Reconstituting Construction & Housing Industries

This is an economic development plan to reconstitute the Construction &

Housing Industries in the Los Angeles County geographic area.

An entrepreneurial plan to make housing accessible to all, without

government support.

Never has there been a more appropriate moment.

For an Idea Whose Time Has ComePowerful forces are aligned correctly at this moment

and couldn't be better, for a change.The price of gasoline appears not to stop rising,

which means commuters want to live closer in to work.

This requires building homes where people work;what's better than mixed use development? The real estate and homemortgage markets have come apart, yet the working class still cannot

afford to purchase a home in Southern California.

Still, a good idea is not enough! Now is the time for those for whomthese ideas have meaning to come together.

BackgroundHome Ownership on the

Southwest U.S. Coast Today

Many Californians consider themselves

Middle Class, when they are not.

This is because they have neither the income nor the opportunity to create the meansthat will provide them with the tools the

American Middle Class has historically had.

That would be namely a home that gains equity for the owners over time. In essence creating a self-

financed retirement plan, or as a gift for heirs or a legacy to beneficiaries such as charities.

How it got this way• Interesting, when one thinks about it. The same homeowners who

were dedicated to their home town who approved Proposition 13 years ago, to limit property taxes so they could afford to stay in their homes when they got older and had restricted incomes, now find themselves defending the values of their existing property as it escalates out of the reach of other local young families in their own home town.

• Now, the original families who may want to move, find that they cannot sell their homes without facing a windfall profit that will have to be paid in taxes, unless they re-invest the money somewhere else, or put it in a trust (if their assets are low enough), in order to pass it on to their heirs - and the government loses out again.

• If they sell, the rich traditions of those original inhabitants as well as their profits leave the community. At the same time, these homeowners don't want their tax dollars being allocated to provide "affordable housing" for others. That's quite a conundrum. Yet the middle class that wants to own a home moves away with all their savings, to invest it and their time elsewhere.

The Primary HUM Mission is

To provide a mechanism for the development of

homes that the Working Middle Class can afford to

buy and KEEP. This while assisting the creation of

a stepladder for lower income families to move up

to homeownership, without simply government

assistance - in order that lower income families

can create equity for their futures, and thereby

move themselves into the Middle Class.

CONCEPT and INTENT• Build Homes the Working Middle Class can Afford to Invest in, which in

turn will benefit the local community, by fostering a viable local economic base. By offering these homes both an investment vehicle and a residence for the upwardly mobile is created. The goal is not to create homes to commute from by building homes where homes are needed, in the cities.

• Who are the Upwardly Mobile?These are the people who are "locked out" of the current owner-occupant real estate market, who would otherwise be striving to reach or maintain their status as a member of the Middle Class, through the accumulation of equity by their investment in the local real estate market. The term "affordable housing" usually applies to these people, if they are in the lower percentile of prospective buyers. In our case however, our primary market is the middle percentile, which we offer to solve the problem for, at the rate of 65% in our business plan. 

• In our estimation, they are also youth that have been remanded to group homes or foster home care, in the supervision of adults who are not their natural parents. These youth, given the opportunity will become upstanding citizens and residents of our county. Our plan accommodates their needs as well, by reserving one home in each development as a foster home, since there is a dearth of foster homes for tens of thousands of California's youth. This is because there are not enough group or foster homes for California's children.

What is the need?• In the last number of years, the cost of housing has been

rising by great percentages annually, out of the reach of the majority of those who would like to buy a home.

• During this period, one of the only ways the Middle Class has been able to own a home prior to our option today is by the government getting involved in helping buyers enter the process of purchasing.

• Non-profit organizations are also formed to assist Middle Class buyers in leveraging their assets, income and credit.

• This has allowed homeowners to indebt themselves for property that is over-valued, just so buyers can get a foothold in the region. We have seen what happens when that builds to a unsupportable level and what it does to the overall economy, as it crashes when homeowners interest rates rise to levels they can't pay.

