The housing-supply crisis in the United States has most impacted low- to moderate-income households. And, while the Earned Income Tax Credit (EITC) program plays a valuable role in increasing housing access for low-income families, there is no similar source for moderate-income households.
Lacking a targeted funding scheme, the demand for moderate-income housing grows, yet the supply is negligible. There are loud voices demanding resources for moderate-income households, but there is not as yet an agreed-upon policy or viable funding format to meet that demand.
Is cooperative housing the answer?
Limited Equity Housing Cooperatives (LEHC) — a cooperative corporation that owns the entire site of the cooperative, including all the apartments and buildings on the site — could be a supplier of much-needed, permanently affordable housing for moderate-income households.
Rather than trade at market rate, the purpose of a LEHC is to provide permanently affordable apartments at a reasonable cost, relative to income. Current LEHCs in the U.S. range from 15-15,000 units, and each family living in that co-op owns one share in that co-op. The co-op members use their vote to elect board members and to approve the co-op’s annual budget and corporate bylaws. The co-op board then hires a professional management company to carry out the day-to-day activities of running the operations of the co-op.
There has only been one small, measurable period of development of cooperative housing for low-to-moderate-income households in the U.S. The core years of that period were from 1950-1970. In that era, there was a coalescence of resources and capacity. Key elements were: post-war funding of housing cooperatives; two key development organizations — United Housing Foundation and the Foundation for Cooperative Housing; and a national political climate that was committed to the development of low- and moderate-income affordable housing.
Since then, there have been city-based efforts in New York and Washington D.C., and a few individual housing co-ops appearing here and there. In a nation needing to house 330,000 million people, cooperative housing should become a movement.
The precedence of looking to Sweden for guidance
The first LEHC in the U.S. was created by Amalgamated Housing Cooperative in 1927 in the Bronx, NY, and was sponsored by the Amalgamated Clothing Workers Union (ACWU). During the five-year development process, Abraham Kazan (developer and first manager of Amalgamated) learned much about other cooperative efforts going on in Europe — especially Sweden — from the many active progressive organizations among the immigrant populations of NYC. So, Kazan sailed for Sweden.
And Kazan is not the only advocate of U.S. housing cooperatives to visit the Nordic nation; many others have followed, as Sweden has become the global benchmark.
How does Sweden do it?
As of 2021, there are 1,218,537 units of cooperative housing in Sweden.
HSB Riksforbund, the National Association of Tenants’ Savings and Building Society (and one of the two largest developers and managers of cooperative housing in Sweden), does not know how many people actually live in their approximately 350,000 units, but they estimate it is around a million people. That educated guess puts HSB occupancy at 2.6 people per unit. If we apply the same 2.6 average to all 1,218,537 cooperative units in the country, then 3,168,196 — or 30.7% of the Swedish population of 10.3 million — live in housing cooperatives.
Of all those co-op units, about 350,000 are part of HSB and 200,000 co-op units are part of Riksbyggen, the Cooperative Housing Association (and 2nd of the top two developer/manager companies). Therefore, 668,537 co-op units are independent and non-replicating. Those static co-ops are not associated with HSB or Riksbyggen, whose purpose is to continuously develop new co-ops or convert other multi-family units into housing cooperatives.
To explore the Swedish system, let’s take a short trip on HSB’s cooperative way (Riksbyggen has a very similar system):
- If you want to live in one of the existing HSB cooperatives, you must first get your name on the waiting list.
- To move further up the queue, you join HSB and start depositing money into a savings account (which allows you to jump ahead of those on the waiting list that have not done so).
In 2021 there were 120,305 savers on the HSB lists. Cumulatively, the HSB savers have amassed 4.3 billion Swedish Kroners (equal to $400 million dollars). The majority of those funds are used by HSB in the development of new housing cooperatives.
In that same year, HSB had an annual turnover of close to $1 billion dollars and a surplus of 100 million dollars. HSB has 4,000 employees throughout Sweden who do all the tasks of land procurement and permissions, architecture, construction, and marketing. HSB Stockholm is the capital city’s largest housing association with 670 of its own employees. It celebrated its 100th anniversary in 2023 by commissioning the design of a 34-story skyscraper built of wood.
In early 2022, Hemnet (the most popular housing platform in Sweden) bestowed HSB with its “Housing Developer of the Year” award.
Hemnet noted that “The winner in the Housing Developer of the Year category takes a big social responsibility and opens doors to more and better housing. This actor works long-term with a focus on all aspects of the concept of sustainability through, for example, innovative financing solutions for first-time buyers, ambitious science-based climate goals, curious exploration of improved housing solutions and construction throughout our long country.”
What, therefore, can we learn from a nation with 30+% of its population living in housing cooperatives?
- It takes building a national organization with a regional structure composed of independent housing cooperative associations to meet needs at the local level.
- It benefits from providing a savings plan that rewards depositors with priority placement.
- The various HSB organizations have the personnel to pursue many opportunities.
- HSB and other cooperative housing groups have the political clout to ensure they have the same access to government housing dollars and housing programs.
- HSB is large enough to work jointly with municipalities on housing development.
Why the U.S. should create cooperative housing infrastructure
Each LEHC co-op has different costs due to buying the land and building apartments in a particular year. The maximum sale of shares in a LEHC is often set by state law and can usually be from 5-to-10 percent of the unit cost of the original finished expenditure. The original share is also determined by either the square footage of the apartment or by how many bedrooms the apartment has. Shares in a LEHC can range from $5,000 to $30,000. Shares are paid a return, which is about five percent per year. The monthly carrying costs of the co-op are then set by dividing them by the total square footage and then multiplied by the square footage of each apartment.
All LEHC co-ops are required to be owner-occupied (no absentee owners), so there can be no apartments that are rented to others or listed as an Airbnb. Under US law, co-op members are homeowners and are entitled to deduct their share of the mortgage interest and property taxes paid.
We have a crisis in the U.S. and LEHCs could provide permanently affordable moderate-income housing. We clearly need more of what Sweden has proven to be effective. So the question is, what will we housing cooperators do next?
You can find out more about LEHC’s at www.npllc.org/publications. Sweden has the most co-op units per population of most countries of the world so it is well worth studying. https://www.hsb.se/in-english/