle
Class, when they are not. This is because they
have neither the income nor the opportunity to
create the means that will provide them with the
tools the American Middle Class has historically
had. That would be namely a home that gains
equity for the owners over time. In essence
creating a self-financed retirement plan, or as a
gift for heirs or a legacy to beneficiaries such
as charities.
3
How it got this way
  • Interesting, when one thinks about it. The same
    homeowners who were dedicated to their home town
    who approved Proposition 13 years ago, to limit
    property taxes so they could afford to stay in
    their homes when they got older and had
    restricted incomes, now find themselves defending
    the values of their existing property as it
    escalates out of the reach of other local young
    families in their own home town.
  • Now, the original families who may want to move,
    find that they cannot sell their homes without
    facing a windfall profit that will have to be
    paid in taxes, unless they re-invest the money
    somewhere else, or put it in a trust (if their
    assets are low enough), in order to pass it on to
    their heirs - and the government loses out again.
  • If they sell, the rich traditions of those
    original inhabitants as well as their profits
    leave the community. At the same time, these
    homeowners don't want their tax dollars being
    allocated to provide "affordable housing" for
    others. That's quite a conundrum. Yet the middle
    class that wants to own a home moves away with
    all their savings, to invest it and their time
    elsewhere.

4
The Primary HUM Mission is
  • To provide a mechanism for the development of
    homes that the Working Middle Class can afford to
    buy and KEEP. This while assisting the creation
    of a stepladder for lower income families to move
    up to homeownership, without simply government
    assistance - in order that lower income families
    can create equity for their futures, and thereby
    move themselves into the Middle Class.

5
CONCEPT and INTENT
  • Build Homes the Working Middle Class can Afford
    to Invest in, which in turn will benefit the
    local community, by fostering a viable local
    economic base. By offering these homes both an
    investment vehicle and a residence for the
    upwardly mobile is created. The goal is not to
    create homes to commute from by building homes
    where homes are needed, in the cities.
  • Who are the Upwardly Mobile? These are the people
    who are "locked out" of the current
    owner-occupant real estate market, who would
    otherwise be striving to reach or maintain their
    status as a member of the Middle Class, through
    the accumulation of equity by their investment in
    the local real estate market. The term
    "affordable housing" usually applies to these
    people, if they are in the lower percentile of
    prospective buyers. In our case however, our
    primary market is the middle percentile, which we
    offer to solve the problem for, at the rate of
    65 in our business plan. 
  • In our estimation, they are also youth that have
    been remanded to group homes or foster home care,
    in the supervision of adults who are not their
    natural parents. These youth, given the
    opportunity will become upstanding citizens and
    residents of our county. Our plan accommodates
    their needs as well, by reserving one home in
    each development as a foster home, since there is
    a dearth of foster homes for tens of thousands of
    California's youth. This is because there are not
    enough group or foster homes for California's
    children.

6
What is the need?
  • In the last number of years, the cost of housing
    has been rising by great percentages annually,
    out of the reach of the majority of those who
    would like to buy a home.
  • During this period, one of the only ways the
    Middle Class has been able to own a home prior to
    our option today is by the government getting
    involved in helping buyers enter the process of
    purchasing.
  • Non-profit organizations are also formed to
    assist Middle Class buyers in leveraging their
    assets, income and credit.
  • This has allowed homeowners to indebt themselves
    for property that is over-valued, just so buyers
    can get a foothold in the region. We have seen
    what happens when that builds to a unsupportable
    level and what it does to the overall economy, as
    it crashes when homeowners interest rates rise to
    levels they can't pay.

7
The Result
  • In the meantime, what we have left is a beautiful
    shell to honour the memory of our traditions,
    where low-paid youngsters primarily run the
    retail shops unschooled in the mechanics of
    economics and business practice that enhances
    economic development for the community. Owners
    that usually live elsewhere, some of who rarely
    visit their own stores, manage that staff. Again,
    a disconnected population, not invested in ideas
    and efforts to revitalize the community, but
    still caught up in an emphasis of "keeping things
    the way they are".
  • The government seems to be happy to see homes
    turnover for higher prices, even if they are for
    sale to those from out of town, since it allows
    for the only available increase in property
    taxes, so that the cost of running the county and
    cities is covered. Yet, we see recently that the
    government cannot run the business of the people
    without going into further debt, because the
    system doesn't work well enough since the homes
    are not turning over fast enough and retail sales
    taxes are not what they could be since the
    tourist industry is seasonal.