The Result• In the meantime, what we have left is a beautiful shell to honour

the memory of our traditions, where low-paid youngsters primarily run the retail shops unschooled in the mechanics of economics and business practice that enhances economic development for the community. Owners that usually live elsewhere, some of who rarely visit their own stores, manage that staff. Again, a disconnected population, not invested in ideas and efforts to revitalize the community, but still caught up in an emphasis of "keeping things the way they are".

• The government seems to be happy to see homes turnover for higher prices, even if they are for sale to those from out of town, since it allows for the only available increase in property taxes, so that the cost of running the county and cities is covered. Yet, we see recently that the government cannot run the business of the people without going into further debt, because the system doesn't work well enough since the homes are not turning over fast enough and retail sales taxes are not what they could be since the tourist industry is seasonal.

Success of Plans• What creates the primary basis of funding for privately subsidizing

90% our mixed-income development is a willingness of Upper Income home buyers to move into our developments, either where we have other income levels on the same property, or separated. (Some homes will be built off-site at other locations). These sales will generate the income, which will be used to do the other levels of development.

• Our success will also come from our co-operative members' joint

interest in making a success of the projects. We have spoken with a consultant that specializes in developing budgets for start up co-ops. We would also be developing a plan to educate buyers on the purpose of co-ops and what makes them work well. We are researching various successful co-ops now.

• Finally, the location of the property, its landscaping and overall ambience and fit to the historical ambience of any neighborhood will assure the accomplishment of the above. (Ideally enhancing or restoring any original natural ecological system on the land purchased).

Funding Sales, Management & OpsSelf-funding sales, management & ops, after initial sales occur, by:

• Construction oversight will be done by Competitively Priced Residences, first on a for-profit basis to upper and middle-income buyers; then afterward, the moderate and low/low-low income buyers will receive a subsidy from the profit earlier generated and HRU will develop those homes.

• Land will be purchased or received in donation, and owned by a Community Land Trust

• Overall planning & development will be managed by Homes for the Rest of Us

• Building will be 90% "affordable", with 10% being sold at Market rate to generate income

– 80% of which will be reserved for the Middle & Working & 20% for the lower income classes

• Homes sold to Lower Income earners will be sold through subsidies, by re-investing the profits from sales of slightly below market rate & moderately priced homes.

• Initial Sales will occur to those who become members of the (PHA), on a first-come, first-served basis.

• Memberships in the Co-operatives will be allowed for all who become participants in the Buyers' Club, called Homes for the Upwardly Mobile.

• At some point down the road, we may even "hold our own" mortgage paper, and generate income for the organization based on the interest we charge for the mortgages for the upper income homes.

• Private equity investment would most likely be done by community stakeholders.

– This could occur by sweat equity development or qualified social investors

– Housing foreclosures will be purchased to build our chain of assets.

Making Change Happen• Just like people in the Midwest Tornado Country, who for many years prefer

to build wooden houses that blow down when a big storm comes through, the people from LA got to a point where, due to cost, they preferred to build their houses outside of the city and commute for hours per day back and forth from home and work. Instead of finding a way to level the playing field, it was easier not to make the effort and do it the way it’s always been done.

• Of course moving to the countryside has always had its incentives and good points. The problem is that the commute never goes away and the city folk end up carrying their problems with them.

• What is that driving force within the mind of humankind that causes people to “go with the flow” or not try to find a solution to a problem, even when the solution is as obvious as neighborhood revitalization and re-creation?

• I believe that the drive to maintain the status quo, or the same old thing, is as strong in our genes as any of our deeply-seated fears. It is fears like these that allow us to easily quit or to not even try to form a “more perfect union”. We are so afraid that the result of our efforts will not turn out to be better than what we have, that we’re not even willing to try. So, we “go along to get along“, letting others make decisions for us that affect our most basic needs.

Are there solutions?• Seems one of the obvious solutions, is to build and maintain

homes that are affordable, where there is a larger base of property taxes, which could be generated to run the government. So, is it possible?

