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A Tyee Series

The Coming Co-op Crunch

As funds dry up and buildings run down, residents don't want to give up on their affordable way of living.

By Colleen Kimmett, 2 Apr 2009, TheTyee.ca

View Court Co-op

Still in fine shape: View Court Co-op in Vancouver.

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Hemmed in by duplexes on either side, the courtyard at Penta Housing Co-operative features a communal garden, playground and massive willow trees.

It's the kind of place you'd want to raise kids: safe, secure and within walking distance to parks and the beach. And, in a neighborhood where houses sell for upwards of a million dollars, it's affordable for a one-income family.

That's why Bruce Inglis, his partner and their two children moved here five years ago (after waiting eight years to get in). The kids have since left home, but for Inglis, "It's hard for us to imagine living anywhere else."

Still, that's a reality he knows they might face one day. The buildings here are 30 years old, near the end of their shelf life, and that means maintenance costs are increasing.

"There's a finite point at which people can continue to repaint or patch up to keep things going," says Inglis.

Like many of the co-ops across British Columbia and Canada, Penta was built in the '70s with a wave of funding from federal government programs that both reduced the cost of the mortgage, and provided subsidies for low-income units.

These programs, which were delivered through operating agreements with individual co-ops and government, continued through the '80s and early '90s. The result was an affordable, diverse and community-based housing stock; there are now approximately 2,000 non-profit housing co-ops currently across the country. In British Columbia, 260 co-ops provide approximately 14,500 homes for mid- and low-income families.

But in the next 10 years, nearly half of the government operating agreements will expire, leaving many co-ops to effectively fend for themselves.

A new co-op generation?

Thom Armstrong, executive director of the B.C. Co-op Housing Federation, says there are a couple of implications to consider.

"On one hand are a whole bunch of wood-frame buildings nearing the end of their 30- or 40-year life. Co-op members are asking themselves, how long will my housing last?" he said.

"At the same time, when you don't any longer have a relationship with government, you don't have an obligation to do anything, other than what the laws of the land say, but neither do you have the security that came with the government financing."

"Is it just a stock of disposable housing, does it just run out and fall down? Or do we rebuild it, refinance it for another generation of co-op members?"

Can co-ops afford to stay affordable?

The question of how (or whether) to refinance and rebuild in the absence of government subsidies is up to individual co-ops. The Co-op Housing Federation of Canada offers a certification program, called 2020 Vision, that requires them to establish a mission statement and financial plan.

Working through the process, says Armstrong, will not only force co-ops to think about their future but also makes them more desirable to private financers.

"They're going to have to go to a commercial lender and say, based on the value of our property and based on our income stream... will you lend us the money to rebuild for another 40 or 50 years," said Armstrong.

"Co-ops haves spent years building really viable supportive communities, and now they're going to have to turn their attention to what it takes to be a real viable business as well."

Never too soon to plan

Scott Hughes, director of community business banking at VanCity has a word of advice: make sure to plan well in advance of when an operating agreement might end.

"Typically, the decision-making process is slower. They will need enough time to get the appraisals and inputs that they need."

Although property values and the amount of financing have shrunk, "low interest rates allow you to borrow more against the same stream of rental payments," he says.

Roofs and Roots Housing Co-operative has had the experience going it alone. Incorporated in 2001, they were the first new co-op in the Victoria area in 15 years.

"The major challenge for a new cooperative like ours was that we don't have an overarching authority, like the federal government, to provide us with a down payment or the benefits of subsidies," says board chair Pascale Knoglinger.

They had to raise equity from five different government and non-governmental funders ("with five different deadlines and requirements," Pascale notes) and find a seller patient enough to wait as they gathered a down payment.

'That's the Catch-22'

"For a co-op these days, you really have to find the right seller and have to have a really good relationship will all these different funders," she said.

Making sure that even low income people can afford co-op housing charges is more difficult, she says.

For example, in order to access certain funding from the Canada Mortgage and Housing Corporation, unit prices have to fall under the median income threshold.

If it was to obtain that funding, the co-op would have to lower some of the units' monthly fees, thereby decreasing revenue, said Knoglinger.

"You have to incur a deficit in order to meet the criteria," she says. "That's the whole thing, that's the catch-22."

'Sweat and time'

"It's hard for people who live in co-ops to think about developing new co-ops," says Sol Kinnis, Roofs and Roots co-founder. "It's a heck of a lot harder than I thought it would be."

She thinks existing co-ops could play a role in invigorating a new stock of housing by contributing to a development fund.

"If we contributed a certain amount of money every year towards a development fund, it could be used as leverage for government funding," she says.

But, as Inglis points out, the success of co-op housing depends on the people involved, not just the funding available.

"We moved here because it was affordable... but in the five years we've lived here we've had no choice but to get closer to the real costs," he says.

"Maybe not so much in real dollar costs, but on a monthly basis some of us contribute a lot of our sweat and time... easily several hundred dollars of my own labour. It's a value that people often forget about."