8
Success of Plans
  • What creates the primary basis of funding for
    privately subsidizing 90 our mixed-income
    development is a willingness of Upper Income home
    buyers to move into our developments, either
    where we have other income levels on the same
    property, or separated. (Some homes will be built
    off-site at other locations). These sales will
    generate the income, which will be used to do the
    other levels of development.
  • Our success will also come from our co-operative
    members' joint interest in making a success of
    the projects. We have spoken with a consultant
    that specializes in developing budgets for start
    up co-ops. We would also be developing a plan to
    educate buyers on the purpose of co-ops and what
    makes them work well. We are researching various
    successful co-ops now.
  • Finally, the location of the property, its
    landscaping and overall ambience and fit to the
    historical ambience of any neighborhood will
    assure the accomplishment of the above. (Ideally
    enhancing or restoring any original natural
    ecological system on the land purchased).

9
Funding Sales, Management Ops
  • Self-funding sales, management ops, after
    initial sales occur, by
  • Construction oversight will be done by
    Competitively Priced Residences, first on a
    for-profit basis to upper and middle-income
    buyers then afterward, the moderate and
    low/low-low income buyers will receive a subsidy
    from the profit earlier generated and HRU will
    develop those homes.
  • Land will be purchased or received in donation,
    and owned by a Community Land Trust
  • Overall planning development will be managed by
    Homes for the Rest of Us
  • Building will be 90 "affordable", with 10 being
    sold at Market rate to generate income
  • 80 of which will be reserved for the Middle
    Working 20 for the lower income classes
  • Homes sold to Lower Income earners will be sold
    through subsidies, by re-investing the profits
    from sales of slightly below market rate
    moderately priced homes.
  • Initial Sales will occur to those who become
    members of the (PHA), on a first-come,
    first-served basis.
  • Memberships in the Co-operatives will be allowed
    for all who become participants in the Buyers'
    Club, called Homes for the Upwardly Mobile.
  • At some point down the road, we may even "hold
    our own" mortgage paper, and generate income for
    the organization based on the interest we charge
    for the mortgages for the upper income homes.
  • Private equity investment would most likely be
    done by community stakeholders.
  • This could occur by sweat equity development or
    qualified social investors
  • Housing foreclosures will be purchased to build
    our chain of assets.

10
Making Change Happen
  • Just like people in the Midwest Tornado Country,
    who for many years prefer to build wooden houses
    that blow down when a big storm comes through,
    the people from LA got to a point where, due to
    cost, they preferred to build their houses
    outside of the city and commute for hours per day
    back and forth from home and work. Instead of
    finding a way to level the playing field, it was
    easier not to make the effort and do it the way
    its always been done.
  • Of course moving to the countryside has always
    had its incentives and good points. The problem
    is that the commute never goes away and the city
    folk end up carrying their problems with them.
  • What is that driving force within the mind of
    humankind that causes people to go with the
    flow or not try to find a solution to a problem,
    even when the solution is as obvious as
    neighborhood revitalization and re-creation?
  • I believe that the drive to maintain the status
    quo, or the same old thing, is as strong in our
    genes as any of our deeply-seated fears. It is
    fears like these that allow us to easily quit or
    to not even try to form a more perfect union.
    We are so afraid that the result of our efforts
    will not turn out to be better than what we have,
    that were not even willing to try. So, we go
    along to get along, letting others make
    decisions for us that affect our most basic
    needs.

