4 ms·

This article is really low on actual facts about how these co-ops can actually operate. I feel like the problem in the US isn't necessarily that the government

by awongh 1y ago

This article is really low on actual facts about how these co-ops can actually operate. I feel like the problem in the US isn't necessarily that the government won't directly pay for these kinds of things like they do in Switzerland, but that it's very very hard to finance a co-op, possibly illegal (that is, you wouldn't have the same legal protections a condo does). I would be curious to see the finances of the buildings they mention in the article. Assuming that you could arrange the two major financial aspects: 1) financing at a level of a normal home loan 2) cut out the real estate developer profit margin, I wonder if a co-op model would become viable in the US. Edit to add: Intuitively it seems like the math could work out, if you figure that a co-op takes the appreciation of the real estate out of the picture for the people living there, and that being able to rebalance that lost value towards the initial cost or towards future costs would be a trade-off normal people would be willing to make. In that sense a co-op is more like an alternative to renting rather than an alternative to home ownership.

yupitsme123 1y ago
I think San Francisco has something like this with their Below Market Rate (BMR) housing program. You have to be below a certain income to be considered, and basically you get to pay a fixed monthly rate to "own" a place that can only be sold for a fixed amount. It always just sounded like rent to me. I think that NYC's co-ops (TICs in San Francisco) provided an interesting alternative model. They usually require owner-occupancy, can't be rented easily, and are difficult to finance. These restrictions eliminate investors and speculators, and shields the the units from the inflation that happens from fed intervention and super low rates. The result is that they're usually priced a lot lower and appreciate more slowly than they would be if they were condos.
- awongh 1y ago
  TICs are a scam though. They are just condos with less legal protections for the relationships between the tenants. They don't solve any of the cost of ownership issues or deal with the idea of appreciation of the value of the real estate. afaik it's actually much worse because you're combining the appreciation of the asset, but you can't sell as easily as with a condo.
  - yupitsme123 1y ago
    Sounds like you want a super liquid asset that's not actually an asset because it doesn't appreciate, and also it needs to be really easy to buy, cheaply. That's unlikely to happen and what we have right now is probably as close as one can get to that. I wasn't saying that coops or TICs are ideal, just that they show what happens when you remove the speculative and investment aspect as well as the subsidy of below-market interest rates and mortgages that any idiot can qualify for. The result is prices which are lower by 10-20%. People seem to want an engineered, top-down, state provided solution that makes homeownership more affordable. But we've already tried many of those solutions and they just inflate prices and encourage speculation and securitization. A better approach might be to end the various implicit and explicit subsidies on mortgages and homeownership, keep speculators, investors, and big developers out of the market, and focus on owner occupied dwellings. I think this would disinflate the housing market and allow it to get back to where it should be.
    - awongh 1y ago
      > end the various implicit and explicit subsidies on mortgages and homeownership, keep speculators, investors, and big developers out of the market, and focus on owner occupied dwellings Yes, totally agree. I think my impression of TIC is that it's a legal loophole because condo-izing buildings isn't politically tenable, but offering a worse option is. A TIC owner still owns an asset but now it's just devalued because it's harder to sell. My original thought was that a true co-op without the pressure of the owners accumulating pent-up capital in their home would be a healthier situation. Maybe that lost value can basically be recouped to make the overall cost of ownership lower. Maybe a different co-op legal structure makes it easier to pay a true market rate to live in an owner occupied dwelling, for a slightly different definition of "owner" (someone who doesn't plan to profit off the appreciation of their home, but still "owns" a place to live).
pcrh 1y ago
Note that most people rent, even in the US. They either rent the property itself, or they rent the capital used to buy the property (i.e. a mortgage). With that in mind, housing associations or co-ops and the like take the place of banks, that is, they possess the capital and rent the property to the residents, but keep a portion of the revenue for future renting, as a bank does for future lending. The difference between the two is that the housing association is typically not-for-profit, and that in a housing association the resident does not accumulate capital, which allows for a reduction in costs compared to a mortgage.
- manwe150 1y ago
  I don’t have any numbers to counter whether it is typical of “most”, but when trying to buy, I was outbid several times by people who paid “in cash”, and that was for million+ dollar homes. So it might be they do “rent” the capital, but possibly from a source other than a bank (eg from their forgone returns on stocks instead)
  - pcrh 1y ago
    Sure, some people do have "cash" to buy a property. However, the vast majority of home buyers do not, and many who offer "cash" may have pre-approved loans.
    - manwe150 1y ago
      Google search say that the “true” cash purchases represent 20-30% of all purchases. Add to that the people that eventually own after a mortgage ends and it still may not be the most common, but it is not the small minority either.
      - pcrh 1y ago
        People who haven't inherited wealth can slowly accumulate capital in their properties, especially if prices are rising. They can use this to part-finance further property purchases. This is the model most Anglophone countries adopt. However, what most miss in this model is that the cost of doing so is much greater than they realize. The most obvious extra cost is the interest paid on mortgages, which can amount to 2-3 times the value of the property by the time the mortgage is fully paid. A further cost is politically imposed, in that governmental policies will avoid making homes more affordable, as this is perceived as a "loss" by many mortgage-holders and home owners.
marcinzm 1y ago
There’s a number of these types of co-ops in NYC although these are due to government legislation and I do not know if there are any less than decades old.