• This project to create attainable/obtainable housing for the

Working Middle Class is offering buyers a chance to participate in "fair equity", to reduce the price of their purchase. What is fair equity? It is similar to "sweat equity", which usually means to participate in building or remodeling your own home, for a reduction in sales price. In our case, it requires very specific actions on the part of the buyers, according to our plans.

• Co-operative housing development and co-housing ownership are the two key organizing forces behind the concept. There is a huge opportunity for this concept nationwide, because around only 1% of the manufactured home developments are in co-operative ownership.

• Our effort is to focus locally in and near downtown Los Angeles initially and then throughout LA County where the need for higher density housing is so people don't have to drive “too far” to get to work. This is why we're also focused on “mixed use” development, which is a combination of residential & commercial building.

Secondary Mission of HUM

To improve and enhance the local economy,

neighborhoods, and quality of life, initially in Los

Angeles County, by reducing the cost of living,

commuting to work and improving local business;

and to improve and enhance the native natural

habitat and environment, while providing the

opportunity for the Upwardly Mobile to maintain

homes for themselves.

BackgroundCooperative Housing

• Cooperative Housing is an apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings.

• It is operated for their benefit by their elected board of directors.

• In a cooperative, the corporation or association owns title to the real estate. (An exception is when the land is owned by a Community Land Trust).

• A resident purchases stock in the corporation that entitles him to occupy a unit in the building or property owned by the cooperative.

• While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

Low-income & First-time Buyers

• Cooperative home ownership is particularly accessible to low-income or first-time buyers because it often eliminates the need for an individual to qualify for a mortgage.

• Historically, mortgage qualification has been problematic for low-income homebuyers who are more likely to have a limited or incomplete credit history. Cooperative homeownership can eliminate this problem.

• A co-op is most often financed through a blanket mortgage, for which the cooperative corporation is liable. Consequently, no single resident is liable, and individual residents do not need to qualify for outside financing. It is the combined value of the shares that creates the asset which qualifies for financing.

Where are Today’s Co-ops?

•Today, there are more than a million units of cooperative housing in the United States.

•Almost 80 percent are located in New York with others scattered around the country, primarily in metropolitan areas.

Cooperative Homeownership

Homes for the Upwardly Mobile

Social Entrepreneurism is a combined effort ofprivate businesses & non-profits towards a common goal

Home

Buyers

Club

House

Builders

Group

Mutual

Benefit

Society

Prospective Homeowners Association is all three of the following types of organizations:

The goals of the organization are accomplishedthrough Social Entrepreneurism & Public Interest Advocacy

Why do this?

Why are We Doing This? ("if it's broke, fix it")

• Because NO other developer is found that has given their business a mandate, no non-profit can justify it as their mission, no government agency or elected body will take this on directly to this degree as their purview.

• Everyone, except for a few exceptions just wants to leave the sleeping dog lie. That is too much of a challenge for social entrepreneurs to leave alone.  

• Therefore, we're doing it to solve this region's major problems for businesses, individuals and families. (Housing & Commuting).

• Our goal is not to do many unique things, but to orient many common things in a unique way. 

What we are not doing• We are not seeking to help members create a down payment

for their home purchase as some housing purchase facilitation organizations, but to create new homes that are less expensive to purchase, based upon the individual member's income level, lowering the cost of the purchase and therefore the down payment, without government grants or assistance from private foundations.

• To get there from here, we've developed a buyers' club to develop membership income which will be used to finance the pre-operations start up of the co-operative, and assist in paying for the work of planners, designers, advisors and architects.

• Other ways that we plan to eventually develop properties to help first time buyers include some unique concepts for getting people from where they are as renters, to homeownership (See presentation page for our concepts on lease-to-own).

Both Original Ideas& Common Practices

• These ideas are made from unique, as well as usual methods of creating personal wealth from home ownership.

• Concepts for development are similar to all of the common concepts of building.

• The plans are designed to take advantage of the building codes and regulations regarding housing in California.

