Thanks to blog reader RPG for sending me this article from from the Village Voice about a few New York City residents who are attempting to keep rents low by purchasing real estate as a collective group.
The idea isn’t brand-new, but it’s not something we’ve seen in our market in a long time, and is particularly difficult given the heat of the market, and the ever-increasing value of property.
Could this idea actually work, or is it just pie-in-the-sky thinking? And if it could work in New York City, could it work in other major metropolitan areas like, oh, I dunno, say……Toronto?
I’ve read this article, through and through, about ten times now.
Every time I read it, I flip-flop as to how I feel.
I don’t know if these people are naive, or if they’re smart.
I’ll reproduce the whole article below, then we’ll debate…
“This Group Wants To Help Lower Rents By Buying Real Estate As A Collective”
By: Madison Margolin
The Village Voice
“Things are getting a little ridiculous in New York City!” says Rafael Jose, Queens-based real estate agent. “Fifty or sixty percent of what people make goes to housing. Working-class people who have done all the right things — gone to school, saved money — are still getting priced out of the neighborhood.”
While wages remain stagnant in contrast to soaring real estate prices, Jose adds, the situation is unsustainable — and he’s not the only one frustrated by this truism. He is now among more than 300 New Yorkers who have joined theNYC Real Estate Investment Cooperative, a group whose stated goal, according to their website, is to “secure permanently affordable space for civic, cultural, and cooperative use in New York City.” Translation: they want to form a collective to buy up real estate throughout the five boroughs to help price low- and middle-income residents, as well as small-business owners and community organizations, back into the market.
But they’re starting small. Requiring an initial $10 investment from each member, the co-op has, since launching in April, banked more than $3000 at the Brooklyn Cooperative Federal Credit Union and has more than $1.3 million in pledges for future investments. They aim to finance at least one property by 2017 (with a guaranteed return of everyone’s $10 if the goal isn’t met) and make further investments for the mutual benefit of the co-op’s member-owners and their communities. They are also considering a ten-year project.
The REIC isn’t the only organization in New York working toward cooperative real estate goals. Founded in 1973, the Urban Homesteading Assistance Board has preserved over 1,700 buildings and created 30,000 home-ownership opportunities, while getting to know New York’s low-income co-op community. And in March, the community organizing project Greater Brooklyn formed the “NYC Cooperative Housing Exchange” a Facebook group of now almost 800 members, designed to “aid in the creation of new cooperative houses, link people up to houses with vacancies, and to assist in the exchange of resources between co-ops.” The REIC however focuses on affordable commercial space, with efforts comparable to the Small Businesses Jobs Survival Act to “level the playing field for business owners when negotiating fair lease terms,” or the Artist Studio Affordability Project, which advocates for legislation to keep studio space affordable.
The idea for the REIC formed when Brooklyn artist and activist Caroline Woolard was faced with a decision whether or not to renew her Williamsburg lease for an additional three years. She had been using the space as a living and working collective with other artists. By the end of the new lease, the group would have spent nearly $1 million in rent — money she realized could be better invested in a cooperatively-owned property.
Woolard stresses that the group is not just for artists: members of small businesses, civic groups, and cultural organizations also comprise the co-op’s constituency. “I am excited that the first project we do as the REIC will likely not be for artists, as I am an artist who understands the power of organizing for affordable space for all New Yorkers, not just for artists,” she says. “We are part of an ecosystem that must be diverse across sectors to be healthy.”
Over the summer, members of the co-op’s working groups (they eschew formal leadership roles) established “threshold criteria” for investments. Inspired by similar efforts in other cities, such as theNorthEast Investment Cooperative in Minneapolis, they have already begun vetting properties everywhere from Coney Island to the Bronx.
“I think it’s very important that there’s a model that’s separate from the standard real estate market model,” says new member Drew Kiriazides. “It’s very challenging because a new model can seem a drop in the bucket against a tidal wave. I think this could be valuable because it will offer something that people can see.”
Another challenge, some members say, is streamlining the ideas of many to produce tangible results. “They’re activists, social justice activists, they have great ideas of what they want to do but they don’t know how to get to where they want to be,” says co-op member Malaika Martin, who works in real estate. “They just say we want to preserve affordability in perpetuity, but how do you do that?” she asks. “One of the things that brings me to this is to find ways to develop real estate that is not only environmentally sustainable but also financially sustainable for as long as possible and that also moves with the community.”