11
Are there solutions?
  • Seems one of the obvious solutions, is to build
    and maintain homes that are affordable, where
    there is a larger base of property taxes, which
    could be generated to run the government. So, is
    it possible?
  • This project to create attainable/obtainable
    housing for the Working Middle Class is offering
    buyers a chance to participate in "fair equity",
    to reduce the price of their purchase. What is
    fair equity? It is similar to "sweat equity",
    which usually means to participate in building or
    remodeling your own home, for a reduction in
    sales price. In our case, it requires very
    specific actions on the part of the buyers,
    according to our plans.
  • Co-operative housing development and co-housing
    ownership are the two key organizing forces
    behind the concept. There is a huge opportunity
    for this concept nationwide, because around only
    1 of the manufactured home developments are in
    co-operative ownership.
  • Our effort is to focus locally in and near
    downtown Los Angeles initially and then
    throughout LA County where the need for higher
    density housing is so people don't have to drive
    too far to get to work. This is why we're also
    focused on mixed use development, which is a
    combination of residential commercial building.

12
Secondary Mission of HUM
  • To improve and enhance the local economy,
    neighborhoods, and quality of life, initially in
    Los Angeles County, by reducing the cost of
    living, commuting to work and improving local
    business and to improve and enhance the native
    natural habitat and environment, while providing
    the opportunity for the Upwardly Mobile to
    maintain homes for themselves.

13
Background Cooperative Housing
  • Cooperative Housing is an apartment building or a
    group of dwellings owned by a corporation, the
    stockholders of which are the residents of the
    dwellings.
  • It is operated for their benefit by their elected
    board of directors.
  • In a cooperative, the corporation or association
    owns title to the real estate. (An exception is
    when the land is owned by a Community Land
    Trust).
  • A resident purchases stock in the corporation
    that entitles him to occupy a unit in the
    building or property owned by the cooperative.
  • While the resident does not own his unit, he has
    an absolute right to occupy his unit for as long
    as he owns the stock.

14
Low-income First-time Buyers
  • Cooperative home ownership is particularly
    accessible to low-income or first-time buyers
    because it often eliminates the need for an
    individual to qualify for a mortgage.
  • Historically, mortgage qualification has been
    problematic for low-income homebuyers who are
    more likely to have a limited or incomplete
    credit history. Cooperative homeownership can
    eliminate this problem.
  • A co-op is most often financed through a blanket
    mortgage, for which the cooperative corporation
    is liable. Consequently, no single resident is
    liable, and individual residents do not need to
    qualify for outside financing. It is the combined
    value of the shares that creates the asset which
    qualifies for financing.

15
Where are Todays Co-ops?
  • Today, there are more than a million units of
    cooperative housing in the United States.
  • Almost 80 percent are located in New York with
    others scattered around the country, primarily in
    metropolitan areas.

16
Cooperative Homeownership
Homes for the Upwardly Mobile
Prospective Homeowners Association is all three
of the following types of organizations
The goals of the organization are
accomplished through Social Entrepreneurism
Public Interest Advocacy
Social Entrepreneurism is a combined effort
of private businesses non-profits towards a
common goal
17
Why do this?
  • Why are We Doing This? ("if it's broke, fix it")
  • Because NO other developer is found that has
    given their business a mandate, no non-profit can
    justify it as their mission, no government agency
    or elected body will take this on directly to
    this degree as their purview.
  • Everyone, except for a few exceptions just wants
    to leave the sleeping dog lie. That is too much
    of a challenge for social entrepreneurs to leave
    alone.  
  • Therefore, we're doing it to solve this
    region's major problems for businesses,
    individuals and families. (Housing Commuting).
  • Our goal is not to do many unique things, but to
    orient many common things in a unique way. 

18
What we are not doing
  • We are not seeking to help members create a down
    payment for their home purchase as some housing
    purchase facilitation organizations, but to
    create new homes that are less expensive to
    purchase, based upon the individual member's
    income level, lowering the cost of the purchase
    and therefore the down payment, without
    government grants or assistance from private
    foundations.
  • To get there from here, we've developed a buyers'
    club to develop membership income which will be
    used to finance the pre-operations start up of
    the co-operative, and assist in paying for the
    work of planners, designers, advisors and
    architects.
  • Other ways that we plan to eventually develop
    properties to help first time buyers include some
    unique concepts for getting people from where
    they are as renters, to homeownership (See
    presentation page for our concepts on
    lease-to-own).