• But the most complicated part is how it took the creation of multiple separate and independent corporate entities to complete the total plan.

– Each of these organizations have very specific and individual purposes and goals.  

Difference it makes• One way of establishing affordable housing in the local area is not

necessarily better than another way.

• However, in our way of thinking, it is important that the proper balance is created between the classes and maintained in an area of limited supply and limited resource.

• Therefore, it is important that there is as much housing built for the Middle and Lower Classes that is built for the Upper Class. It is the results however that in the end count.

• Does each plan create a balance? Do the plans when taken as a whole create an overall balance? How does the overall balance affect the equity in the Quality of Life in this local area?

• We don't want to reduce the effect of squeezing out the Working Middle Class, we want to reverse it.

The benefit that results from each affordable housing plan in this

area?

• Every plan save one benefits the Lower Class, and the only plan that benefits the Middle Class benefits primarily the Developer Class, while the Middle Class pays the same price for the homes as the Upper Class does.

• In that plan, the benefit that accrues to the Middle Class happens only because there is a subsidy for the down payment, but the Middle Class can only qualify for the purchase if their income can cover the cost of the monthly payment thereafter.

• On the other hand, our plan benefits primarily the Working Middle Class, while benefiting the Lower Class as a by-product, and the Upper Class only as a means to an end.

• While the best that other plans can offer only reserve the natural habitat, while benefiting the Upper Class and ignoring the other classes to any degree of equity, our plan integrates the natural environment and thereby enhances the local species of flora and fauna.

Ready to Spring into Action

• This is a business plan, which is ready to spring into action. • Where the plan refers to organizations, companies, members, working

committees and boards of directors, know that it is only in the formation stage. • The plan was begun in 2003, but the names of the organization have not yet been

registered with any County, nor have any of the individual entities, which make up the organizations, been legally incorporated in California or any other state.

• Therefore none of these organizations have requested nor received any designations from HUD (Such as CHDO) or the IRS, such as 501(c)(3) or subchapter 905.

• So, when any of these entities or issues are referred to in this plan, they are only mentioned in terms of a future tense, or potential relationship or status.

• We have not yet reviewed these plans details with legal or financial professionals. • We have however created these plans by interviewing professionals in the

housing and construction industries, including architects, builders, association leaders & others.

• We have compiled this plan by researching and distilling the information they have shared with us.

• This is an honest and forthright attempt to consider all of the needs of the people in California Coastal Communities for housing.

• It is a plan that causes people to work together for the common good.

To Whom this Matters Most

• What would it take to pull this idea out of a working plan and make it a reality?

• It would take at least the self-interest and time of the Stakeholders and the experts in housing development finance to build the financial models while looking at the minute details of the idea.

• It would take many dedicated individuals joining the working committees or board of directors to foster these developments.

Who are the Owners of HUM?

”Homes for the Upwardly Mobile”

This is a community-basednon-profit organization

As such it is owned and directedby the Community Stakeholders

This includes those buying shares in the co-ops, which are not themselves non-profits, and are

also owned by other shareholders, such as social investors who are concerned about the health

and well-being of the community.

Who are the Stakeholders?• Stakeholders in the effort to build homes

that the Working Middle Class can afford

• We could have preferred buyers, and may develop a "point system" to qualify buyers at some point, based on:

– their contribution to the local community and this effort, as well as– the communities' need for them as homeowners in the community,

(such as emergency workers)

• for now we will work to provide homes to the members of Prospective Homeowners Association, on a first-come, first-served basis.

• However, when a prospective home buyer's employer purchases a corporate membership,

– any employees working for that employer will get bumped to the front of the list,

– right behind other employees whose employer also purchased a corporate membership before them.

Stakeholder Benefits (1 of 3)

• Home Buyer: A home they can live in, save money for the future, gain equity and increased values, a willable piece of property for their heirs.

