|Because money is available.|
|Because it is politically fashionable.|
|Because the tenants are the only people who want the development.|
Creating co-ops and other resident-controlled developments just because the money is there, or because no one else would take the development, merely creates new problems for the residents, and gives a bad name to resident control.
The purpose of this article is to help developers (including tenants) make a decision about whether their development should be resident-controlled for the right reasons. If we want to create stable, high quality, secure and affordable housing, with the additional benefit of empowering residents both politically and economically, we have almost three decades of experience to fall back on. What works?
You cannot make a silk purse from a sowís ear, and you
cannot create a successful resident-controlled development
without a good site, a decent amount of time, careful plans,
and sufficient funds. If an experienced developer would not
take on the project, then donít foist it on unsuspecting
residents. For specific info on financing co-ops, see Fifty Ways to Finance Your Co-op.
The size needs to be appropriate for the type of ownership model. In most cases, resident-controlled developments should have at least twelve units, and preferably twenty. Running an affordable housing development is a lot of work, and if there are not enough members to draw from, the Board and its Committees will not have the people power to get the job done. Converting small buildings to co-ops is not a good idea even when the current residents are energetic, enthusiastic, and well informed, because sooner or later the original residents will move out. And when the new residents move in, they will not have the same enthusiasm as the founders. In most cases, the new residents select the co-op not because it is resident-controlled, but because it is the right unit, in the right neighborhood, at the right price. Once the new resident moves in, that combination might make the resident very happy with his/her unit, but it will not motivate him/her to come to a board meeting.
The only exception to this rule is in the case of condominiums, especially condos that have little common area. The demands on the owners of condos are much less than in co-ops, because only the common areas are owned in common, and because debt is associated with the individual owners, not the association. A condo board does not have to worry about paying to fix someoneís faucet, non-payment on a mortgage, or marketing a vacant unit. Condo boards do still have significant responsibilities, but they are infrequent enough that a smaller number of unit owners can still get the jobs done.
For potential residents, the prospect of resident control has both a cost and a benefit. It holds out the prospect of control over oneís housing, with all the management, security, and financial benefits described above. But it also requires the time and energy of residents, especially during the first few years. No one can buy that energy -- it is either there or it isnít. If the development is an existing, occupied building, then the decision about resident control should come from the residents themselves when they understand the costs and benefits. For new construction, the developer should gauge community support for a resident-centered housing initiative before deciding who should own and who should control the housing.
Prospective residents will respond to resident control differently in different communities. Politically progressive areas might jump at the opportunity to do something new and innovative, while more conservative prospects will look for a model that they have heard of before and that they feel comfortable with. If a developer is considering a co-op, a resident-controlled rental, mutual housing, condominiums or something else, the developer should first be clear that this is a model that the target population will understand and be comfortable with.
In many cases, the tenants are the developer. They may hire a stable of consultants to make the deal happen, but it is the tenants who are making the decisions. In this case, it is very important that the tenants understand what it is that they are getting into. First of all, there must be a real commitment from at least two residents to throw their lives into the project. A modest commitment is not enough -- real estate development is very demanding! And a commitment from one person is not enough either. Even if there are a few others who support the idea, having only one person who all the work falls on will eventually create a dynamic of distrust and resentment with other tenants.
Beyond the core enthusiastic group, there should be other tenants who are strongly supportive and willing to help out from time to time. And all should understand that this is a multi-year commitment. The tunnel always seems shorter at the beginning; it always seems possible that the housing will be built and occupied in six months or a year. But where government sources and neighborhood politics are involved, the timetable is always much longer. Starting out with this understanding can save heartache later on.
And the work is not over when the papers are passed. Experienced resident-owners will let you know that owning is harder than buying. There is less help, less money, and the tasks, like deciding who will shovel the snow, are less romantic than purchasing a million dollar development. Finally, just in case there is any misunderstanding, becoming a resident-owner of affordable housing is not going to make anyone rich. You may save money by not having to come up with a down-payment, and by keeping your monthly costs low, but you will not be able to sell your housing and make windfall profits.
If developers and tenants are working side-by-side in the development process, both parties must think carefully about the relationship.