19
Both Original Ideas Common Practices
  • These ideas are made from unique, as well as
    usual methods of creating personal wealth from
    home ownership.
  • Concepts for development are similar to all of
    the common concepts of building.
  • The plans are designed to take advantage of the
    building codes and regulations regarding housing
    in California.
  • But the most complicated part is how it took the
    creation of multiple separate and independent
    corporate entities to complete the total plan.
  • Each of these organizations have very specific
    and individual purposes and goals.  

20
Difference it makes
  • One way of establishing affordable housing in the
    local area is not necessarily better than another
    way.
  • However, in our way of thinking, it is important
    that the proper balance is created between the
    classes and maintained in an area of limited
    supply and limited resource.
  • Therefore, it is important that there is as much
    housing built for the Middle and Lower Classes
    that is built for the Upper Class. It is the
    results however that in the end count.
  • Does each plan create a balance? Do the plans
    when taken as a whole create an overall balance?
    How does the overall balance affect the equity in
    the Quality of Life in this local area?
  • We don't want to reduce the effect of squeezing
    out the Working Middle Class, we want to reverse
    it.

21
The benefit that results from each affordable
housing plan in this area?
  • Every plan save one benefits the Lower Class, and
    the only plan that benefits the Middle Class
    benefits primarily the Developer Class, while the
    Middle Class pays the same price for the homes as
    the Upper Class does.
  • In that plan, the benefit that accrues to the
    Middle Class happens only because there is a
    subsidy for the down payment, but the Middle
    Class can only qualify for the purchase if their
    income can cover the cost of the monthly payment
    thereafter.
  • On the other hand, our plan benefits primarily
    the Working Middle Class, while benefiting the
    Lower Class as a by-product, and the Upper Class
    only as a means to an end.
  • While the best that other plans can offer only
    reserve the natural habitat, while benefiting the
    Upper Class and ignoring the other classes to any
    degree of equity, our plan integrates the natural
    environment and thereby enhances the local
    species of flora and fauna.

22
Ready to Spring into Action
  • This is a business plan, which is ready to spring
    into action.
  • Where the plan refers to organizations,
    companies, members, working committees and boards
    of directors, know that it is only in the
    formation stage.
  • The plan was begun in 2003, but the names of the
    organization have not yet been registered with
    any County, nor have any of the individual
    entities, which make up the organizations, been
    legally incorporated in California or any other
    state.
  • Therefore none of these organizations have
    requested nor received any designations from HUD
    (Such as CHDO) or the IRS, such as 501(c)(3) or
    subchapter 905.
  • So, when any of these entities or issues are
    referred to in this plan, they are only mentioned
    in terms of a future tense, or potential
    relationship or status.
  • We have not yet reviewed these plans details with
    legal or financial professionals.
  • We have however created these plans by
    interviewing professionals in the housing and
    construction industries, including architects,
    builders, association leaders others.
  • We have compiled this plan by researching and
    distilling the information they have shared with
    us.
  • This is an honest and forthright attempt to
    consider all of the needs of the people in
    California Coastal Communities for housing.
  • It is a plan that causes people to work together
    for the common good.

23
To Whom this Matters Most
  • What would it take to pull this idea out of a
    working plan and make it a reality?
  • It would take at least the self-interest and time
    of the Stakeholders and the experts in housing
    development finance to build the financial models
    while looking at the minute details of the idea.
  • It would take many dedicated individuals joining
    the working committees or board of directors to
    foster these developments.

24
Who are the Owners of HUM? Homes for the
Upwardly Mobile
  • This is a community-based non-profit organization
  • As such it is owned and directed by the
    Community Stakeholders
  • This includes those buying shares in the co-ops,
    which are not themselves non-profits, and are
    also owned by other shareholders, such as social
    investors who are concerned about the health and
    well-being of the community.

25
Who are the Stakeholders?
  • Stakeholders in the effort to build homes that
    the Working Middle Class can afford
  • We could have preferred buyers, and may develop a
    "point system" to qualify buyers at some point,
    based on
  • their contribution to the local community and
    this effort, as well as
  • the communities' need for them as homeowners in
    the community, (such as emergency workers)
  • for now we will work to provide homes to the
    members of Prospective Homeowners Association, on
    a first-come, first-served basis.
  • However, when a prospective home buyer's employer
    purchases a corporate membership,
  • any employees working for that employer will get
    bumped to the front of the list,
  • right behind other employees whose employer also
    purchased a corporate membership before them.