• Land Donor: A donor would receive a tax write-off for the land donation, or receive a life insurance policy equal to the value of the land donation. (check with your tax specialist) This policy could be used to benefit your heirs, or if you got a certain kind of policy, it could be used as "living insurance" where if you ended up with a critical illness, your policy could pay you cash to live through that illness.

• Existing Home or Land Owner & Seller: A chance to sell their older home, which may exist today on a larger piece of property, and use the proceeds to buy back into a new unit on the same piece of property. They could live in a newer condominium, townhouse, or 2-story home, where they feel comfortable living! We also reward landowners for working with us, if they would like to make their properties available to our builders. Landowners may share in the profits of the sale (difference between cost of building and selling price) of the homes, once they are built and sold, on top of the profit of the sale of the land itself!

• Existing homeowners - You have an opportunity to borrow against the great equity in your home (short term loan, or use your home to assist us in securing start-up funding), and invest it in one or more of our projects. Instead of letting your home sit while land values escalate or selling it off so you can buy another home in Arizona, why not invest in your home town and help other young families as well as yourself? (This is not an offer for an investment - we're still in planning stage)

• Builder-Developer or General Contractor: A chance for certain trades to work on developing an additional project that wouldn't have come about any other way. Our organization has created a financial reward for builders in return for making homes accessible to first-time buyers. These rewards include sharing the future equity of the property, sometimes over the life of the home, if the builders work with us to lower the cost of building. This helps lower the purchase price for first time home buyers. 

• Project Manager: An opportunity to create a project that defines the Project Manager's community-oriented spirit and investment in time, to create a whole new lifestyle and benefit for the local community. 

• Home Manufacturer: A chance to sell products to a large group of buyers it Wouldn't have had any other way, so they buy into the American Dream.

 • Home Buyer's Employer: An opportunity to keep good employees in the local

community, who might otherwise leave to where they could afford to purchase a home. When a prospective homebuyer's employer purchases a membership from HUM, it allows that member to go to the front of the list (behind other members who are so prioritized by their employers' contributions).

• Home Buyer Community: An opportunity to have a large and economically diverse group of individuals and families invested in the future of the community, buying additional products for a larger home than they may have lived in before. These same buyers would keep their earnings invested locally. They would not be those who purchase the home for a secondary domicile. They would purchase all the things a Middle Class person purchases. (Ask yourself this: "Has the Santa Barbara economy improved in the last 5 years, and the County received more tax dollars from product sales; from all of the buyers of high-priced homes now in the area"?)

Stakeholder Benefits (2 of 3)

Dear Construction Industry Employers:June 2, 2008 

Dear Construction Industry Employer:  If like many workers, your employees and you yourself are tired of commuting from somewhere with reasonable rent or affordable home purchase prices - don't you and they both want relief? "How long are your employees willing to wait to own a home of their own"? I'm writing to ask you to help your employees purchase their first home.  You may already know that no one who earns their living working in Santa Barbara can afford to buy a home. Now, only 2% of buyers in Los Angeles County can afford to buy a home if they work for a living. Few can afford the other developers' homes because like any business, the developers want to sell their homes at market rates. Why are no housing developers offering this opportunity? Because in a market economy, every company is charged with making as much profit as possible. When existing owners or new property developers can sell for market price, why would they sell for less - what's in it for them? But then why should a contractor build less homes, because of the lack of creative developers to work with? If homes can be built homes for the 98% who are left out of the loop currently for home purchasing opportunities, what kind of return would that provide your company and your employees?  As members of Prospective Homeowners Association, a not-for-profit start-up, contractors can work with their employees to make non-government sponsored affordable housing happen, at a price that is affordable! How is that possible? View the websites and see the simple equation. The formula created by Prospective Homeowners Association allows for a kind of "sweat equity", and other features that reduce the cost to the buyer and the time to market. This is not just about “affordable housing” for low-income persons. This is truly attainable housing for the Working Class. These are true "trickle down" economics due in part to private subsidizations from the profits of residential property development sales to upper income buyers, along with multiple other established techniques.  If like me, you would like to make a difference, for yourself and your business associates, please consider joining with the Prospective Homeowners Association. Help produce the results needed in Southern California for working families; earn income for your company, and help your employees get their own new homes. You can help by either becoming a member, or directly sponsor this effort and donate to assist with predevelopment funding, or work with us in development of building and remodeling opportunities we identify.  Visit www.CooperativeHomeowners.com and view the Microsoft PowerPoint or Adobe PDF presentation, and www.ProspectiveHomeowners.com to read our complete business plan. Then for a discussion of the benefits your organization can experience, please contact me for an in-person conference. I am looking for sponsors with an enlightened self-interest. Perhaps we can work together.  Sincerely, Gary R. Cook, Founder & Development Sponsor

