AB 569: A bill to facilitate the development of cooperative housing in California

In 2014, the Governor signed another bill that Sustainable Economies Law Center helped create! This bill, AB 569, will facilitate cooperative housing development in California, especially the creation of Limited Equity Housing Cooperatives (LEHCs). LEHCs provide residents with a unique form of equity stake in their home that restricts the resale value of shares to keep the prices low when regular market forces would otherwise drive them up.

Read the full chaptered bill here.

This is the culmination of three years of work by a coalition of organizations, including the Sustainable Economies Law Center, the California Center for Cooperative Development, the Bay Area Community Land Trust, and other organizations that support affordable and cooperative housing throughout California. Assemblymember Ed Chau backed the bill and helped it through the legislative process.

So many people are seeking more stable and affordable housing in California, especially in the Bay Area's volatile housing market. The legal landscape surrounding the creation of cooperative housing in California is unnecessarily complex, which is why we helped write and support AB 569.

AB 569 will remove two of the most significant barriers to the cooperative ownership of housing and make one minor amendment to facilitate the operation of smaller housing cooperatives. AB 569 will address these barriers by making the following amendments:

1) Remove Barriers to Financing for Cooperative Housing: Until AB 569 goes into effect next year, the California Subdivided Lands Act prohibits the sale of housing cooperative shares when the units are subject to a mortgage secured by the entire property, which has the effect of banning housing cooperatives in California, since most cooperatives finance the purchase of a building with a single blanket mortgage. AB 569 creates safeguards to protect members of cooperatives, while allowing a cooperative to actually obtain a mortgage.

2) Modify the Situations in which Limited Equity Housing Cooperatives are Exempt from the Public Report Requirement: This expands the opportunities under which Limited Equity Housing Co-ops can secure an exemption from the costly public report requirement by adding state or federally charted credit unions and state or federally certified community development financial institutions (CDFIs) to the list of financing agencies qualified to enter into the regulatory agreement under the public report exemption.

3) Remove Burdensome Election Procedures for Collectively Governed Housing Cooperatives by exempting housing cooperative where every member serves on the board of directors from burdensome election procedure in the California Davis Stirling Act.

SELC and the rest of the coalition that worked on this bill also hoped for amendments to the California Subdivision Map Act that would remove other unnecessary barriers to creating cooperative housing in California. We got a lot accomplished with the bill this year by amending many confusing provisions of law, which required educating legislators about housing cooperatives. We didn't want to run the risk of the bill getting further stalled by adding more layers of complexity, but we hope to be part of efforts in the future to make more revisions to state laws so they are more conducive to housing cooperatives.