Support More Affordable Housing Co-ops in Oregon!
Oregon's 2023 legislative session is underway, and SquareOne has put forth two bills to advance the development of affordable housing cooperatives HB2465 & HB2466. We also strongly support SB601.
To allow LECs to qualify for Oregon Affordable Housing Tax Credits (OAHTCs) without going through a rental program. >> click here to view and submit testimony
To amend the Low-income Rental Housing Property Tax Exemption to also include housing owned by LECs serving very low-income households. >> click here to view and submit testimony
To provide tenants of multi-family housing with opportunity to purchase their building by forming a co-op when the owner lists it for sale.
HB 2465 & 2466
Problem: Despite the success of manufactured dwelling park co-ops, cooperatively-owned multi-family housing remains an unfamiliar concept in Oregon and an untapped resource for addressing the state’s housing affordability crisis. As a result, they do not currently qualify for several incentives that are available to other affordable housing types serving a similar low-income demographic.
Addressing the Problem: HB2465 & HB2466 have been proposed to extend two existing housing finance incentives to LECs. The overall intent is to 1) allow LEC projects to hit deeper affordability goals in providing resident-owned housing, and 2) encourage more housing developers to pursue the LEC ownership structure.
Both bills have been endorsed by Oregon Housing Alliance, Housing Oregon, CASA of Oregon, Better Housing Together, Oregon Cooperative Housing Coalition, and SquareOne Villages.
>> Support HB2466: To amend the Low-income Rental Housing Property Tax Exemption to also include housing owned by LECs serving very low-income households.
The savings to the LEC would be directly passed on by reducing the monthly carrying charges paid by residents to the LEC, helping to create a resident-owned housing option for households under 60% area median income.
A property tax is already available to rental housing serving this same income demographic. While an LEC is a form of resident-owned housing, the resale price is restricted in order to preserve long-term affordability.
>> Support HB2465: To allow LECs to qualify for Oregon Affordable Housing Tax Credits (OAHTCs) without going through a rental program.
This would allow the LEC to reduce the interest rate on its mortgage by 4%, a savings that would be directly passed on by reducing the monthly carrying charges paid by residents to the co-op.
OAHTCs are already offered to manufactured dwelling park co-ops and to rental housing projects paired with LIFT Rental.
Background: In 2019, SquareOne Villages received a grant from Meyer Memorial Trust to research and develop the LEC ownership model. SquareOne piloted a 6-unit LEC in Springfield in 2020 (C Street Co-op), and we are currently under construction on a 70-unit LEC in Eugene that will be permanently affordable to households under 60% Area Median Income (Peace Village Co-op). We have another large LEC project in the pre-development stage, and several other future development opportunities on the table. There has also been growing interest in the cooperative housing model in Oregon as a long-term affordable housing solution. The Oregon Cooperative Housing Coalition recently formed as an effort to organize and advocate for these interests.
What is Cooperative Housing? It’s multi-family housing that is collectively owned by the residents through forming a cooperative corporation. Each resident has an ownership interest in the co-op rather than owning their individual dwelling unit.
What is a Limited-Equity Cooperative (LEC)? The proceeds that members can get from selling their ownership interest in the co-op is limited by the pre-determined formula set in the bylaws. This keeps the cost of shares low and preserves affordability for future members.
Limitations of Rental Housing & Single-Family Homeownership
The vast majority of public investment into affordable housing is restricted to low-income rental housing. In rental housing, low-income residents lack control, security of tenure, and equity.
Homeownership is not a one size fits all solution. In traditional single-family homeownership, lower-income residents are exposed to significantly greater risk and are far less likely to generate wealth when compared to higher-income homeowners.
Combining single-family homeownership with a community land trust model is an effective way for creating greater accessibility and stability to low-income households, however the household still must qualify for a mortgage, which is out of reach for many.
Oregon Housing & Community Services has two divisions, rental and homeownership, which target different demographics. The rental programs primarily target households under 60% area median income (AMI), whereas the homeownership programs primarily target households between 60% to 80% AMI.
How LECs Fill a Gap
LECs helpf fill a gap, providing a pathway to resident-owned housing for households under 60% AMI, providing greater stability and control to a population otherwise relegated to rental housing.
LECs don’t require each households to qualify for an individual mortgage. Instead, the co-op holds a single mortgage on the property. Each member holds a proprietary lease with the co-op, giving them exclusive rights to a specific dwelling unit. And in turn, each member pays a monthly carrying charge to the co-op to cover all operating costs of the housing, debt service, reserves, etc. Similar to rent but without third party profit.
How this Relates to HB2465 & HB2466
The fact that there is a single mortgage and that members make a monthly housing payment to a single entity is a key point in relation to the two bills that we have proposed, which extends existing incentives for rental housing to LECs serving a similar income demographic.
Currently both of these incentives are specific to "tenants". While members of a co-op are not technically "tenants" under Oregon law, the cashflow and affordability restrictions are similar. And this can be easily amended by adding "tenants OR a holder of a proprietary lease in a limited equity cooperative"
Implementing Permanently Affordable LECs at Scale
In 2021 the state legislature awarded SquareOne $2m under HB5202 to create a “Shared-equity Affordable Homeownership pilot program”. Along with some other one-time funding, this allowed SquareOne to begin construction on the 70-unit Peace Village Co-op, which combines and LEC with a CLT model, creating a permanently affordable homeownership opportunity for households under 60% AMI.
In order to replicate this, the state needs to establish ongoing funding and incentives for LEC housing, such as:
Property Tax Exemption (as proposed in HB2466)
Oregon Affordable Housing Tax Credits (as proposed in HB2465)
Additional funding for the Shared-equity Affordable Homeownership pilot program created by the legislature in 2021, or soft set aside for LECs under LIFT Homeownership
Despite the success of manufactured dwelling park cooperatives, multi-family housing organized as a resident-owned cooperative remains an unfamiliar concept in Oregon and an untapped resource for addressing the state’s housing affordability crisis.
While recent advances have been made with renter protections, tenants still face significant housing insecurity. For example, landlords were still able to raise rents 14% this year, and out of state investors continue to buy up our housing stock and squeeze it for profit.
Homeownership rates are at a historic low, and one-third of renters are paying more than half of their income towards housing costs.
Build on the success of the legislation that has supported the preservation of affordable manufactured dwelling co-ops.
Extend a similar concept to multi-family housing, where tenants have an opportunity to organize and purchase their building following an owners intent to sell.
If combined with other resources, this could be a more cost and time effective solution to addressing the scale of our housing affordability crisis when compared to new construction.
Housing co-ops offer a more accessible pathway to homeownership, providing an opportunity to boost our homeownership rates.
This solution is supported by SquareOne Villages, CASA, and Oregon Cooperative Housing Network.
How SB601 Works:
Each tenant would receive written notice of the owners intent to sell the housing.
The tenants would then have 10 days to provide the owner with written notice that they have formed a single tenant committee and have an interest in purchasing the building.
If notice is received, the owner would not be allowed to accept a purchase offer until after making a binding offer to sell the housing to the tenants committee at an equal or lower price and on substantially similar terms. The tenant committee then has 30 days to accept the offer.
We propose to amend the above dates to 15 days and 45 days, respectively, and that notice also be provided to OHCS. This would be in line with current law for manufactured dwelling parks, and provide supporting organizations a better opportunity to advise tenants on their opportunity to purchase.