26
Stakeholder Benefits (1 of 3)?
  • Home Buyer A home they can live in, save money
    for the future, gain equity and increased values,
    a willable piece of property for their heirs.
  • Land Donor A donor would receive a tax write-off
    for the land donation, or receive a life
    insurance policy equal to the value of the land
    donation. (check with your tax specialist) This
    policy could be used to benefit your heirs, or if
    you got a certain kind of policy, it could be
    used as "living insurance" where if you ended up
    with a critical illness, your policy could pay
    you cash to live through that illness.
  • Existing Home or Land Owner Seller A chance to
    sell their older home, which may exist today on a
    larger piece of property, and use the proceeds to
    buy back into a new unit on the same piece of
    property. They could live in a newer condominium,
    townhouse, or 2-story home, where they feel
    comfortable living! We also reward landowners for
    working with us, if they would like to make their
    properties available to our builders. Landowners
    may share in the profits of the sale (difference
    between cost of building and selling price) of
    the homes, once they are built and sold, on top
    of the profit of the sale of the land itself!
  • Existing homeowners - You have an opportunity to
    borrow against the great equity in your home
    (short term loan, or use your home to assist us
    in securing start-up funding), and invest it in
    one or more of our projects. Instead of letting
    your home sit while land values escalate or
    selling it off so you can buy another home in
    Arizona, why not invest in your home town and
    help other young families as well as yourself?
    (This is not an offer for an investment - we're
    still in planning stage)

27
Stakeholder Benefits (2 of 3)?
  • Builder-Developer or General Contractor A chance
    for certain trades to work on developing an
    additional project that wouldn't have come about
    any other way. Our organization has created a
    financial reward for builders in return for
    making homes accessible to first-time buyers.
    These rewards include sharing the future equity
    of the property, sometimes over the life of the
    home, if the builders work with us to lower the
    cost of building. This helps lower the purchase
    price for first time home buyers. 
  • Project Manager An opportunity to create a
    project that defines the Project Manager's
    community-oriented spirit and investment in time,
    to create a whole new lifestyle and benefit for
    the local community. 
  • Home Manufacturer A chance to sell products to a
    large group of buyers it Wouldn't have had any
    other way, so they buy into the American Dream.
  •  
  • Home Buyer's Employer An opportunity to keep
    good employees in the local community, who might
    otherwise leave to where they could afford to
    purchase a home. When a prospective homebuyer's
    employer purchases a membership from HUM, it
    allows that member to go to the front of the list
    (behind other members who are so prioritized by
    their employers' contributions).
  • Home Buyer Community An opportunity to have a
    large and economically diverse group of
    individuals and families invested in the future
    of the community, buying additional products for
    a larger home than they may have lived in before.
    These same buyers would keep their earnings
    invested locally. They would not be those who
    purchase the home for a secondary domicile. They
    would purchase all the things a Middle Class
    person purchases. (Ask yourself this "Has the
    Santa Barbara economy improved in the last 5
    years, and the County received more tax dollars
    from product sales from all of the buyers of
    high-priced homes now in the area"?)

