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

2

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

3

Basics of housing cooperatives:

What they are and how they work

4

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.

5

How do homeownership cooperatives work?

A cooperative owns the building and grounds

COOPERATIVECOOPERATIVE

6

How do homeownership cooperatives work?

Members buy shares in the cooperative

Holly

Andrea Warren

Jon

C.J.

7

How do cooperatives work?

Warren

C.J.

Each share is linked to a unit in the building

AndreaJon

Holly

8

How do cooperatives work?

The cooperative is governed by its resident-owners

9

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

10

Financing housing cooperatives

11

Financing a Single-Family Home

Debt:90%

Equity:Equity:10%10%

12

Financing a Condominium

Each individual owner can choose different levels of equity and debt financing

13

Financing a Housing Cooperative

Each member-owner chooses level of equity, and share debt, and cooperative gets blanket debt

Option 1:

14

Financing a Housing Cooperative

Each member-owner chooses levels of equity and share debt

Option 2:

15

Financing a Housing Co-op

98% blanket debt

2% equity

HUD Section 213 financing

Option 3:

16

One application:

Cooperative conversions of

manufactured home parks

17

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

18

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

19

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.)

20

There Are 1,000 Resident Owned Manufactured Home Parks Nationwide

21

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?

22

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.

23

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.

24

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?

25

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

26

Case Study: Sunrise Villa Cooperative Cannon Falls, Minnesota

Sunrise Villa Mobile Home Park

47 units

27

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

28

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)

29

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 faxkevin@ncdf.coop