When Amber Massey was looking for a place to live three years ago, she knew she couldn’t afford most real estate in DC, at the age of 25 on a non-profit salary. But she also didn’t like the idea of paying rent forever to a landlord, building no equity in a home.
While visiting the now-closed Colorado Kitchen on 14th Street, Massey stumbled across something she’d never heard of before: A 36-unit art deco apartment building on Colorado Avenue marketing “shares” of the property, rather than individual condominiums.
Massey could pay $2,000 for a cozy one-bedroom unit, and then $850 per month as a “carrying charge” to keep paying the long-term mortgage on the building, along with the costs of keeping up the building.
“That’s like homeownership!” Massey thought. Well, not exactly -- buying a share is kind of like the down payment on your own house, and the carrying charge feels like rent or a condo fee.
But it’s different: The building is what’s known as a limited equity cooperative, in which residents are both tenants of the corporation that owns the building, and also shareholders. There’s no landlord profit, and they exercise collective control over how the property is run.
Limited equity cooperatives arose in the 1970s, when tenants got the right of first refusal to purchase their buildings when they went up for sale. With loan assistance from the city government, even low-income tenants could go in together, and restricting the amount of equity they could build allowed the property to remain affordable for the long term.
In the mid-2000s, as housing values were again rising and developers eyed apartment buildings for investment opportunities, the Coalition for Nonprofit Housing and Economic Development did a landmark inventory of how many limited equity coops remained in the city.
What they found: While 18 percent of those units had been converted into condos, and five percent had gone into foreclosure, 75 percent continued as coops, and were predominantly in good financial health. Another study done this year has found that the number remains steady, with 84 buildings comprising 3,080 units across the city (with the highest number in wards one and seven).
Maintaining a healthy coop isn’t easy -- as Lea Franklin learned when she and fellow tenants bought the Colorado Avenue building back in 1995. They secured loans from the city’s Department of Housing and Community Development and Housing Finance Agency, as well as a five-year break from property taxes, in exchange for the coop’s limited-equity status and the stipulation that some units be reserved for very low-income people.
Over the years, however, after Franklin gave up her board responsibilities, the building’s finances started to deteriorate. The new board was “totally corrupt,” Franklin says, exempting themselves from rent and allowing the building to fall $30,000 behind in its gas bills. “We were at foreclosure’s doorstep,” she says. And then, “We just got busy.”
With help from the Community and Economic Development Law Clinic at the American University School of Law, Franklin worked to boot out the malefactors and put the coop back on sound financial footing. That meant hiring a competent management company to take care of facilities issues, and get as many of the shares sold as possible in order to keep current with the mortgage.
There are still $300,000 worth of necessary renovations, and it’s hard to raise that money without a fully occupied building -- but it’s hard to bring people in when the building looks shabby.
Meanwhile, their McKinney Act loan matured last November, and the board is looking for another lender to help them cover the gap -- and that’s as difficult for a limited equity coop to find as it is for anyone else.
The key to keeping a coop on the level is bringing in people you can work with. D.C. coops aren’t as insane as those in New York City, for example, where the difficulty of getting into coop buildings is legendary. But the board does have enough control to shape a trusting community, which sometimes feels more like a college dorm for adults than an apartment building.
“I brought in everyone I could,” says Massey. “When we say we know our neighborhoods, we know our neighbors.”
“Once you get good people, you’re good,” agrees Franklin.
Owning a Building With All Your Friends: Life in a Limited Equity Coop was originally published by Washington City Paper on May 5, 2011.