In basic terms, a cooperative, more commonly known as a co-op, is a building of apartments that is owned collectively. The entire building is owned and managed by the co-op organization, and individuals purchase shares that entitle them to "the right to live in the building and be a part of the community that manages it." [source] Individuals pay monthly co-op fees for the maintenance of the building, utilities, property taxes, etc. Changes and updates to the building, as well as maintenance and repairs, are determined by the residents.
A limited-equity co-op (LEC) is a specific type of co-op, "typically created with the use of public funds with the long term goal of remaining affordable. Limited equity coops in Washington DC typically have restrictions on the price and resale value as well as income restrictions on who may purchase. This type of cooperative can provide housing options well below standard market rates." [source] In other words, LECs are priced much lower with the goal of maintaining long-term affordability for residents. As the name suggests, LECs aren't big financial investments for residents with huge payouts, but that isn't the goal. The purpose of LECs is for the units to remain affordable for future buyers.
If you have been paying attention to the cost of housing in the DC area, you know how prices have been shooting up, both for homes for rent and for sale. It's extremely daunting and discouraging to look at housing prices as a normal person with an average salary. LECs limit the increase on property prices and make it actually possible for average people to own their homes.
In his article "The Limited Equity Cooperative: An Economic and Social Solution to Affordable Housing Crises," Niko Papoutsis writes that "LECs provide a viable economic solution to combat affordable housing crises and, simultaneously, foster a host of non-economic benefits that can work to catalyze the social and economic growth of their [...] residents."
We want to turn our building into a limited-equity co-op in order to keep our 88 units affordable. We live in beautiful Adams Morgan, a block away from the zoo, and our neighborhood is not immune to the skyrocketing housing prices. We want our neighborhood to remain affordable in the long term for regular people, not just the wealthy.
Additionally, we want to exist as a community! A benefit of co-ops is the community aspect, where residents help each other, work together, spend time together, collaborate together, and solve problems together. It's so easy to feel isolated in the city, and fostering a community at home can combat that.
Papoutsis writes:
Equity interests aside, the level of stability of one’s housing provides an essential foundation for economic, social, physical, and mental well-being. Stability, however, is a luxury that a significant portion of the American population does not enjoy. Rapid increases in the cost of living stemming from the gentrified redevelopment of urban spaces have generated rampant displacement among the subset of the population positioned on the lower rungs of the socioeconomic ladder. In the midst of such chaotic housing uncertainty, it seems absurd to suggest that even low-income individuals should continue to strive for equity and the benefits that equity ownership entails when they have such difficulty consistently maintaining a place to call home. Under the traditional equity model of fee simple ownership, this conclusion would be correct. However, there exists an underutilized tool through which low-income members of society can enjoy many of the benefits associated with equity ownership while also retaining affordability and long-run guarantees of ownership: the limited equity cooperative (LEC). [source]
If you are concerned about the long-term feasibility of living in DC and want to help preserve long-term affordable housing for regular people, consider supporting us!
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