Related Tyee stories:

[Tyee]

Colleen Kimmett is a reporter for The Tyee.

This series on affordable housing was made possible in part through the support of Tides Canada Foundation, the Catherine Donnelly Foundation, and the Van Tel/Safeway Credit Union Legacy Fund, held and managed by Vancity Community Foundation.

16 Comments:

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  • Tbarnston

    2 years ago

    Harper is already subsidising housing market

    Good article. It is a shame that it is even an issue for co-ops to get funding for renovations to remain liveable and affordable. Clearly the government has no desire to see an increase in coop housing.

    A quote stuck out for me:
    "Co-ops haves spent years building really viable supportive communities, and now they're going to have to turn their attention to what it takes to be a real viable business as well."

    It is striking because the governments lack of commitment to such a viable method of housing is frankly quite disgusting when you consider the following:
    "Ottawa to buy $50B in mortgages, hopes to spur loans"
    http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20081112/Ottawa_mortgages_081112/20081112

    Overnight, the Government can cough up $50 billion to get in to subsidizing mortgages for the banks. Imagine what even 5% could do for coops and other types of affordable housing across Canada.

  • anarcho

    2 years ago

    Are You serious?

    Wood frame buildings 30-40 years old "at the end of their shelf life?" My wood frame house was built in 1912 and will probably still be here in 2112, as long as the roof is kept shingled.

  • realisticman

    2 years ago

    Tbarnston

    "Overnight, the Government can cough up $50 billion to get in to subsidizing mortgages for the banks."

    Sorry but that's not what occurred. There was no subsidizing. At the time there was a lack of liquidity in the system and the government PURCHASED the mortgages so that the banks had liquidity to enable them to finance their daily business, which includes providing funds for companies to meet payroll, so that working men and women can buy food, etc.

  • G West

    2 years ago

    Not at all

    The government bailed out the banks, and to the tune of a lot more than $50 billion dollars for that matter.

    That was simply the first installment - as for the last part of your claim, realistman, I take it you're not following the news.

    http://www.cbc.ca/money/story/2009/03/24/ei-bankrupt-canada-january.html

    The truth hurts - sadly it doesn't hurt pee wee OR the banks.

  • realisticman

    2 years ago

    Completely untrue. Suckers beware!

    Canadian banks have not been bailed out at all. If you have any details that they have then describe them. This myth doesn't hold any water whatsoever! The link to the other story is completely unconnected to this spurious claim.

    "In October, the World Economic Forum ranked Canada as the soundest financial system, mostly as the result of its conservative practices. The United States ranked 40th.

    Things are looking so rosy for Canadian banks, they are now even turning down some of the funding that the federal government is making available to them, reports The Globe and Mail.

    The banks have stopped selling the government the full amount of mortgages they could under Ottawa's $125-billion mortgage purchase program, the report says -- a good sign that they are weathering the financial crisis..."

  • White Knight

    2 years ago

    wood frame buildings

    30 - 40 year old wood frame buildings are at end their useful life?

    Only if you don't maintain them properly.

    Our 1961 bungalow needs work, yes, but it is certainly still very useful. As long as you keep up the maintenance, it will serve for at least that long again and more. Yes, we put a lot of sweat into it but that is much cheaper and better stewardship than tearing it down and rebuilding. Vancouver's numerous post-war houses are still serving well after more than 60 years.

    Any 1970s building should be paid off by now. So take the rent money to increase maintenance.

  • G West

    2 years ago

    Yeh Right! After holding

    Yeh Right!

    After holding out their hands for $125 Billion (not the $50 billion you mention) they aren't complaining.

    Glad you enjoy holding the debt. I don't.

    As for the World Economic Forum - who cares?

    They represent the kind of cretins who created this mess.

    As John Kenneth Galbraith put it, 'economic prognostications give astrology a good name.'

  • realisticman

    2 years ago

    Revealing

    "As for the World Economic Forum - who cares?".

    Millions of people are at risk of suffering from job losses and food shortages are already occurring. Sure, we in Canada are extremely fortunate to live in one of the only places that is so well governed that we are not suffering like most of the world is. Yet some people bury their heads in the sand and say, "Who cares?".

    Whatever happened to compassion?

  • Tbarnston

    2 years ago

    Good news Realisticman

    Its great news that the banks don't need to tap the full 125 billion. That should mean there is money left over that the government can invest in affordable housing, right?

    Call it a subsidy or don't call it a subsidy. The point I am trying to make is that the government was able to amass a huge amount of money that would be available to the banks. If we assume the party line here and say that government is "investing" in these mortgages, then the government should be able to "invest" in coops too.

    The rationale for the mortgage investments is that they generate positive returns to the country.

    I think it is clear that housing coops generate returns in high multiples to their initial public investment dollars. In fact, investment in affordable coop housing would generate far greater returns to the country than buying dozens of billions of dollars of mortgages from the banks. It also is less risky of an investment for taxpayers.