28
Dear Construction Industry Employers
June 2, 2008  Dear Construction Industry
Employer  If like many workers, your
employees and you yourself are tired of commuting
from somewhere with reasonable rent or affordable
home purchase prices - don't you and they both
want relief? "How long are your employees willing
to wait to own a home of their own"? I'm writing
to ask you to help your employees purchase their
first home.  You may already know
that no one who earns their living working in
Santa Barbara can afford to buy a home. Now, only
2 of buyers in Los Angeles County can afford to
buy a home if they work for a living. Few can
afford the other developers' homes because like
any business, the developers want to sell their
homes at market rates. Why are no housing
developers offering this opportunity? Because in
a market economy, every company is charged with
making as much profit as possible. When existing
owners or new property developers can sell for
market price, why would they sell for less -
what's in it for them? But then why should a
contractor build less homes, because of the lack
of creative developers to work with? If homes can
be built homes for the 98 who are left out of
the loop currently for home purchasing
opportunities, what kind of return would that
provide your company and your employees? 
As members of Prospective Homeowners
Association, a not-for-profit start-up,
contractors can work with their employees to make
non-government sponsored affordable housing
happen, at a price that is affordable! How is
that possible? View the websites and see the
simple equation. The formula created by
Prospective Homeowners Association allows for a
kind of "sweat equity", and other features that
reduce the cost to the buyer and the time to
market. This is not just about affordable
housing for low-income persons. This is truly
attainable housing for the Working Class. These
are true "trickle down" economics due in part to
private subsidizations from the profits of
residential property development sales to upper
income buyers, along with multiple other
established techniques.  If like me,
you would like to make a difference, for yourself
and your business associates, please consider
joining with the Prospective Homeowners
Association. Help produce the results needed in
Southern California for working families earn
income for your company, and help your employees
get their own new homes. You can help by either
becoming a member, or directly sponsor this
effort and donate to assist with predevelopment
funding, or work with us in development of
building and remodeling opportunities we
identify.  Visit www.CooperativeHomeow
ners.com and view the Microsoft PowerPoint or
Adobe PDF presentation, and www.ProspectiveHomeow
ners.com to read our complete business plan. Then
for a discussion of the benefits your
organization can experience, please contact me
for an in-person conference. I am looking for
sponsors with an enlightened self-interest.
Perhaps we can work together. 
Sincerely, Gary R. Cook, Founder Development
Sponsor
29
Stakeholder Benefits (3 of 3)?
  • Community Supporter A Community Supporter is one
    who believes in the possibilities our mission and
    is willing to work towards seeing the dream come
    to fruition. That person may derive satisfaction
    from offering a great level support that costs
    very little, depending upon their personal age
    and health condition. We are able to offer that
    supporter the opportunity to provide support to
    our ventures in the form of a life insurance
    policy, with our organization listed as the
    beneficiary. Our organization may receive the
    proceeds upon their passing, and if there comes a
    point in their life where they can't afford the
    cost of the premium, they let us know and we'll
    ask another supporter to replace the expense.
  • Mortgage Lender A whole new large group of
    customers they would have never had any other
    way. In Nov. 2007, the market is in the doldrums,
    and this offers an opportunity to finance
    existing and new housing stock, as well as build
    additional by giving classes of families the
    opportunity to buy into the American Dream
    through the utilization of the Co-operative
    Corporation, and other building techniques that
    lower the cost of construction and acquisition of
    land.
  • Project Financier An opportunity to start a
    project that fulfils a worthy community goal, and
    to profit by the good return on a short term
    investment.

30
Natural Environment
  • How can housing benefit the naturally preserved
    environment, and enhance it without changing its
    character?
  • By fostering a natural environment that is
    different than other built developments, through
    enhancing it with native plants and wildlife and
    natural energy resources (See National Renewable
    Energy Laboratory).
  • We seek to work with local environmental groups
    to create a landscape for all of our developments
    that foster the lifestyles of the wild animals,
    birds, and insects that are natural to this local
    area.
  • We want to have the least amount of "footprint"
    on the land we use and will only permit
    landscaping that both requires low-water-usage
    and is a natural enhancement (restoration
    ecology) even if this means designing the home
    to be vertical or putting much of the square
    footage of each home underground to increase
    insulating qualities, storing the sun's energy
    and recycling and enhancement of gray water for
    plantings.
  • We also want to utilize the sun, wind and rain as
    a component in our developments, so that the
    requirement for electricity may be provided as
    much as possible by processing that can occur and
    be stored on site.
  • As far as telephone lines and other cables for
    television in outlying areas, we will utilize
    satellite and cell phones. Any windmill activity
    will be designed in such a way so as not to have
    an impact on bird flight patterns and destruction
    of populations.