Stakeholder Benefits (3 of 3)

• Community Supporter: A Community Supporter is one who believes in the possibilities our mission and is willing to work towards seeing the dream come to fruition. That person may derive satisfaction from offering a great level support that costs very little, depending upon their personal age and health condition. We are able to offer that supporter the opportunity to provide support to our ventures in the form of a life insurance policy, with our organization listed as the beneficiary. Our organization may receive the proceeds upon their passing, and if there comes a point in their life where they can't afford the cost of the premium, they let us know and we'll ask another supporter to replace the expense.

• Mortgage Lender: A whole new large group of customers they would have never had any other way. In Nov. 2007, the market is in the doldrums, and this offers an opportunity to finance existing and new housing stock, as well as build additional; by giving classes of families the opportunity to buy into the American Dream through the utilization of the Co-operative Corporation, and other building techniques that lower the cost of construction and acquisition of land.

• Project Financier: An opportunity to start a project that fulfils a worthy community goal, and to profit by the good return on a short term investment.

Natural Environment• How can housing benefit the naturally preserved environment, and enhance it without

changing its character?

• By fostering a natural environment that is different than other built developments, through enhancing it with native plants and wildlife and natural energy resources (See National Renewable Energy Laboratory).

• We seek to work with local environmental groups to create a landscape for all of our developments that foster the lifestyles of the wild animals, birds, and insects that are natural to this local area.

• We want to have the least amount of "footprint" on the land we use and will only permit landscaping that both requires low-water-usage and is a natural enhancement (restoration ecology); even if this means designing the home to be vertical or putting much of the square footage of each home underground to increase insulating qualities, storing the sun's energy and recycling and enhancement of gray water for plantings.

• We also want to utilize the sun, wind and rain as a component in our developments, so that the requirement for electricity may be provided as much as possible by processing that can occur and be stored on site.

• As far as telephone lines and other cables for television in outlying areas, we will utilize satellite and cell phones. Any windmill activity will be designed in such a way so as not to have an impact on bird flight patterns and destruction of populations.

Entities Separately Created in the Process1. The purpose of Prospective Homeowners Association, as a Mutual

Benefit Society or Builders Society, is to act on behalf of members as a Home Buyers Club or Union as well as a public special interest group

(This is the non-profit corporate entity which incorporates other entities below)It becomes the Community Association for later Co-operative Developments.

• Non-profit (Homes for the Rest of Us, Inc.), Property Development Company

• It’s responsibility is to build out properties for low-low, low and moderate income buyers (See: Other non-profit housing co’s.) & as such it owns a for-profit below it.

• For-profit Wholly-owned subsidiary Competitively Priced Residences, Inc. (CPR) Builds out properties for middle, upper-middle and upper income buyers)

2. Housing Co-ops (Non-profits) incorporated: One a LEC, other a MEC– Limited Equity Co-op (LEC)

(Owns and manages properties for low-low, low and moderate income buyers)

– Market Equity Co-op (MEC) (Owns and manages properties for middle, upper-middle and upper income buyers)

• Community Land Trust (Independent non-profit corporation) is formed, and Limited Equity Co-op’s land is transferred to it, so it remains affordable by leasing the land itself back to the co-operative for 99 years.

