By Chris Tittle, Law Center Director of Organizational Resilience
In March 2018, several of us sat in a rooftop garden overlooking downtown Oakland. As we discussed the future of the region, the city skyline suddenly appeared as a timeline, revealing the past and future imaginations of developers, city planners, and investors. We could literally see the concrete visions of developers from 100 years ago towering next to the visions of today’s developers unfolding before our very eyes. Taken together, these buildings represented much more than just a place to work or sleep, but an idea about how life should be lived and who the city is for. Undoubtedly, these people have a long-term vision for this city -- and their visions are backed by capital and political power.
The Law Center is piloting a new model of cooperative real estate we’ve named the Permanent Real Estate Cooperative (“PREC”), which will permanently take land off the speculative market and into community stewardship. A PREC simultaneously decommodifies land, enables community control for structurally excluded communities, and disrupts root causes of racialized inequality. Unlike a conventional housing cooperative, which is formed to provide housing to a defined group of residents, a PREC could be described as a “movement cooperative,” because it is designed to provide housing, build a large membership base, and serve members’ collective goal to transform our neighborhoods and our systems of finance and land ownership. Our vision is for a typical PREC to have hundreds or thousands of members who look around at the land and buildings in their community and think: “We should own this!” Rather than watching the fate of their communities be determined by wealthy speculators, large companies, and absentee landlords, PREC members will build collective power, pools of capital, skills, and organized communities that can take action to shape the future of local land and buildings.
In 2017, the Law Center helped officially incorporated the East Bay Permanent Real Estate Cooperative in collaboration with the People of Color Sustainable Housing Network, a community of over 1000 people of color interested in building intentional, healthy, collective, and affordable housing communities in the Bay Area and beyond. We have convened a series of community design sessions to further refine the PREC model, and developed a participatory governance structure with multiple volunteer-led working groups. It is now an autonomous cooperative with a dynamic staff collective led primarily by women and people of color. In late 2018 or early 2019 it expects to take title to its first property, a Berkeley home donated for joint stewardship by EBPREC and the Oakland Community Land Trust.
Entity structure: A PREC is a cooperative corporation, which has at least three built-in perks:
- A cooperative’s primary governing body is chosen and major decisions are made on a one-member one-vote basis, meaning that democracy is embedded in the legal structure.
- Cooperative corporations are limited in their ability to pay high returns on capital, meaning they cannot be vehicles for making the wealthy wealthier.
- The Sustainable Economies Law Center recently helped write and pass a law that increased California cooperative corporations' securities exemption, allowing them to raise capital by selling membership shares for up to $1,000 each.
Decentralized organizing and governance structure: The vision for PRECs is that they are decentralized organizations where land and housing acquisition and development is driven from the grassroots, rather than by individuals at the top of governance hierarchies. Groups of members can take initiative, self-organize, search for properties, raise capital, and shepherd housing into the cooperative, with the board and staff serving in a supportive role.
Homebuying: Members who live on the cooperative’s properties will pay a “purchase” price for a long-term “diminishing rent lease,” and the experience will simulate direct homeownership in many ways. Monthly payments will be reduced over time as residents pay off the purchase price.
Resident control: The cooperative will set minimum standards of maintenance, but the residents will control most decisions related to the property.
Price stabilization: When a member “sells” their lease, they will receive a pre-determined price that will give them a modest return (likely tied to the Consumer Price Index or a similar index) on their purchase price, as well as compensation for improvements. This ensures that housing will be affordable for the next buyer, and it means that a bidding process (which always privileges the wealthy) will no longer be the method by which communities allocate housing and land resources.
Title and long-term protection: The cooperative holds title to the land and housing and adopts multiple restraints on its own ability to sell properties. To keep it off the speculative market in the long-term, the cooperative preferably gives multiple land trusts and other PRECs rights (through deed restrictions, easements, co-ownership, and purchase options) to enforce affordability restrictions and to take ownership of projects that are abandoned by the PREC.
