Lapas attēli
PDF
ePub

12. In the operation of the Mortgage Corporation, a priority should be established for the purchase of mortgages of consumer-sponsored cooperatives, as distinguished from builder-sponsored cooperatives. Such consumer-sponsored cooperatives are those which have a nonprofit sponsorship where the members of the initial board of directors of the cooperative, as well as the sponsors of the project, consist of people who will purchase memberships in the cooperative and reside in the project or who are representatives of nonprofit consumer groups (such as labor unions or the National Association for the Advancement of Colored People) or organizations interested in the encouragement of consumer-sponsored cooperative housing (such as the Cooperative League of the U. S. A. or the Foundation for Cooperative Housing). The reason for such a priority is that through consumer-sponsored cooperatives of a nonprofit character, there is a fuller realization of the cooperative objective of better housing at moderate prices, produced in the interest of the consumer. As between different consumer-sponsored cooperatives, a priority should be given to projects which have the greatest difficulty in securing financing due to occupancy largely by minority groups; likewise, there should be a similar priority to such minority projects as between cooperative projects in the builder-sponsored category.

13. It is necessary that there be this separate mortgage corporation to purchase the FHA-insured mortgages on housing cooperatives because:

(a) It is clear that the National Mortgage Corporation would not provide a market for these mortgages. As recommended by the President's Advisory Committee, the functions of this corporation would be limited to facilitating the free operation of the mortgage market with respect to "those mortgages for which a normal market exists." The subcommittee on FHA-VA problems has indicated that there is only a restricted market today for this mortgage paper. Moreover, as the National Mortgage Marketing Corporation will be owned (first partially, and later fully) by private financial institutions who were not willing to purchase these mortgages, there is no basis for relying on their purchasing them through the National Mortgage Marketing Corporation.

(b) A separate cooperative housing corporation is required to meet the special problems of housing cooperatives and their need for special servicing in the operation of their projects.

(c) Housing cooperatives desire to purchase stock in a mortgage corporation which they will ultimately own. They should be given this same privilege which is being extended to financial institution in the case of the National Mortgage Marketing Corporation.

(d) The establishment of a separate mortgage corporation for housing cooperatives follows the sound precedent of the Central Bank for Cooreratives which makes farm loans, and the Federal home loan banks which service the institutions which purchased stock in those banks.

C. Continuance of FNMA pending establishment of Housing Cooperative Mortgage Corporation

14. In order to avoid any interruption in the purchase of housing cooperative mortgages insured under section 213, it is recommended that FNMA continue to function through the issuance of advance commitments for the purchase of cooperative mortgages until the Housing Cooperative Mortgage Corporation is established and ready to function. Consequently, it should continue to carry on this function until the Housing Cooperative Mortgage Corporation is ready to make such purchases of FHA-insured mortgages on cooperative housing projects. 15. It is necessary that there be an immediate increase in the authorization of FNMA for the issuance of advance commitments to purchase FHA-insured mortgages under section 213, since the $30 million authorization was not adequate to take care of the eligible mortgages on cooperative housing projects which were covered by statements of eligibility issued by the FHA prior to September 1, 1953. That was the date specified in the FNMA legislation to establish the eligibility of such cooperative mortgages for advance FNMA commitments. Sponsors proceeded in good faith and incurred great expense on cooperative projects in the expectancy that FNMA funds would be available to purchase the mortgages on the projects. Recognizing the equities of taking care of such projects, subject to a 10-percent limitation on the amount to be allocated to any 1 State, it is recommended that there be an increase in the authorization from $30 million to $100 million, and an increase in the limit to be allocated to any 1 State from $3,500,000 to $10 million.

44750-54-pt. 1-63

16. To relieve the hardship of sponsors whose projects were approved before September 1, 1953, but who failed to get a FNMA commitment because of the insufficiency of the available authorization, it is urged that separate legislation be immediately introduced to cover the necessary increase in the FNMA authorization.

17. It is recommended that in connection with this increase in authorization, a provision be included in the legislation to establish the priorities described in paragraph 12 above covering the purchase of mortgages of consumer-sponsored cooperatives, and, as between projects in this category, those occupied largely by minority groups-with a like priority to such minority projects as between cooperative projects in the builder-sponsored category.

Sincerely yours,

DAVID L. KROOTH.

Mr. CAMPBELL. If the Housing Act of 1954 is to be effective in stimulating construction of an adequate number of new homes, a new approach must be made to financing such construction. Either a new mortgage corporation should be created, or the Federal National Mortgage Association should be continued with adequate authority to support the kind of housing which the Congress feels is essential to the welfare of the people. This would include defense housing, minority housing, rehabilitation and slum clearance, as well as cooperative housing.

One final word about cooperative housing. The feature which, in our judgment, is most important is that through cooperative housing, we make it possible for a wider spread ownership of housing facilities by the people who live in them. This principle of ownership, through either cooperative housing or other Federal programs, is the basic cornerstone of American housing and an American free economy. Thank you very much.