Other non-profit Housing co’s.

• We have considered incorporating as a public charity under another non-profit, as a subordinate (IRS) Sec. 905 organization to an existing 501(c)(3) based in California.

• The purpose of doing this would be to get our status rolling quicker as a non-profit, for the purpose of receiving donations.

• We have been unable so far to incorporate this way, for the fact that Housing Non-profits typically have a mission of helping only low-low to lower income buyers, and they cannot mix their mission with our mission of additionally helping moderate and middle income buyers.

Flowchart of Organizations

Homesfor the

UpwardlyMobile

CommunityLand Trust

MarketEquity Co-op

LimitedEquity Co-op

ProspectiveHomeowners Association

Homes for theRest of Us

CompetitivelyPriced

Residences

IndependentContractors &Consultants

Homes for theUpwardly Mobile

CommunityLand Trust

Stages of Organizational Growth

1

Market EquityHousing Co-op

Limited EquityHousing Co-op

4A

CompetitivelyPriced

Residences

2A

Homes for theRest of Us

5

2B

ProspectiveHomeownersAssociation

CharitableTrust

4B

Developfor

Resales

4C

3A 3B

Difference between Prospective Homeowners, a Public Interest Advocacy & Mutual Benefit Association & Home

Buyers Club

• Homes for the Upwardly Mobile (HUM) buyers club members are not owners yet, but aspire to be. – To make that happen, HUM contracts with Development Sponsor and other consultants and home buyers skilled

in development processes and functions to lay the groundwork for the further development of construction goals. – There is a cost to hiring consultants to perform objective analyses and create plans, therefore the necessity to

charge memberships. – This is the staging organization, which is the entryway for new members to join the process and lend a hand and

give funds to sponsor its success.

• Prospective Homeowners Association (PHA) members are in the process of buying and building upon the land.

– This organization formalizes the relationships with affiliates, builders and suppliers. – Once someone becomes a member of the association, the members fees for participation are different than the

rates they've been paying, for different services than HUM.

• The above two organizations are quantitatively and qualitatively different from the other two organizations just below here, which are property development companies; none of the previously-mentioned organizations, until the final stages of physical property development, have anything to do with a co-operative*:

• Homes for the Rest of Us (HRU) – This organization (non-profit) owns CPR and through it, as the developer, it builds concepts for the creation of

homes and communities. It may also receive donations, and give receipts which may be used for tax write-offs.• Competitively Priced Residences (CPR)

– This organization (for-profit) is a wholly-owned subsidiary of HRU and it negotiates and creates contracts with general contractors and home-landowner development partners to improve land and build homes and structures for living.

– This entity may also take investment dollars by selling shares; or may co-operate with other developers.

• * L.E.C or M.E.C. (These two designations - as defined on other pages herein** - have to do with the establishment of a co-operative, of which none of the organizations listed on this page either are or will be, until the final stage of any particular property's development; whereupon one or more of the properties and its residents will form one each of these legal co-operatives and manage to own and manage particular properties by virtue of their being corporate shareholders, the land of which the homes reside upon will be owned by a Community Land Trust and leased back to that housing co-operative. 

• Therefore, the Process Creates & Maintains 6 Corporate Entities (including the Community Land Trust)

2 Different “Levels” of Co-ops

Benefits of Housing Co-ops Types:

• Market Equity Co-opsIn a market equity co-op, units are bought and sold at market value, similar to family homes and condominiums. In practice, a market rate co-op is operated in a manner similar to a condominium.

• Limited Equity Co-opsOne of the unique aspects of a cooperative corporation is that the co-op can adopt bylaw provisions that limit the maximum resale prices of co-op units. Typically, this strategy is employed in order to maintain long-term co-op housing affordability and retain the value of any public subsidy that may have been used in financing the creation of the co-op. Since this type of co-op limits each unit’s equity appreciation, it is called a “limited equity” co-op. Because of their potential for offering long-term affordable housing, limited equity co-ops are attractive recipients for government and non-profit grants and loans.

