Sweden’s housing cooperatives offer a housing model for middle-income people – Shelterforce Shelterforce

Previous versions of this article were published in Quarterly Housing Cooperative And Sharing.

The housing supply crisis in the United States has hit low- and middle-income households the hardest.

While the Low Income Housing Tax Credit program plays a valuable role in increasing the supply of housing for low-income families, a similar source does not exist for middle-income households. Without a targeted funding scheme, supply will be negligible and therefore Demand for moderate-income housing continues to grow. In many urban settings, middle-income households are excluded from homeownership of any type.

Limited Equity Housing Cooperatives (LEHCs) can become providers of permanently affordable housing for middle-income households. But this format is just a dream without government funding and organizations that can create the potential for cooperative development. Where should housing activists in the US turn to solve this problem?

A model we could replicate is Swedish social housing, a category that includes non-profit, cooperative and municipal housing.

In the United States, we use tax credits to subsidize low-income rental housing (for residents earning between 30 and 80 percent of the area median income, or AMI), and we also subsidize for-sale housing for people who can afford it through tax dollars. deductions. . However, we do not have government funding to accommodate middle- and moderate-income families (or those earning between 80 and 120 percent of AMI). In Sweden, low- and middle-income families have ownership shares in the same apartment buildings. Along with other social housing organizations, the Swedish co-operative sector is a key active housing developer.

Housing cooperatives in Sweden

Sweden has the most housing cooperatives per capita in Europe (according to countries with data provided) Cooperative Housing International) makeup almost a quarter of all housing in the country.

About 350,000 of these units are part of the HSB Riksförbund, and 200,000 are part of Riksbyggen. HSB and Riksbyggen are two different national cooperative organizations that create new cooperatives and convert existing public and private apartment buildings into housing cooperatives. In recent years, Housing cooperatives have seen the largest growth in the multi-family housing sector..

Let’s look at the largest of them. VSB. As of 2022, HSB Co-ops had over 675,000 active members in over 4,000 tenant-owned co-operative housing associations, owning and managing almost 350,000 apartments and over 25,000 rental apartments.

Interested in living in one of the co-ops? First, put your name on the waiting list. These waiting lists can be long in large cities, but shorter in small and medium-sized cities, says HSB’s Lynn Matic.

Want to get ahead of others on the waitlist? Join HSB, open a savings account and start making deposits. At HSB, about 125,000 people are saving for co-op apartments, with savings of 4.8 billion kronor, or almost $500 million. HSB uses most of these funds to develop new housing cooperatives.

Impact of the Swedish recession on the middle-income housing market

In 2023 Sweden entered recession. As a result, a series of shocks occurred in the housing sector. Until 2023, to balance their balance sheets, many cities sold their council apartments to pools of private investors. SBB, one of Sweden’s largest private real estate companies, bought thousands of former council rental units but was immediately put out of business by rising interest rates. With him shares lose 90 percent of their valueSBB had to take measures to reduce debt.

SBB borrowed new funds and sold some of its divisions. It is likely that she will transfer the remainder of her apartments to the new company by selling shares and using the incoming capital to pay off her debt. It is unclear whether the transfer will result in the removal of rent protections for apartments. subsidiary company SBB Sveafastigeter is currently Sweden’s largest listed housing company. The company has about 14,500 apartments and another 7,900 in development or construction.

Home prices and interest rates are rising in a very tight market, while housing production is falling. But now, with limited social housing options, there are far fewer council-owned apartments available at a reasonable price or rent for middle-income families.

Whatever the outcome, this housing market collapse will test the stability and reliability of Sweden’s 100-year-old co-operative housing model for middle-income households.

Lessons from the Swedish model for the USA

What can we learn from a country where a quarter of housing is in co-ops?

1. To meet local needs, Sweden has created a national organization with a regional structure, consisting of independent housing cooperative associations.
2. HSB benefits from a savings plan that rewards member savers with a priority on home purchases and uses nearly $500 million in owner savings as capital for growth. The savings of previous owners become part of the ownership when new residents move into their apartments.
3. HSB organizations have the capital, resources and personnel to pursue housing development opportunities independently or in partnership with municipal governments, private organizations or non-profit organizations.
4. HSB and other cooperative housing groups have the political clout that allows them to have the same access to public housing dollars and programs as private, nonprofit, or municipal organizations.

Efforts to develop US housing cooperatives

A limited liability housing cooperative owns the entire site and all the apartments and buildings on it. Each family living in one unit of this cooperative owns a share. Under US law, a share in a housing cooperative gives the shareholder the same tax position and benefits as any other homeowner. Co-op members can use their votes to elect a board and approve the annual budget and corporate bylaws. The board then hires a professional management company to handle the day-to-day operations of running the co-op. All units must be owner occupied, so no units can be rented out to others or listed on Airbnb.

The maximum price for LEHC shares is often set by state law and is typically 5 to 10 percent of the unit cost of the initial finished costs. The initial share is also determined by either the size of the apartment or the number of bedrooms in the apartment. LEHC shares can cost between $5,000 and $30,000. Shareholders are paid a return of 3 to 5 percent per year. Monthly co-op costs are calculated by either square footage or number of bedrooms.

There was only one small, measurable development period cooperative housing for low- and moderate-income households in the United States. The main years of this period were between 1950 and 1970. The era had a fortunate abundance of both government funding and development potential. Key elements were post-war financing of housing cooperatives (including Section 213 the No Income Required Mortgage Insurance Program and Section 221(d)(3), which provided below-market mortgage insurance for income-qualified households); two key development organizations (the United Housing Foundation, created by several New York-based labor unions and best known for creating 15,372 units Bronx Cooperative City and Cooperative Housing Foundation); and a national postwar political climate supported by labor unions and cooperative organizations that committed to developing affordable housing for low- and moderate-income people.

Since then, several attempts have been made by citizens New York And Washington, DC. Otherwise, co-op housing is rarely seen, heard or talked about. Those few individual housing co-ops that appear once in a blue moon create neither a sector nor a movement.

The housing shortage for middle-income households is a crisis, and the market cannot meet demand. Housing cooperatives with limited equity can provide permanently affordable, middle-income home ownership in the United States.

However, the United States currently lacks the institutional capacity to develop new cooperatives to meet needs. We clearly need many parts of what Sweden has built. US housing activists, unions and cooperatives must fill this gap through local, regional and national capacity, as well as a well-funded government program promoting homeownership for people with moderate incomes.

About the author

David J. Thompson

David J. Thompson partnered with Thompson Housing to develop non-profit and cooperative housing that has benefited over 10,000 people. He was one of the founders and previous Regional Director of the National Cooperative Bank.