I’ve been writing about and advocating for a publicly financed cooperative ownership model. My proposal is that a local government issues revenue bonds, backed by some source of revenue or tax. That means really low interest rates. The proceeds from the sale of those bonds can build housing which residents could buy, over time, with their regular housing payments. After running hypothetical numbers in many markets, it usually works out that in about 12 years, with some initial subsidization for operating costs, the cooperative fully owns the project. This builds equity faster than traditional financing, lowers the risk of foreclosure (if a resident fails, everyone else picks up the slack), and both wealth and risk are kept local, not in a bank or the Government Sponsored Enterprise (GSE).
Addressing Challenges & Practical Considerations
Cooperatives are complicated to set up and manage. Operating costs must be considered and probably subsidized for a period. And can projects be delivered at low cost in a global materials market and with local labor costs always an issue? And what happens when someone wants out of the cooperative early? How are new members allowed to buy in? Would start up and operating costs rise and wouldn’t that price up the costs of living in a cooperative? How would new residents who want to buy in get financing? Would they have to? And the biggest questions of all, how long would it take for social norms to shift to prefer a cooperative system over what is perceived to be such a high social accomplishment, making a monthly mortgage payment on a detached, single-family home, with a yard.
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