The CHAIRMAN. Thank you very, very much. You have made a very fine statement, and we appreciate it. We may want more information from you later on on this subject, when we get down to writing the bill, and you have always been cooperative with us, and we know you will continue to do so.

We will insert in the record your booklet, What Every Cooperator Should Know, a guide to cooperative housing.

(The material referred to follows:)

WHAT EVERY COOPERATOR SHOULD KNOW-A GUIDE TO
COOPERATIVE HOUSING

United Housing Foundation, New York 17, N. Y.

"The rapid growth of areas adjacent to public improvements is dramatically evident around public and quasi-public housing projects.

"These large developments, each a small town in itself, in a few years have created new neighborhoods where only vacant land formerly existed, and lifted the face of older neighborhoods."-Robert Moses, Chairman, Slum Clearance Committee, New York City.

HOUSING PROGRAM FOR THE CITY OF NEW YORK

New York City is competing not only in housing, but in employment opportunity and community living with its suburban areas. Better schools, better playground and recreation facilities, convenient local shopping, ability to use and store private automobiles, and a more personal stake in local affairs must be recognized as some of the things people now look for when they seek the better housing.

Private enterprise must be encouraged to do more in building new housing and renovating old housing if any significant progress is to be made.

In the field of cooperative housing lies one of the greatest hopes for private enterprise and for the broadening of home ownership and citizen interest. Everything possible should be done to encourage private interests in the construction of cooperative housing.

[blocks in formation]

A housing development owned by its residents. In the United States most housing cooperatives are apartment houses. In these the tenant-owner usually has a lease on the unit which he selects and as long as he follows the rules and practices of the cooperative, his lease will be renewed.

Each tenant-owner also holds stock in proportion to the size of the unit he occupies and irrespective of the number of shares he owns, has one vote. Thus all tenant-owners have an equal voice in the management and control of the corporation.

owners.

The management is controlled by a board of directors elected by the tenantAll corporate business is conducted by this board. Frequently, the Board has committees to advise it and may delegate authority to them where appropriate. It is important that the tenant-owners show an active interest in the welfare of the project and take part in the work of important committees. Can cooperatives produce single-family houses for their members?

Although in the East most cooperatives have provided apartments, in other areas of the country there have been a number of cooperatives which have built individual homes. One of the few single-family cooperatives in the East is Hickory Hill, a member of the United Housing Foundation, in Tappan, N. Y.

In suburban areas, where land is available and relatively cheap, garden-type projects are often more suitable than multistory apartments. In Europe, the garden city cooperative is common, and there are also projects with some apartments and some single-family and row houses.

What advantages does the housing cooperative offer?

It offers the opportunity to own, on a mutual basis, an attractive house or apartment at a moderate monthly charge.

It provides a feeling of security and ownership and gives the individual an opportunity to control the environment in which he lives.

In addition, in a true cooperative there develop strong community ties and many common social and civic activities among the residents. Because of similar objectives and financial interests, tenant-owners learn that many problems can be solved by the self-help cooperative method.

How can a cooperative provide less expensive houses or apartments than a commercial builder?

Speculative profit is eliminated. By putting up his own equity, the tenantowner saves the promoter's profit.

With a board experienced in the housing field, serving without compensation, the construction fees and related costs are kept to a minimum.

The tenant-owner pays only his share of the actual cost.

A large group of housing units built at one time, whether individual houses or apartments, is less expensive to construct and manage.

1 This booklet represents the thinking of the directors and officers of the United Housing Foundation. For her help in compiling and editing the material, the foundation wishes to express its appreciation to Miss Lenore Turner.

Cooperators are usually permanent tenants and turnover is reduced. It is therefore possible to make a smaller allowance for vacancies in computing the monthly charges.

Operating expense can be reduced by careful maintenance on the part of tenant-owners who take pride in their homes.

How is a cooperative financed?

Through the equity, or tenant-owners' investment; and through a mortgage loan, or borrowed funds.

In a speculative enterprise the tendency is for the promoter to invest as little as possible, and to have as large a mortgage loan as can be secured. Capital cost is increased by promotional cost. But the higher the mortgage loan, the greater the amount of interest which must be paid every month by the occupant. In a sound cooperative where the aim is to make the carrying charges as low as possible, the tendency is to reduce the amount of the mortgage; therefore, the tenant-owner's investment, or equity, must be higher.

However desirable it may be in theory to have the mortgage as low as possible, in practice, the mortgage usually runs from 80 to 90 percent of the total value of the development. The reason for this becomes clear when an example is cited. A well-built, 2-bedroom apartment or single-family house, including a proper site, costs about $10,000. The average person of moderate income finds it difficult to raise more than 20 percent of this amount in cash. How are cooperative organizations sponsored?

By a group of people who conceive the idea of a development in which they can live, and get together and form an organization. They may obtain assistance and sponsorship from labor organizations or civic-minded people who see the advantages of cooperative housing for families of moderate income.