31
Entities Separately Created in the Process
  • The purpose of Prospective Homeowners
    Association, as a Mutual Benefit Society or
    Builders Society, is to act on behalf of members
    as a Home Buyers Club or Union as well as a
    public special interest group
  • (This is the non-profit corporate entity which
    incorporates other entities below) It becomes the
    Community Association for later Co-operative
    Developments.
  • Non-profit (Homes for the Rest of Us, Inc.),
    Property Development Company
  • Its responsibility is to build out properties
    for low-low, low and moderate income buyers (See
    Other non-profit housing cos.) as such it owns
    a for-profit below it.
  • For-profit Wholly-owned subsidiary Competitively
    Priced Residences, Inc. (CPR) Builds out
    properties for middle, upper-middle and upper
    income buyers)?
  • 2. Housing Co-ops (Non-profits) incorporated
    One a LEC, other a MEC
  • Limited Equity Co-op (LEC) (Owns and manages
    properties for low-low, low and moderate income
    buyers)
  • Market Equity Co-op (MEC)
  • (Owns and manages properties for middle,
    upper-middle and upper income buyers)?
  • Community Land Trust (Independent non-profit
    corporation) is formed, and Limited Equity
    Co-ops land is transferred to it, so it remains
    affordable by leasing the land itself back to the
    co-operative for 99 years.

32
Other non-profit Housing cos.
  • We have considered incorporating as a public
    charity under another non-profit, as a
    subordinate (IRS) Sec. 905 organization to an
    existing 501(c)(3) based in California.
  • The purpose of doing this would be to get our
    status rolling quicker as a non-profit, for the
    purpose of receiving donations.
  • We have been unable so far to incorporate this
    way, for the fact that Housing Non-profits
    typically have a mission of helping only low-low
    to lower income buyers, and they cannot mix their
    mission with our mission of additionally helping
    moderate and middle income buyers.

33
Flowchart of Organizations
34
Difference between Prospective Homeowners, a
Public Interest Advocacy Mutual Benefit
Association Home Buyers Club
  • Homes for the Upwardly Mobile (HUM) buyers club
    members are not owners yet, but aspire to be.
  • To make that happen, HUM contracts with
    Development Sponsor and other consultants and
    home buyers skilled in development processes and
    functions to lay the groundwork for the further
    development of construction goals.
  • There is a cost to hiring consultants to perform
    objective analyses and create plans, therefore
    the necessity to charge memberships.
  • This is the staging organization, which is the
    entryway for new members to join the process and
    lend a hand and give funds to sponsor its
    success.
  • Prospective Homeowners Association (PHA) members
    are in the process of buying and building upon
    the land.
  • This organization formalizes the relationships
    with affiliates, builders and suppliers.
  • Once someone becomes a member of the association,
    the members fees for participation are different
    than the rates they've been paying, for different
    services than HUM.
  • The above two organizations are quantitatively
    and qualitatively different from the other two
    organizations just below here, which are property
    development companies none of the
    previously-mentioned organizations, until the
    final stages of physical property development,
    have anything to do with a co-operative
  • Homes for the Rest of Us (HRU)
  • This organization (non-profit) owns CPR and
    through it, as the developer, it builds concepts
    for the creation of homes and communities. It may
    also receive donations, and give receipts which
    may be used for tax write-offs.
  • Competitively Priced Residences (CPR)
  • This organization (for-profit) is a wholly-owned
    subsidiary of HRU and it negotiates and creates
    contracts with general contractors and
    home-landowner development partners to improve
    land and build homes and structures for living.
  • This entity may also take investment dollars by
    selling shares or may co-operate with other
    developers.
  • L.E.C or M.E.C. (These two designations - as
    defined on other pages herein - have to do with
    the establishment of a co-operative, of which
    none of the organizations listed on this page
    either are or will be, until the final stage of
    any particular property's development whereupon
    one or more of the properties and its residents
    will form one each of these legal co-operatives
    and manage to own and manage particular
    properties by virtue of their being corporate
    shareholders, the land of which the homes reside
    upon will be owned by a Community Land Trust and
    leased back to that housing co-operative. 
  • Therefore, the Process Creates Maintains 6
    Corporate Entities (including the Community Land
    Trust)?

35
2 Different Levels of Co-ops
  • Benefits of Housing Co-ops Types
  • Market Equity Co-ops
  • In a market equity co-op, units are bought and
    sold at market value, similar to family homes and
    condominiums. In practice, a market rate co-op is
    operated in a manner similar to a condominium.
  • Limited Equity Co-ops
  • One of the unique aspects of a cooperative
    corporation is that the co-op can adopt bylaw
    provisions that limit the maximum resale prices
    of co-op units. Typically, this strategy is
    employed in order to maintain long-term co-op
    housing affordability and retain the value of any
    public subsidy that may have been used in
    financing the creation of the co-op. Since this
    type of co-op limits each units equity
    appreciation, it is called a limited equity
    co-op. Because of their potential for offering
    long-term affordable housing, limited equity
    co-ops are attractive recipients for government
    and non-profit grants and loans.

