Planned co-operative housing offers a low-cost way to become a homeowner…but working together is required
A three-story nursing home in Kingfield may become one of Southwest’s more progressive housing options if a local group successfully converts it to a co-operative.
The former Good Samaritan Home, 4429 Nicollet Ave. S., is still being renovated by its current owner, but a developer, Neal Esterkin, and a non-profit financing agency, the North Country Co-operative Development Fund, have signed a $2,650,000 purchase agreement for the 29-unit complex.
Esterkin said he plans to convert the building into a limited-equity co-operative by next spring. Esterkin said 29 people would pay a one-time fee of $2,000 per unit to join the Nicollet Co-operative Association, then pay a monthly charge to live there, like rent. However, the base fee gives the purchaser 3.45 percent control in the corporation that owns the building, so it’s as if the individual actually owns their own housing unit, he said.
Only $100 of the base fee is due up front to reserve a unit; the additional $1,900 must be paid in February, Esterkin said. He added that the base fee is locked at $2,000 for as long as the co-op exists, due to contract stipulations made by the North Country fund.
Esterkin said once all 29 unit owners sign on, they can manage the building themselves or hire building management outside the co-op.
Warren Kramer, North Country’s director of housing development, said the housing charge (see sidebar) is split into building management, heat and the building’s mortgage; however, the monthly payment does not include electric, cable or phone.
He said the mortgage portion of the monthly payment builds equity up to a maximum of $100,000 for the owner/shareholder. "You gain equity when you decide to leave, and the renter just walks away without anything," he said.
Esterkin said that because of the low cost to get in, co-ops give people a first chance to own property that might otherwise be financially impossible. However, he adds, there are other advantages.
Co-op members’ mortgage interest and property tax payments are tax-deductible because the co-op is considered homesteaded, Esterkin said.
And, he added, co-op members benefit when they move out, since they are able to sell their unit for a profit. When they sell their co-op space, members are reimbursed their initial $2,000, plus any mortgage principal they’ve paid each month.
Also, Esterkin said, members can control livability because they can decide who moves in after the co-op has been established. That’s because co-ops are considered privately held corporations that can set membership rules.
Kramer said that given the proximity to neighbors and the effort involved in co-op decision-making, people form close relationships and can unlock leadership skills.
Kramer said one of the biggest co-op advantages is affordability. Units are "below the fair-market rate for Minneapolis, but there’s no government money in it," he said.
Esterkin said the rents will probably be lower than he’s estimated, because the more work tenants do in their co-op, the less they pay for services, cutting their rent. He said that even without such work, the current rental rates are comparable to an apartment building he owns in Kenwood.
Kramer said he acknowledges that life in a co-operative is not for everyone, because of the level of commitment required. As unit owners, members are responsible for repairs and maintenance that a property owner or building manager would be responsible for in a rental apartment.
"There is no landlord here," Kramer said. "If something breaks, you fix it."
For people who don’t like to know their neighbors, Kramer said the close working relationships that co-ops require might make communal living less attractive. Feuds can also break out in close quarters.
Esterkin said that, as a financial investment, co-ops are a good idea, but the downside for some people is that they have to live there to receive the benefit.
Kingfield residents are excited about the Nicollet Co-operative Association, but some neighborhood board members hope marketing is done exclusively with Kingfield residents in mind.
Kingfield Neighborhood Association president Steve Jevning said he thinks neighbors will be very optimistic and excited about the prospect of a co-op. The neighborhood had pushed for affordable units, but when Ned Abdul, a private developer, bought the building, KFNA lost any guarantees. Now, Jevning said, he is happy to see the units become more affordable.
Board member Gary Hoover said he’s planning on moving in. He said he likes the concept of working together in the community. Hoover said he is looking forward to saving some money by living in the co-op, as the mortgage payments on his Kingfield home are expensive.
"Also, my wife and I had talked about joining part of a housing co-op before; now it’s happening in the neighborhood we like," he said.
Esterkin said that if he can find enough tenants by the end of November, he’ll finalize the purchase with Abdul (who did not return calls by press time) and have the co-op ready for tenants by March 1, 2003.
Esterkin said the community interest has already been strong, and he’s already sold 25 percent of the building’s space. "If this is successful, I know we’ll do more," he said.