By a civic group interested in promoting without profit to themselves better housing and better neighborhoods for middle- or low-income families.

By builders or investors who select a site, make plans, and use the tenantowners' money as the equity. In return for their organizational efforts they receive a substantial profit.

Why are bylaws necessary?

Bylaws are the general rules of procedure and conduct under which the board of directors must operate. While bylaws can be changed from time to time, it is not customary to make frequent changes and they establish a form of protection of the rights and privileges of the cooperators. A good set of bylaws encourages tenant-owners to govern themselves and take a definite interest in their own affairs.

2. PROFIT VERSUS NONPROFIT COOPERATIVES

What is a nonprofit cooperative?

As the term is used in this booklet, the nonprofit cooperative is one in which the organizers and sponsors make no profit. Such a cooperative is usually organized by public-spirited groups or individuals or by the future residents themselves. Cooperatives which have been built for profit often become nonprout in the management phase of their development.

What is a cooperative built for profit?

A builder and his associates may promote and finance a cooperative in which they expect to make a profit from the land, the construction, the management of the apartments, or from other sources. The builder-sponsored cooperative is like any private building enterprise except that the builder sells the apartments to a number of purchasers instead of to a single investor.

How can a prospective tenant-owner select a sound, bona fide cooperative?

By determining the aims, responsibility, and experience of the sponsors. By examining the plans and determining the desirability of the location of the cooperative in terms of neighborhood development.

By examining the prospective financial setup: the cost of land, type of construction, method of supervision, handling of finances during construction, method of operation, and estimated carrying charges.

By getting an independent opinion from a qualified lawyer, architect, builder, or competent real-estate firm. To save money, a group of prospective cooperators can get together and arrange for a competent study and appraisal.

By consulting United Housing Foundation, which will attempt to suggest or provide competent technical assistance.

What are the objections frequently made to cooperatives sponsored by commercial builders?

Although commercial builders have been largely responsible for housing middleincome families, their work in the cooperative field is often unsatisfactory because their primary motive is immediate profit rather than the welfare of the tenantowner. This has sometimes resulted in bad planning, construction shortcuts which will eventually lead to higher maintenance costs, and high charges for land rental. Furthermore, estimates of the monthly carrying charges have often been too low to provide for adequate maintenance, for proper compensation for labor, and for annual tax charges.

By making the downpayments as low as possible, the builder-sponsor creates a situation where the monthly carrying charges have little prospect of ever being reduced. Interest may have to be paid for as long as 40 years, land rental for at least 99 years. Although in prosperous times these additional carrying charges may create no burden, in the long run, low monthly charges with provision for adequate maintenance and repairs are essential for a sound cooperative investment.

3. FHA OR 213 DEVELOPMENTS

What are the “213” cooperatives!

The Congress of the United States, in its effort to provide cooperative housing for the largely forgotten middle-income groups, enacted in 1950, section 213 of the National Housing Act. This act permits the Federal Housing Administration to insure long-term mortgages made by lending agencies to cooperatives for a period up to 40 years. It also contains other financial terms which make it possible to reduce the investment by the tenant-owner.

What has been the experience under section 213 of the National Housing Act?

So far this act has been used mainly by speculative builders looking for a profit in the construction or management of the project. It should be used by more groups of cooperators interested in building for themselves, and more largely by civic-minded groups. Banks and insurance companies should interest themselves in the social and civic purposes of a development as well as in the soundness of the loan. Middle-income cooperative housing offers one of the safest investments and should be particularly advantageous to the loaning institutions in periods when there is an ample supply of capital competing for investment.

How can a group form a cooperative under section 213 of the National Housing Act?

Under section 213 of the National Housing Act, provision is made for guaranteeing loans to two types of cooperatives:

Management type-where the cooperative corporation builds, owns, and operates the residential units on behalf of its tenant-owners.

Sales type-where the homes are built cooperatively, but then sold to the individual cooperators outright.

In either case there must be at least 12 units in the proposed cooperative.

What help can cooperators get from the FHA?

Groups interested in developing a cooperative for their own use may go to the local FHA office and receive information as to how to comply with FHA standards, rules, and regulations. Various FHA booklets provide technical advice in planning, construction, and operation of cooperatives for which mortgage insurance is sought. The technical advice and service provided by the FHA is supplementary to the specific technical service required by cooperative groups. Community Services, Inc., a subsidiary of the United Housing Foundation, was organized to provide these specific services.

What are the terms of the loans the FHA is authorized to guarantee under section 213?

The FHA will guarantee loans to cooperatives for a period of 40 years with a maximum interest rate of 44 percent. If the cooperative has at least 65 percent of its members who are veterans, the FHA will guarantee a loan of $8,550 per dwelling unit or $1,900 per room. If there are less than 65 percent veterans, this figure is reduced to approximately $8,100 per unit and $1,800 per room.

« iepriekšējāTurpināt »