The group is now seeking funding to hire paid staff for the incubation phase, to work with partners to formalize their research and share it with co-op membership and beyond, and to establish a governance structure to facilitate their goals and responsibilities.
Jose says the group is an important move against the hedge funds, private equity firms, and international investors who are pouring billions of dollars into the New York real estate, because it’s safer than the stock market, and driving up prices for everyone. This is especially prevalent in Brooklyn, he adds. “Now everybody’s feeling it. If you go anywhere and open up a conversation with people relative to affordability and housing, there’s a consensus across the board,” he says. “You can’t rent an apartment by yourself, you have to get roommates. That’s a sign that things are getting ridiculous.”
Jose serves on the REIC’s “public building inventory” and “outreach to institutional investors” working groups to help identify potential investments and look for additional sources of funding. “I like being part of taking action,” he says. “This is something that benefits [many] people instead of just a few.”
So first, I let my cynical side take over.
These folks, pledging a paltry $10 per head, have collected a whopping $3,000………since April.
Is this even a story?
300 people in a city of close to ten million?
How is this even newsworthy?
But I took a step back from that line of thinking, and then considered………wait for it…….bike lanes.
What do bike lanes have to do with a NYC cooperative?
Well, when I wrote that blog post two weeks ago about how I don’t feel the number of cyclists in Toronto necessitates dedicated lanes, taken away from cars, a lot of people shared their ideas, and while some were illogical, a few sentiments stuck in my head.
It was something along the lines of “you have to start somewhere.”
Or maybe the famous line from Field of Dreams would ring true here: “If you build it, they will come.”
One person commented that we need to be “progressive,” and somebody else mentioned that cycling to work is something that will “take time to catch on.”
So while I haven’t changed my opinion on the matter, I do see a completely different way of thinking about it.
My initial thought when I read the story about 300 people in NYC who put down $10 per person was that this is insignificant, naive, and a waste of time.
But if this catches on, maybe that number grows to 300,000. And maybe (because I think $10 is just way too little skin in the game), that dollar amount grows to $100. Or $1,000.
It’s a ways off, but 300,000 people at $1,000 is $300 Million.
You never know. It could happen.
They have to start somewhere, right?
I applaud the effort, no matter what happens. But I always wonder about the underlying thought process involved, and how people’s socio-economic values shape their opinions.
I was having a conversation with somebody earlier tonight about retirement. I asked, “Is it a right, or a privilege?” I feel like many people believe it’s an inherent right, and thus, ultimately, it’ll fall back on the government to ensure that everybody can retire. But retirement is a privilege, in my mind. It’s the reward for people working hard all their lives.
How can anybody think it’s a right?
What about the person who didn’t work hard, spent money frivolously for a half-century, and then turns 65 with nothing in their pockets. Does that person have a “right” to retire?
Many people think so.
Some people just think differently; they have a different value system.
So what goes through the minds of NYC cooperative owners who are making a “move against the hedge funds, private equity firms, and international investors who are pouring billions of dollars into the New York real estate, because it’s safer than the stock market, and driving up prices for everyone”?
Do the cooperative owners understand commerce? Do they understand the free market?
Why wouldn’t hedge funds, private equity firms, and international investors buy NYC real estate?
Should they be banned from doing so?
I feel like we’re only getting part of the story in the article from the Village Voice. As I said, I applaud these folks for trying something different, and for coming together. I think the whole “lack of formal leadership roles” goes against basic human nature, and that eventually, they’ll have some internal friction.
But what’s the underlying value system that these cooperative owners live their lives by?
Do they think that all real estate “should” be affordable, somehow, in some way?
Or do they acknowledge the realities of free market economics, and are simply trying to carve out a small piece for themselves?
If it’s the latter, then good on them. Their logical, they see the reality, and they’re trying something different.
But when I read that they’re “looking for funding,” I wondered if maybe they’re 300 people who have put together $10, and are now looking for millions of dollars to get their project off the ground.
In any event, I’m going to follow this group over the next few months, and perhaps we’ll bring this up again in 2016.
And of course the question needs to be asked: could we see this start to take shape in Toronto?