northcountry cooperative development fund putting it into practice: overview of the housing...
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Northcountry Cooperative Development Fund
Putting It Into Practice:Putting It Into Practice:Overview of the Housing Cooperative Model
and A Look at One Application
Conference on Housing and Economic DevelopmentConference on Housing and Economic Development
Indianapolis, Indiana Indianapolis, Indiana
September 12, 2005September 12, 2005
Kevin Walker ~ Cooperative Housing Program ManagerKevin Walker ~ Cooperative Housing Program Manager
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Northcountry Cooperative Development Fund(NCDF)
• Started in 1978
• Community Development Finance Institution specializing in cooperatives
• Lending to housing, food, worker cooperatives
• Provides lending, technical assistance, development services to cooperatives
• Serves eleven states of Upper Midwest
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Basics of housing cooperatives:
What they are and how they work
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How Does a Housing Co-op Compare with Other Housing?
In a condominium association, each individual owns a divided piece of the property.
In a housing co-op, all members combined own an undivided share of the property.
In a rental apartment, tenants own nothing.
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How do homeownership cooperatives work?
A cooperative owns the building and grounds
COOPERATIVECOOPERATIVE
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How do homeownership cooperatives work?
Members buy shares in the cooperative
Holly
Andrea Warren
Jon
C.J.
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How do cooperatives work?
Warren
C.J.
Each share is linked to a unit in the building
AndreaJon
Holly
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How do cooperatives work?
The cooperative is governed by its resident-owners
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Cooperative Development Agenda
• Adaptive reuse projects• Conversions of conventional rental property• Conversions of expiring Low Income Housing
Tax Credit projects• Conversions of USDA Section 515 projects• Conversions of manufactured home parks
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Financing housing cooperatives
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Financing a Single-Family Home
Debt:90%
Equity:Equity:10%10%
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Financing a Condominium
Each individual owner can choose different levels of equity and debt financing
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Financing a Housing Cooperative
Each member-owner chooses level of equity, and share debt, and cooperative gets blanket debt
Option 1:
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Financing a Housing Cooperative
Each member-owner chooses levels of equity and share debt
Option 2:
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Financing a Housing Co-op
98% blanket debt
2% equity
HUD Section 213 financing
Option 3:
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One application:
Cooperative conversions of
manufactured home parks
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Typical Manufactured Home Park
Owner
• Regular rent increases
• No direct voice in park policies
• Little incentive to invest in park
• No land ownership for residents
• Home depreciation
• Risk of displacement
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Manufactured Home Park Cooperative
Coopera
tive
Coopera
tive
• Monthlies increase only with operating cost increases
• Direct voice in park policies and operations
• Strong incentive to invest in park
• Land ownership for residents
• Potential for growth in home equity
• No risk of displacement
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Why Become a Cooperative?
• You own it.– You continue to own your home.– As a cooperative member-owner, you also own the park.
• You run it.– The Board of Directors is elected from resident members;– Your Board oversees property management and operations;– You decide which improvements, if any, should be made to the
park.• You benefit.
– No one takes profits from the park’s operations;– If revenue exceeds expenses, excess returns to residents or the
park;– Security of tenure (no one can sell the park from under you.)
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There Are 1,000 Resident Owned Manufactured Home Parks Nationwide
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What We Look For
1. Able and Willing Seller?
2. Able and Willing Buyer?
3. Feasible?1. What is the condition of the park?
2. Will it be affordable to residents?
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Willing Seller
• Seller willing to make park available at affordable price.
• Seller signs sales agreement providing investigation period for us to confirm viability of resident cooperative.
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Willing Buyer
Interest. Residents are interested. “Sense of the room” Later: Written ballots and surveys
Capacity. Residents engage, ask questions.Commitment. Core group of residents volunteer
for Acquisition Committee.
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Is It Feasible?
1. What is the condition of the park?
2. Can park be acquired, improved as needed, and still be made affordable to residents?
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Facilitating Success
• Professional management company (preferably with experience with homeowner associations)
• Governance and support services consultant
• Pre-funded reserves– Replacement Reserve
– Operating Reserve
– Training Reserve
– Working Capital Reserve
– Marketing Reserve
• Translation and interpreter services
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Case Study: Sunrise Villa Cooperative Cannon Falls, Minnesota
Sunrise Villa Mobile Home Park
47 units
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Sunrise Villa Mobile Home Park
• Local mom-and-pop owner• Community facilities: storm shelter, mailboxes• Purchase price: $928,000 or $19,745/unit• Financing:
– $696,000: Community Development Bank, Ogema, MN
– $490,000: Northcountry Cooperative Development Fund
– $23,500: Resident Equity
• Equity requirement: $500
• Monthly carrying charge: $300
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Sunrise Villa Cooperative
• Total development timeframe: 11 months• Resident Process: One meeting about every six weeks• Park Attendance of meetings: 33% to 51% of households• Charter membership: 29 of 46 households (63% of park)• Closed on purchase: September 28, 2004• Current membership: 43 of 47 households (91% of park)
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Contact Information:
Kevin WalkerProgram Manager, Cooperative Housing
Northcountry Cooperative Development Fund219 Main Street SE, Suite 500
Minneapolis, MN 55414612.767.2111 direct
612.767.2133 [email protected]