36
Examples of limited equity formulas are listed
below (1)?
  • Zero or no equityThe members initial equity to
    buy in to the co-op does not appreciate and is
    simply returned on departure, less any debt owed
    to the co-op.
  • Constant dollarThe value of a members share
    increases only by a standard inflation index,
    such as the consumer price index.
  • Limited percentageThe maximum resale price is
    allowed to increase by a certain percentage per
    year to reflect some degree of market
    appreciation.
  • Limited resaleMaximum resale price is increased
    by a set amount per year, typically based upon
    the underlying mortgage. For example, under a
    30-year mortgage, members might be credited with
    an annual increase in equity equal to 1/30th of
    the value (cost to develop) their unit.

37
Examples of limited equity formulas are listed
below (2)
  • Shared equityA non-profit or other such
    organization may own a unit in partnership with a
    resident, allowing the resident to reside in a
    more costly unit than would otherwise be
    possible. When the unit is sold, profit is split
    equitably between the resident and the non-profit
    partner.
  • Credit for amortization without
    appreciationMembers equity accounts are
    credited with their initial down payment, plus a
    proportionate share of the principle on the
    blanket debt that has been paid down by the
    members monthly payments.
  • HybridIn one housing co-op developed by NCDF,
    bylaws were written so that a members equity
    appreciation was structured in two stages. For
    the first five years, equity growth was limited,
    equaling the sum of one percent (1) per year
    inflation allowance and the members contributed
    share of mortgage principal payments. On the
    first day of the sixth year of residence, the
    member will be allowed to sell his/her share at
    market value. This formula was designed to
    encourage and reward long-term ownership of
    units.

38
What is a Community Land Trust?
  • A community land trust is a private non-profit
    corporation created to acquire and hold land for
    the benefit of a community and provide secure
    affordable access to land and housing for
    community residents. In particular, CLTs attempt
    to meet the needs of residents least served by
    the prevailing market. Community land trusts help
    communities to
  • Gain control over local land use and reduce
    absentee ownership
  • Provide affordable housing for lower income
    residents in the community
  • Promote resident ownership and control of housing
  • Keep housing affordable for future residents
  • Capture the value of public investment for
    long-term community benefit
  • Build a strong base for community action
  • (see our website for more data on Community Land
    Trusts)?

39
Making development different
  • We would not build as so to drive down the value
    of existing properties, but might stabilize them,
    by 1) building a new tier of property values, by
    setting prices that do not escalate with the
    local market through deed, sales contract and
    membership in the co-operative, and 2) By
    building slightly below market rate homes that
    escalate or de-escalate with the market over
    time.
  • Create a village atmosphere, where people are not
    locked away from one another, but they are
    enticed to participate in the common space
    provided by the developed environment. 
  • Even when people are in their homes, develop each
    so that part of the inside and the outside share
    commonality.
  • Create mixed-use (commercial residential)
    space, in order that people do not have to
    commute to go to work, but can walk to work
    downstairs. 
  • Develop Telecommuting (TeleWork) Centers  for the
    outlying areas, or even for inner city areas, so
    people do not have to commute physically to work.
  • In the effort to create housing for outlying
    "village" areas, foster development of industry,
    in a way that provides opportunities for people
    to have good jobs, in order that the town is not
    dependent upon low skill/wage support positions
    for health and tourism, and
  • Develop an incubator for entrepreneurs who live
    in the housing development, providing space,
    supportive services, financial and marketing
    assistance for micro-to-small business owners.

40
Initial Questions Answers
  • Why are you here today?
  • What Stakeholder category do you fit into?

41
Actions Meeting Outcomes
42
Break Time
  • This is a moment to take a 10 minute break, to
    get to know the people who are here today in the
    room with you.
  • When we re-join the meeting, well start at the
    previous screen.
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