Examples of limited equity formulas are listed below:

(1)• Zero or no equity–The member’s initial equity to buy in to

the co-op does not appreciate and is simply returned on departure, less any debt owed to the co-op.

• Constant dollar–The value of a member’s share increases only by a standard inflation index, such as the consumer price index.

• Limited percentage–The maximum resale price is allowed to increase by a certain percentage per year to reflect some degree of market appreciation.

• Limited resale–Maximum resale price is increased by a set amount per year, typically based upon the underlying mortgage. For example, under a 30-year mortgage, members might be credited with an annual increase in equity equal to 1/30th of the “value” (cost to develop) their unit.

Examples of limited equity formulas are listed below

(2):• Shared equity–A non-profit or other such organization may own a

unit in partnership with a resident, allowing the resident to reside in a more costly unit than would otherwise be possible. When the unit is sold, profit is split equitably between the resident and the non-profit partner.

• Credit for amortization without appreciation–Members’ equity accounts are credited with their initial down payment, plus a proportionate share of the principle on the blanket debt that has been paid down by the members’ monthly payments.

• Hybrid–In one housing co-op developed by NCDF, bylaws were written so that a member’s equity appreciation was structured in two stages. For the first five years, equity growth was limited, equaling the sum of one percent (1%) per year inflation allowance and the member’s contributed share of mortgage principal payments. On the first day of the sixth year of residence, the member will be allowed to sell his/her share at market value. This formula was designed to encourage and reward long-term ownership of units.

What is a Community Land Trust?• A community land trust is a private non-profit corporation

created to acquire and hold land for the benefit of a community and provide secure affordable access to land and housing for community residents. In particular, CLT’s attempt to meet the needs of residents least served by the prevailing market. Community land trusts help communities to:

– Gain control over local land use and reduce absentee ownership

– Provide affordable housing for lower income residents in the community

– Promote resident ownership and control of housing– Keep housing affordable for future residents– Capture the value of public investment for long-term

community benefit– Build a strong base for community action

(see our website for more data on Community Land Trusts)

Making development different• We would not build as so to drive down the value of existing properties, but might

stabilize them, by 1) building a new tier of property values, by setting prices that do not escalate with the local market; through deed, sales contract and membership in the co-operative, and 2) By building slightly below market rate homes that escalate or de-escalate with the market over time.

• Create a village atmosphere, where people are not locked away from one another, but they are enticed to participate in the common space provided by the developed environment. 

• Even when people are in their homes, develop each so that part of the inside and the outside share commonality.

• Create mixed-use (commercial & residential) space, in order that people do not have to commute to “go to work”, but can walk to work downstairs. 

• Develop Telecommuting (TeleWork) Centers  for the outlying areas, or even for inner city areas, so people do not have to commute physically to work.

• In the effort to create housing for outlying "village" areas, foster development of industry, in a way that provides opportunities for people to have good jobs, in order that the town is not dependent upon low skill/wage support positions for health and tourism, and

• Develop an incubator for entrepreneurs who live in the housing development, providing space, supportive services, financial and marketing assistance for micro-to-small business owners.

Initial Questions & Answers• Why are you here today?

• What Stakeholder category do you fit into?

Service Provider:–Builder-Developer–Project Management–New Home Sales Company–Prefab. Building Manufacturer–Architects, Community Planners–Attorneys, CPA’s–Mortgage Companies–Qualified Investors

Community Stakeholder:–Prospective Homeowner–Existing Landowner–Existing Homeowner–Troubled Mortgage Holder–Association Management Svc.–Home Buyers’ Employers–Non-profit Community Services–Local Community Leaders

Actions & Meeting Outcomes

GoalsPlansCommittees

VisionPurposeContext

Search for PropertiesOffer Memberships

Start EffortDevelop Awareness

Break Time

This is a moment to take a 10 minute break, to get to

know the people who are here today in the room with

you.

When we re-join the meeting, we’ll start at the previous

screen.