    To me the government set a precedent this fall with the mortgage buying scheme. It should be an easing link to make to get a few billion for federal affordable housing in light of the massive "investment" the goverment was going to make in mortgages.

    The government can shave the mortgage buying amount from $125B to $122.5B, and use $2.5B to invest in affordable housing. There's still a big pile for the banks, and there would finally be relief for the rest of us. What's the hold up?

  • PepperGirl

    2 years ago

    Mortgages are paid...

    White Knight is right, many of these coops should have paid-off mortgages by now. I've encouraged friends who live in coops to use their surplus rents to help fund other coops, since there is only so much renovation/repairs needed. Rents are often well-below market, even on the "market units" within coops, so this should be a no-brainer for paid-off coops. (I'm not sure, but there may even be legal restrictions that prevent coops from reducing rents to benefit only current members once their mortgages are paid off. Does anyone know more about this?)

    And I completely agree with other posters that 30-40 years should *not* mean the end of life for a wood frame building. Some of the coops built in the late 80's or 90's may have leaky coop issues, but earlier coops should be in good shape physically and financially.

  • Everything

    2 years ago

    Co-ops mostly have themselves to blame

    This experiences of the folks at Roofs and Roots Co-op is irrelevant to the first part of this article. They are an entirely different kind of organisation with very little in common with co-ops such as Penta (who do not receive any federal subsidies for low income units, by the way). It's also a bit weird that you did not talk to any co-ops who have already completed paying their mortgages, or to anyone from CMHC or the Agency for Co-op Housing who administer the federal co-op program. Additionally, there are many important factors not mentioned here - the escalating costs of maintenance work, the fluctuation in mortgage rates over the decades (which affects subsidies), the variations in the different co-op housing programs, the problems created by BC's building codes etc.

    Anyway, the main reason that some co-ops are in crisis over their building's condition is because they failed to plan and save for future building maintenance, didn't do enough preventative maintenance and ignored sometimes very serious maintenance issues for years and years. There are still co-ops leaking like sieves or with mould problems, failing roofs or needing piping replacements who keep housing charges as low as 60% of market averages, yet stick their heads in the sand and pretend like the lack of funds is someone else's problem. Proper maintenance procedures and planning are required in their CMHC operating agreements, so perhaps CMHC could take some blame for not making co-ops comply with those requirements more forcibly.The truth is that there has never been much that CMHC could do to make co-ops do comply with their agreements anyway. Co-op members were entrusted with some huge responsibilities which in many cases they ignored in order to keep their housing charges low.

  • alive

    2 years ago

    In actual life....

    Maintenance of Co-ops is s thorny issue for most strata-councils: they have no actual experience in owning a house and keeping it in shape, and most depend on some firm to supply overall maintenance and guidance.
    Those same firms are however in business to make money, and seem to spend very little time in selecting contractors or soliciting for bids on larger jobs.
    My experience is that they have some sweet-talking representative who will say the appropriate words, and go back to his office and see where the best profit can be made for his firm (if not for himself).
    Every council has a few hardworking individuals who are booed at ever AGM for their efforts, and after a few years they resign and then nobody volunteers to replace them.

  • Everything

    2 years ago

    Re: Mortgages are paid....

    In response to Peppergirl, there is no such thing as "surplus rents" in co-ops. Housing charges are set according to budgetted expenses. That includes saving for future maintenance replacements etc, so every penny is earmarked already. I doubt there is a single co-op with spare cash floating around and nothing to spend it on.

  • peterroyce

    2 years ago

    View Court: wood frame and 100 years old

    Colleen Kimmett's article features a picture of View Court Housing Co-op and discusses the problems of wood framed buildings and more importantly co-op governance.

    It fails to mention that View Court and many older Vancouver buildings are wood framed, nearing their first century of existence and are still going strong.

    View Court is also no longer governed by an agreement with CMHC but manages very well as a member-owned provider of secure, affordable, self-managed housing. Monthly housing charges are very affordable and further subsidy is available when members need it. See http://viewcourt.vcn.bc.ca for more details.

    Commentators have rightly pointed out that existing co-ops should play a much stronger role in creating new housing co-ops. Instead, we have preferred to flog the dead horse of government for a new co-op funding program.

  • wondering

    2 years ago

    wait a second

    I don't get it...I live in an unfinished farm house that is 30 years old and we just keep fixing it. My grandparents lived in a wooden house in Europe that was about 300 years old. Since when does a wood house have a life expectancy of 30-40 years?? Houses/buildings continually need maintenance but to consider starting anew once they are begiining to have some historic class is completely rediculous.

  • Davin18

    2 years ago

    wood frame buildings

    I am a member of a housing co-op in the lower mainland. When younger I helped build several houses, homes that will last well over 80 years. The contractors that built the co-op housing stock in Canada did not work to such standards. They were the lowest bidder, and would go out of bussiness as soon as they were paid for building the co-op. Then they would open under a new name, and get a new contract from the government. The co-op I live in is well maintained, and we have pride in our homes, but they were not built to the minimum housing code when they were built.

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