FAQ on the Model
How are PRECs different from Community Land Trusts (CLTs)?
CLTs and PRECs have many similarities and emerge from the same movement toward equitable and democratic control of land. Both engage community members in governance and permanently remove real estate from the speculative market. A primary difference is that most CLTs are 501(c)(3) nonprofits. The cooperative structure of PRECs create promising opportunities:
- Cooperative corporations have the flexibility to take capital in multiple forms, meaning that financing options are greatly expanded.
- Unlike 501(c)(3)s, cooperatives are not constrained to providing housing to low- and moderate-income people. PRECs can spread the expectation that everyone – high- and low-income – should stop profiting from property and live in price-stabilized housing.
- Cooperatives are platforms for mutual aid and self-help, not charitable assistance. Charities can sometimes create a disempowering divide between the helpers and the helped. The cooperative structure transforms the relationship to create empowered groups of people working together to provide for their own long-term housing needs.
Where did PRECs come from?
“Permanent Real Estate Cooperative” is a phase that the Sustainable Economies Law Center uses to describe a land ownership model that began to strike a chord with many of our partner organizations and clients. The model combines features of CLTs, limited equity housing cooperatives, real estate investment cooperatives, and self-organizing social movements from around the world. This hybrid needed a name to set it apart from other models.
PREC? Couldn’t you find something with a better-sounding acronym?
Trust us. We tried and gave up. Embrace it! PREC the city! PREC the planet!
Can a PREC change the world?
Not quite, but a widespread PREC movement can change the world. As people begin to reject the inequitable and exploitative nature of conventional land ownership and financing structures, people everywhere will be looking to be part of the solution. The PREC, itself, is designed to foster movement-building. Anyone can join and support a PREC (whether or not they intend to live in PREC housing), and the decentralized organizing structure can spur rapid scaling and leadership growth from the grassroots. The vision is for every community to be filled with PRECs, each PREC will steward many properties, and every person may join multiple PRECs.
FAQ on PREC Finances
What does it mean to buy an ownership share of the Cooperative?
The Cooperative will initially sell ownership shares for up to $1,000 each. If you buy a share, you can later redeem it at face value along with a small rate of return, so long as the Cooperative has funds available. For example, if the Cooperative pays a 2% dividend on shares, you will receive $1,195 if you redeem your share 10 years later. After a round of selling initial ownership shares, the Cooperative likely will offer the opportunity to purchase larger shares or to lend money to the Cooperative.
Regardless of the size of your investment, the rate of return will be capped, likely below 5%. No individual or company will be able to profit limitlessly from the Cooperative. The goal is to pay a reasonable return on investments (comparable to what you receive in interest‐bearing savings accounts, at the very least) and to return as much value as possible to the Owners in the form of good housing, jobs, education, and community‐building.
What does it mean to buy into Cooperative housing?
If you buy into a house or building, the Cooperative will structure your purchase to simulate homeownership as closely as possible. The main exception is that, rather than selling your share on the speculative housing market, you will later sell your share at a predetermined price. That price will be designed to pay you a rate of return that is more akin to a savings account, and likely tied to a common index, such as the Consumer Price Index. The formula is designed to stabilize the price of housing for future residents. For example, if you buy a unit for $200,000, you might sell it 10 years later for $239,000 (if the return is around 2%), plus the cost of improvements you made or minus the cost of restoring the property to good condition. Ideally, the Cooperative, itself, will purchase your unit and then sell it to another Cooperative owner.
While you live there, you will be making monthly payments to the Cooperative. Legally speaking, the Cooperative holds title to property and you will be a tenant of the Cooperative. What you purchase when you buy in is a “diminishing rent lease,” which is a type of lease designed to simulate homeownership. It is called this because your rent is designed to be substantially reduced when you pay off your share of the purchase price.
