Saturday, March 26, 2016

In France, a Retirement Co-op Ensures Seniors Are Not Treated as Commodities

In France, a Retirement Co-op Ensures Seniors Are Not Treated as Commodities

"They didn't want to end up in a traditional retirement home. They wanted to remain the actors in their own lives. Seven years after their first discussions about how to age well, a group of retired people is starting to build the first co-op for the aging. Non-speculation, democracy and environmental concern are the foundations of the "Chamarel-Les Barges" project, located in a neighborhood of Vaulx-en-Velin, east of Lyon, France. The project is so inspiring that the bank has even conferred a 50-year loan to the founders, who are in their 60s."

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Housing cooperatives are not popular with the real estate industry, bankers, or title companies. They love condominium ownership because it creates many individual units that can be bought and sold, creating a whole lot of business for everybody involved in real estate transactions.  But most of the people who live in co-ops find them a good living and ownership arrangement. In a co-op, each resident has a proprietary lease that entitles them to exclusive occupancy of their unit, and also a share of stock in the corporation that owns the entire property. In other words, each resident is a tenant, and collectively they are their own landlord. There is only one blanket mortgage on the whole property. And in order to sell a share, the new prospective owner has to be approved by the co-op board.  Usually co-op shares are not viewed primarily as investments, as many condominium units are, so there is more permanence and less selling at the slightest sign of falling real estate prices. There seems to be less conflict in co-ops than in condominiums, and on the whole they survived the crash better than condominiums, or at least that seems to be the predominant opinion.

5 comments:

robert @ colorado hoa . com said...

Evan McKenzie wrote that the real estate industry, bankers, and title companies "love condominium ownership because it creates many individual units that can be bought and sold, creating a whole lot of business for everybody involved in real estate transactions".

This seems like a good place to repeat this:

”Before 1960, the condominium form of ownership was unknown in the United States. Beginning in the early 1960s, the states began enacting statues authorizing the condominium form of ownership, principally in response to the enactment of the National Housing Act of 1961, which extended Federal Housing Administration mortgage insurance to the condominium form of ownership. See McKenzie, supra note 2, at 95. By 1967, all fifty states had enacted condominium statutes. Id. at 95–96.” (Steven Siegel. The Public Role in Establishing Private Residential Communities.” Urban Lawyer. Fall 2006. Footnote 23 on page 869. PDF and TOC)

Deborah Goonan said...

What's interesting about this cooperative arrangement is that it is nothing like an Association Governed Community:
--The people who invest and hope to live in the building call the shots, not a developer, not a property management company
--One Person, One Vote! Not a radical concept!
--Built-in financial planning for reserves, steady maintenance fees, and guaranteed minimum return of initial investment
--No Speculation


The condo/HOA industry will probably hate this concept.

robert @ colorado hoa . com said...

Evan McKenzie wrote that the real estate industry, bankers, and title companies “love condominium ownership because it creates many individual units that can be bought and sold, creating a whole lot of business for everybody involved in real estate transactions”.

Something else you once wrote is worth repeating here:

“The condominium as a form of ownership is so fragile that it can't survive without all this endless ‘clarification’ that is really complication, and constant gimmes and goodies for banks, vulture capitalists, developers, lawyers, managers, and so forth to induce them to somehow keep this institution held more or less together with duct tape and baling wire. When you look through all the verbiage, all these schemes come back to one strategy: more responsibilities and less power and freedom for the unit owners.” (February 18, 2012).

robert @ colorado hoa . com said...

Evan McKenzie wrote "In a co-op, each resident has a proprietary lease that entitles them to exclusive occupancy of their unit, and also a share of stock in the corporation that owns the entire property" (emphasis added).

In a traditional corporation, owners and potential investors can determine the value of their investment by the price of the stock. Granted, there's not a perfect correlation, but it works well enough for most purposes. I'm relatively ignorant about housing cooperatives, but for the sake of argument I'm going to assume that the stock price mechanism works there, too.

In contrast, owners and prospective buyers (the "potential investors") of H.O.A.-burdened property have no practical (and probably no possible) means to determine the value provided by an H.O.A. corporation.

robert @ colorado hoa . com said...

A long time ago, Tyler Berding wrote that

”It seems that I am increasingly a prophet of doom. But really, if owners are unwilling to govern themselves then condominiums are merely apartments, and if they are unwilling to make the contributions that must be made for a community association to survive, then they must be willing to surrender their ownership interests and be renters. This is a housing crisis as serious as the present economic one, and it may be worse, because the crisis in community association government is not likely to end in a year or two” (“Why Won’t They Serve?” via this blog on December 09, 2009. Emphasis added).

Or perhaps we should stop trying to duct tape together a public policy that forces the survival of the so-called “community association” at the expense of the individual owners, and instead try to come up with way to protect the individual owners.


Berding later told Shu Bartholomew that

[41:55] ”Maybe we need to have a whole different concept” … “Instead of the developer building this building and selling the units off to individuals, who the end up owning the entire building and have to maintain it” … “Maybe what we ought to do is have a hybrid between an apartment building and an ownership of the individual units. The individuals own the airspace in their unit, and they pay an assessment. But the developer, an investor, retains ownership of the building shell, and treats it like a residential rental property. The association, which would deal with just behavioral issues and recreational issues and things like that, doesn't deal with the repair of the building and all of those expensive things. The owner of the building does that, and he gets paid a certain amount of money by each owner, call it rent if you want. So you can get the appreciation from being the owner of the unit, but somebody else is going to be responsible for the shell. And that kind of hybrid may very well be where we're going to have to go in the future. We've kind of done it a little bit with time-shares” … “When you have one owner, an investor, owning the shell of the building, and let the individual owners own their individual units, buying and selling them same as they could, you'd shift the responsibility to somebody who has a long-term interest in protecting the condition of the building.” [43:55] (“On the Commons”. October 02, 2010. Emphasis added).

In a traditional trailer park, individuals own their mobile home, but have to pay rent to a single landlord for the land it their trailer sits on. Now imagine pushing those trailers together and stacking them on top of each other, so that the owners are sharing walls and no longer have control over the exteriors of their building. But they’re still paying rent to the single landlord. Who doesn’t want to live like that?

Too bad there is no alternative to Berding’s proposed “hybrid model”. Too bad there aren’t some real-life examples of how multi-resident buildings can be made to work, other than apartments and condominiums. Perhaps residential complexes where “each resident has a proprietary lease that entitles them to exclusive occupancy of their unit, and also a share of stock in the corporation that owns the entire property. In other words, each resident is a tenant, and collectively they are their own landlord. There is only one blanket mortgage on the whole property. And in order to sell a share, the new prospective owner has to be approved by the co-op board”. Nah, that’s crazy talk. If it worked, somebody would have tried it already.