UnionSD Co-Op Membership Drive
For about a year now, I have belonged to a co-op called UnionSD. The "SD" stands for "Sustainable Development". Their motto is "Permanent Affordability through Community Ownership". Their goal is to secure affordable housing in Waterloo Region. They hope to do this by buying existing multi-tenant housing stock on the free market, and keeping rents affordable. When units become vacant they want to make them available to nonprofits (currently Reception House) or to people waiting on assorted affordable housing waitlists.
Housing is expensive (duh) so the co-op needs to raise money so that it can make down payments on properties. This is where individual investors come in. The co-op wants members to purchase so-called "preference shares", which will be pooled together for the down payment. Then tenant rents will pay the rest of the mortgage and maintenance costs, as well as (in principle) paying a dividend to shareholders.
In addition to individual investors the co-op wants charitable foundations to purchase five-year "debentures" the co-op can use towards its down payment.
In principle the co-op is a for-profit organization, and the preference shares members purchase are supposed to be investments. In practice, return rates are set deliberately low -- the plan is to have dividends set to at most 3% above the prime rate, and there is no guarantee that dividends will be announced for any given year (and I am guessing there won't be any dividends for the first few years while the union gets used to being a landlord). There will probably be some return, but I am not counting on it being very much.
The co-op is not a cheap hobby. A membership costs $500, and preference shares are sold in $1000 chunks up to a maximum of $10 000. I am in a strange position where I (a) care about affordable housing, (b) have some (but not a lot of) savings, (c) depending on my employment and my own housing situation, could be facing destitution myself in a few years. Nonetheless I am planning to purchase some preference shares. I have no expectation of making much of a return, and given the dividend rates I probably will not even make back the cost of inflation, but my hope is that I will not lose my investment entirely, and that this investment will make a small dent in housing affordability.
Many aspects of the co-op appeal to me:
This plan is real and concrete. The board and core staff have been working really hard to navigate the bureaucracy and regulations to make this real. It is not a pie-in-the-sky idea: if the co-op gets the money, they really will purchase and manage a property.
In many ways this co-op model is different from other social investment ventures. A common refrain from the core staff is "this has never been done before". Given that other housing co-ops exist it is not clear why this is so new, but apparently it is?
The group is (currently) committed to democracy and having many stakeholders -- including tenants! -- participate in decision making. I do not know how long this will last, but it is an admirable intention.
There are so many aspects of housing affordability that seem out of our hands. This is a concrete way for people who feel guilty for having too much money to help solve the problem, independent of government programs or big private benefactors.
As the co-op acquires more properties, it will gain more equity, which will give it yet more power to acquire further properties. This is how other real-estate holders become rich, so it would be nice to leverage this power for housing affordability.
This co-op gives existing landlords who want to sell their properties but not screw over their tenants an opportunity to sell to an organization that will (we hope) treat their tenants well. Usually when properties are sold the new owners renovict the existing tenants and then jack up the rents to whatever the market will support (in fact, this is in the sales pitches for many of these properties).
We are a rich community with lots of people who have lots of money. This is part of the reason housing is becoming increasingly unaffordable. But if lots of those (we) rich people invest enough in affordable housing then maybe housing can be affordable despite our presence.
Of course, I do have reservations:
This is not going to solve housing affordability. At best it is going to make a dent. They are talking about spending $3 million to buy 15-20 units of housing. In this region alone, we need thousands and thousands of affordable housing units, not 15-20.
As such, guilty people cannot absolve themselves of their negative feelings by throwing $1000 or $10000 at this problem. We still need other solutions, and it is likely some of those solutions will involve government intervention. We might end up housing people better if we lobbied Doug Ford to pave over the Greenbelt (and the Countryside Line) than by investing here.
In fact, UnionSD suffers from the same issues rent controls (and unions in general) cause: they are great for the people under the umbrella, and make things worse for everybody else. The co-op will will be competing in the open market for properties, which will drive the prices for those properties up, which will hurt the tenants in those properties more for the properties where UnionSD loses the bidding war.
Man, democratic consensus is tiring. I am at best a peripheral member (and the core members roll their eyes whenever I open my big fat mouth) but being a part of this co-op has felt like a burden. In some ways I want to throw my money somewhere and be done with it, but that is not how co-ops work.
During a bunch of the meetings planning the direction of the co-op, many people prioritized housing affordability over making returns. Maybe that has gone too far, because it looks like there will be almost no returns for this investment. I don't particularly care about this, but clearly a lot of investors who are out to make some money will be dissuaded from buying shares -- and without lots of people buying lots of shares, this idea cannot get off the ground.
I suppose I am writing this blog entry as part of the membership drive? The co-op has about 50 members now and wants to expand to 500. If you are interested in affordable housing and don't mind expensive hobbies, then this might be of interest to you.
If my publicity here and elsewhere convinced a handful of people to sign up as members, I would consider it a success. (But given how committed I am to disclaimers and downsides, I do not expect success.)