For example, imagine that half of your monthly “rent” is put toward your $200,000 purchase price. The other half of the rent is put toward costs such as maintenance, property taxes, insurance, and administration by the Cooperative. When you pay off your $200,000 purchase price and financing costs, your monthly payments will be substantially reduced, likely by as much as 50%.
How will the Cooperative finance everything?
The Cooperative is designed to grow and support the acquisition of many properties over time, meaning that it will always be raising capital. The Cooperative will aim to build a large ownership base in order to raise substantial capital through the sale of ownership shares for up to $1,000 each. While this will not be enough to continuously acquire properties, this amount will enable the Cooperative to leverage capital in other forms and from other sources, such as banks, cities, and other institutions. However, the vision is to source as much capital as possible from the grassroots. A significant portion of our communities’ wealth is tied up in savings invested on Wall Street. As movements grow and encourage divestment from fossil fuels and other extractive and exploitative industries, growing numbers of individuals, businesses, and large institutions (like foundations), are searching for alternative investments. A Permanent Real Estate Cooperative is designed to be a vehicle to enable divestment from Wall Street and reinvestment in our local communities. In order to solicit and receive this capital from ordinary people in the community, the Cooperative will have to obtain a permit to offer securities from the State of California. This is also called a direct public offering (DPO).
The development of EBPREC is also supported by grants from San Francisco Foundation, Full Circle Fund, Christensen Fund, and potentially other grants that are pending.
What will the Cooperative do with its profits?
Cooperatives generally operate to maximize benefit to their members (aka owners), which means that – apart from paying a small return on capital, as described above – profits are otherwise returned to members in various forms. The main form of “return” is to constantly improve the Cooperative’s offerings and opportunities, based on the interests and needs of owners. In addition, owners may be allocated a small dividend at the end of each year, which essentially represents a refund on amounts each owner pays in annual dues, event tickets, course tuition, and other costs. The more you take advantage of and pay for the services and opportunities of the Cooperative (aka “patronize” the Cooperative,) the larger your dividend will be. In the cooperative sector, these dividends are therefore often referred to as “patronage dividends” or “patronage refunds.” Owners who are residents of Cooperative property will receive an additional patronage dividend representing funds from their monthly payments that were not spent on maintenance and management of their unit and building.
Dividends will often be retained in an account for each owner, rather than paid out directly. This is because the dividends will be used as both operating capital and reserve capital for the Cooperative and for its properties. When accounts build up to a certain level, the Cooperative will then make distributions directly to owners. For example, if you are a resident owner, the Cooperative might allow your account to grow as high as $30,000 in order to retain a maintenance reserve for your property. If the account builds up beyond ideal reserve levels, you might be paid annual dividends. When you leave the Cooperative, you will be paid the amount in the account, either immediately or as payments over time.
In sum, financially speaking, here’s what it means to be a Cooperative owner:
- All owners will likely receive a small dividend representing a return on their ownership share investment.
- Owners who pay dues and participate in events and activities will also likely receive a small dividend representing a refund on dues and other payments to the Cooperative.
- Owners who are residents will also likely receive a dividend representing a refund on “rent,” and they will receive a small return when they sell their unit or share of housing.
Disclaimer: The exact financial structures of East Bay Permanent Real Estate Cooperative are still works in progress, as we are currently seeking and incorporating feedback. This summary offers the basics, which are subject to change.
By Julie Gilgoff, Legal Fellow //
While billion dollar development companies eat up affordable housing units throughout the Bay Area, dedicated teams of organizers, nonprofit service providers, community development corporations, and others fight a relentless battle along side and on behalf of those at threat of displacement. Some are seeking to transform the current system of land ownership, removing profit incentives, and assuring that the land is used for the benefit of longtime community residents.Read more
Our Vision: Elders deserve to live with housing security, in a community of their choosing, and retain self-determination for as long as possible. The Sustainable Economies Law Center supports resident-controlled housing options for all, and is further committed to support cooperative, resident-controlled housing for seniors.