by awongh 1y ago

yupitsme123 1y ago

I think San Francisco has something like this with their Below Market Rate (BMR) housing program. You have to be below a certain income to be considered, and basically you get to pay a fixed monthly rate to "own" a place that can only be sold for a fixed amount. It always just sounded like rent to me. I think that NYC's co-ops (TICs in San Francisco) provided an interesting alternative model. They usually require owner-occupancy, can't be rented easily, and are difficult to finance. These restrictions eliminate investors and speculators, and shields the the units from the inflation that happens from fed intervention and super low rates. The result is that they're usually priced a lot lower and appreciate more slowly than they would be if they were condos.

awongh 1y ago
TICs are a scam though. They are just condos with less legal protections for the relationships between the tenants. They don't solve any of the cost of ownership issues or deal with the idea of appreciation of the value of the real estate. afaik it's actually much worse because you're combining the appreciation of the asset, but you can't sell as easily as with a condo.
- yupitsme123 1y ago
  Sounds like you want a super liquid asset that's not actually an asset because it doesn't appreciate, and also it needs to be really easy to buy, cheaply. That's unlikely to happen and what we have right now is probably as close as one can get to that. I wasn't saying that coops or TICs are ideal, just that they show what happens when you remove the speculative and investment aspect as well as the subsidy of below-market interest rates and mortgages that any idiot can qualify for. The result is prices which are lower by 10-20%. People seem to want an engineered, top-down, state provided solution that makes homeownership more affordable. But we've already tried many of those solutions and they just inflate prices and encourage speculation and securitization. A better approach might be to end the various implicit and explicit subsidies on mortgages and homeownership, keep speculators, investors, and big developers out of the market, and focus on owner occupied dwellings. I think this would disinflate the housing market and allow it to get back to where it should be.
  - awongh 1y ago
    > end the various implicit and explicit subsidies on mortgages and homeownership, keep speculators, investors, and big developers out of the market, and focus on owner occupied dwellings Yes, totally agree. I think my impression of TIC is that it's a legal loophole because condo-izing buildings isn't politically tenable, but offering a worse option is. A TIC owner still owns an asset but now it's just devalued because it's harder to sell. My original thought was that a true co-op without the pressure of the owners accumulating pent-up capital in their home would be a healthier situation. Maybe that lost value can basically be recouped to make the overall cost of ownership lower. Maybe a different co-op legal structure makes it easier to pay a true market rate to live in an owner occupied dwelling, for a slightly different definition of "owner" (someone who doesn't plan to profit off the appreciation of their home, but still "owns" a place to live).

pcrh 1y ago

Note that most people rent, even in the US. They either rent the property itself, or they rent the capital used to buy the property (i.e. a mortgage). With that in mind, housing associations or co-ops and the like take the place of banks, that is, they possess the capital and rent the property to the residents, but keep a portion of the revenue for future renting, as a bank does for future lending. The difference between the two is that the housing association is typically not-for-profit, and that in a housing association the resident does not accumulate capital, which allows for a reduction in costs compared to a mortgage.

manwe150 1y ago
I don’t have any numbers to counter whether it is typical of “most”, but when trying to buy, I was outbid several times by people who paid “in cash”, and that was for million+ dollar homes. So it might be they do “rent” the capital, but possibly from a source other than a bank (eg from their forgone returns on stocks instead)
- pcrh 1y ago
  Sure, some people do have "cash" to buy a property. However, the vast majority of home buyers do not, and many who offer "cash" may have pre-approved loans.
  - manwe150 1y ago
    Google search say that the “true” cash purchases represent 20-30% of all purchases. Add to that the people that eventually own after a mortgage ends and it still may not be the most common, but it is not the small minority either.
    - pcrh 1y ago
      People who haven't inherited wealth can slowly accumulate capital in their properties, especially if prices are rising. They can use this to part-finance further property purchases. This is the model most Anglophone countries adopt. However, what most miss in this model is that the cost of doing so is much greater than they realize. The most obvious extra cost is the interest paid on mortgages, which can amount to 2-3 times the value of the property by the time the mortgage is fully paid. A further cost is politically imposed, in that governmental policies will avoid making homes more affordable, as this is perceived as a "loss" by many mortgage-holders and home owners.

marcinzm 1y ago

There’s a number of these types of co-ops in NYC although these are due to government legislation and I do not know if there are any less than decades old.