From the residentsí point of view: Do you trust the developers? Do you trust them to make decisions about matters that they will understand better than you? Do you trust them to spend the large sums of money that will be devoted to redevelopment? How do you feel about the prospect of spending dozens, if not hundreds of hours with them over the next few years? Are you clear about what decisions you will make and what decisions the developer will make? It is important to recognize that housing development is a full time job for the developers, while the residents have other commitments. Thus, residents must decide what issues they want to spend time on, and what issues they can leave to their consultants. Donít spend all your time trying to agree on what your letterhead looks like.
The developer, or development consultant, should ask a similar set of questions. Do you trust the tenants? If youíre a consultant, will you feel comfortable implementing the residentsí decisions? If youíre a developer, will you feel comfortable sharing decision-making with the tenants, even when you disagree with them? How do you feel about their style?
Residents and consultants sometimes live in different worlds, with consultants relying on their brains to make decisions based on technical principals of urban design, while residents, thinking about their future homes, might make decisions based more on their heart and their individual interests. In addition, residents are typically the only participants in planning meetings who are not being paid for their time. Consultants must understand that resident time is valuable -- every hour in a meeting is an hour away from children, relaxation and other pursuits. Consultants must therefore prepare carefully for meetings and make sure that as much as possible is accomplished. Residents must recognize that housing development is a full time job, and that there will be times when they (the residents) will feel left behind by discussions at daytime meetings when residents are at work.
One early decision concerns how to limit the equity of owners. For a full discussion see the accompanying article.
If you think youíre ready to work together, make some commitments to each other from the beginning. These commitments may be part of a legal document defining your relationship, or they may simply be the result of sitting down together and speaking frankly. The agreements might include:
Being honest with each other at all times. Taking no action that would be detrimental to the development project, so long as it is developed according to agreed on parameters of affordability, quality, etc. Meeting together on a regular basis. Taking at least 30 days to work through any disagreements that might come up before terminating the relationship.
Make sure that you are clear about who is minding the store during the process. Who is going to make sure that everything keeps moving on schedule? Who is going to call back to set up a meeting when you have not been in touch for a while?
The work is not over when the last brick is laid. Take the time to make your decisions about property management very carefully. Solicit at least 4 proposals, make sure you visit sites managed by your candidates, and talk to tenants at those sites (ARCH has another publication with more information on selecting management companies). Nothing will affect the quality of life at your development more than the Management Company.
Resist the temptation to self-manage. Management seems like an easy task, but it is emotionally taxing and mentally demanding. Non-profits always find that it takes more of their time than they expected, and that the payment they are receiving does not cover the costs of the time that people are spending.
Boards should make a clear decision about how time they want to spend, and what kinds of details they want to leave to their managers. Boards who want to go over every account receivable are to be praised for their level of commitment, but must understand that they will be meeting more than once a month. Boards that meet every quarter may find it easy to recruit new members, but the Board will end up leaving almost all decisions to their Manager. Most Boards are comfortable with a level of commitment somewhere between these extremes.
Make sure that your Board members get some training every year. Laws change, and your directors need to know them. Even more importantly, directors will get their spirits raised and their batteries renewed by talking to other directors at similar developments. Even if local training is not available, getting to know directors at nearby resident-controlled developments should be a high priority.
All Boards get discouraged at the level of participation in their development. Many directors feel that all members should turn out for meetings, but this never happens. Set a realistic goal for participation (about one semi-activist for every ten members is a good rule of thumb) and donít get discouraged when you canít always reach a quorum. Involvement will rise and fall as issues arise that capture member interest (ARCH has another publication on this topic).
All resident Boards should have their own office with locked files. As directors and officers turn over, it is important that there is one location where records or kept, or they will be lost. Having an office also contributes to an organizationís self-image.
Finally, resident Boards should stay in touch with the professionals that they worked with originally. At some point, their development will need to re-finance, buy new land, or fix up the original work. The original professionals are familiar with the development, and that familiarity will help them meet your needs down the road.
These steps do not guarantee a successful development. Resident initiatives are hard work and require real dedication from residents and professionals alike. The best sponsoring non-profits understand this, and know that there may be a time in the future when they are asked to step in again and get the resident group on the right track.
There is a real payoff to all this work, though. When all is said and done, the empowerment of residents, the stabilization of neighborhoods and the other intangible results of resident housing initiatives change communities far beyond simply creating affordable housing.
Unless otherwise indicated, copyright ©
1999 ARCH. All rights reserved.