By the year 2030, one in every five Americans will be over the age of 65. As thousands of Baby Boomers retire each year, and continue to live longer and vibrant lives, alternative housing models that meet our aging population’s needs must be explored.
For most older Americans, high-quality supportive housing and services is prohibitively expensive. Reasonably priced nursing home facilities are commonly associated with boredom, depression, and abuse. Many seniors try to live unassisted in their homes for as long as possible, but encounter financial hardships - a third of adults 50 and older already spend more than 30% of their income on housing. For seniors who own their own homes and opt to age in place, many experience isolation and depression due to lack of community.
Within this context, some seniors are taking a proactive approach to create long-term, affordable, and communal housing solutions. A group in the East Bay, who call themselves Hibiscus Commons, have banded together to collectively look for property to call home. They are working with the Bay Area Community Land Trust (BACLT) to form their housing cooperative.
Hibiscus Commons first began to organize because its members acknowledged the difficulty of finding affordable housing. They found the available models of senior housing alienating, disempowering and institutional, and took the matter into their own hands.
While each member of Hibiscus Commons will have their own apartment unit within their envisioned co-op, members will share communal space such as a community garden and dining area, and decide collectively the policies and decisions, such as what staff will be hired (if any), when and how much to raise the monthly assessments, as well as decisions about building maintenance. The residents will screen and select new residents when units become vacant.
Current Hibiscus Commons members are considering leaving one apartment unit vacant for a live-in aide, as their health needs increase, to provide help with house cleaning and personal care.
Democratic control of the cooperative will be protected through cooperative bylaws and oversight by the BACLT. A Board elected from among the cooperative members will have direct responsibility for overseeing management of the co-op and implementation of the bylaws and membership agreement.
International Models of Elder Housing Cooperatives
There are several successful models of senior housing co-ops created by older women, that could provide an example for newly forming ones like Hibiscus Commons. Maria Brenton helped create a housing co-op called New Ground in North London, in response to her discontent with traditional forms of assisted living. “Most of the older population do not wish to have everything done for them," she says. New Ground is comprised of 26 women aged in their 50s to 87; the oldest member is still working.
When a New Ground resident falls ill, members provide for one another, working with the member’s family and social services to get the support they need. "The group rallied when one of their members got ill, and for at least a week someone would bring her a hot meal every day and look after her," says Brenton.
The women in London struggled to buy land and get financing, but eventually prevailed. The Hibiscus Commons group is still looking for a realtor and deciding on a neighborhood to concentrate their property search.
In such expensive and rapidly-gentrifying areas such as the Bay Area, Hibiscus Commons’ collaboration with the BACLT might help them to obtain below market-rate property, especially if some of its members are 80% below the Area Median Income, qualifying the co-op for certain tax breaks and subsidies.
Still, the process of elder co-op formation can be long, and serves as a reminder of the time commitment inherent in forming a housing cooperative: searching for like-minded members, a suitable property, and collectively engaging in the components of decision-making. The process for New Ground took approximately 20 years.
There are several housing options available - it is important to take the time to choose the model that is right for you.
1. Join Existing Housing Communities
For seniors who are interested in becoming a member of Hibiscus Commons, or learning more about seniors-only housing co-ops, they can contact organizers through the BACLT website. There are also other intergenerational models to consider.
2. Get Legal Help For Your Existing or Emerging Housing Coop
Sustainable Economies Law Center offers free legal services for newly forming housing co-ops, at their Resilient Communities Legal Cafes. RSVP for an upcoming legal clinic today!
3. Get The Help You Need and Build Community While Aging in Place
For seniors interested in Aging in Place, read about the village model, as a way to stay in your homes with the support of the community, and become a member of an existing village in the East Bay: Ashby Village, or North Oakland Village, to help you run errands and perform household chores. Becoming a member of a village also gives you access to a thriving community with a wide variety of classes and events.
4. Share Housing with a Senior Roommate
For seniors who want to rent a room out in their house, or who seek to live in another’s home with similarly-situated roommates, become a member of the East Bay organization TTN HOME.
5. Help Expand the Housing Options Available by Joining the Senior Policy and Programming Brigade
Sustainable Economies Law Center supports changing policy and introducing supportive programs that benefit older Americans.
Some states, like New York, have rent subsidy programs that freeze eligible seniors’ rents so that they are not as vulnerable to eviction. Some universities match students with seniors in the community who have a spare bedroom in their houses. National Shared Housing Resource Center matches seniors with potential roommates of all ages.
In other models, students receive discounted rent in exchange for helping seniors run errands or perform household chores.
If you are interested in getting involved to change local policy and bring more supportive programs to the Bay Area, contact Borchard Fellow for Law & Aging, Julie Gilgoff at email@example.com.
By Christina Oatfield, Policy Director //
We believe that community land trusts (CLTs) are an underrated yet critical solution to the housing crisis, not only in the Bay Area but pretty much everywhere. They need more attention, funding, and other forms of support, such as government policies and programs to nurture their development.
What is a CLT and why are these organizations so great? Here’s an excerpt from an op-ed I wrote about CLTs last year:Read more
By Van Dell and Chris Tittle, Sustainable Economies Law Center staff
On a warm spring day at the end of April, Sustainable Economies Law Center and Qilombo/Afrikatown hosted an Afrikatown District Tour and Land Liberation Strategy Session as part of an ongoing effort to build solidarity and develop cooperative responses to Oakland's displacement crisis. A diverse group of community organizers, neighbors, funders, lawyers, and comrades gathered in the Afrikatown Community Garden to share visions for community self-determination and introduce our respective work. It quickly became a space for cultivating new relationships and rooting ourselves in the social and material ecology of Afrikatown’s particular project to liberate land for community need.Read more
By Chris Tittle, Sustainable Economies Law Center Housing Program Co-director
All politics are local. No matter what your feelings on the Presidential race or the state of our national political discourse, there are likely many important decisions on the rest of your ballot this November. As an Oakland-based organization, Sustainable Economies Law Center endorses Oakland Measure JJ, the Renter Protection Act.Read more
By Sustainable Economies Law Center (SELC) Director of Economic Democracy, Ricardo Nuñez
There has been a constant stream of depressing and demoralizing news this summer. A dysfunctional political system, continuing police violence against our black and brown brothers and sisters, and an economic system that continues to exacerbate income inequality. At times like these, we only need to look within our own communities to find hope and renewal. SELC Summer Institute interns teamed up with interns from Project Equity and the Community Economic Justice Clinic at EBCLC to take a day to visit spaces of an economy that redirects wealth and control back to communities; an economy based on solidarity. Below, our summer interns share their reflections on the spaces we visited, spaces where individuals are taking collective action to live out the solidarity economy SELC and our allies are working to build.
Thank you to Design Action Collective, the Arizmendi Association of Cooperatives, Mandela Food Cooperative, Arizmendi Lakeshore Cooperative, the Addison Court Housing Cooperative and land trust, and Phat Beets for sharing your stories of resilience and solidarity!Read more
By Sustainable Economies Law Center Executive Director, Janelle Orsi
Imagine that a group of people works hard to fill their neighborhood with urban farms, bike lanes, parks, murals, community services, and education programs. Next, imagine that those same people are forced to move away. Ouch, that bites.
Sadly, this is real: Improving the livability of a previously disinvested neighborhood creates opportunities for speculators, landlords, and developers to increase rents and drive up the cost of property, often causing displacement of the very people who made the neighborhood livable to begin with.Read more
If you live in a fairly populous city, or you like to travel off the beaten path, you've probably heard of Airbnb-style short-term rentals (STRs). Residential housing that is rented for short periods of time, STRs were once a niche way to travel, but are now available for rent all over the world.
The evolution of STRs is a success story for the many STR platforms that broker transactions between STR hosts and guests, but for cities and communities dealing with the adverse social and economic impacts of the activity, STRs pose a unique new challenge.Read more