Co-op housing in Canada is in danger of disappearing up its own association. After a kickstart by the Trudeau government in the 1970s and some scattered one-off entrepreneurial efforts in a few provinces over the years, it has been virtually a no-growth sector for almost a half century.
There are 250,000 members living in 2,200 housing co-ops in Canada with 90,000 units, many of them falling apart. Almost every co-op built before 1985 needs capital repairs to maintain it. “Many can’t wait for their present mortgages to expire,” according to the Co-operative Housing Federation of Canada (CHF).
How this came to pass is a sad story, and what the CHF is (and isn’t) doing about it today is raising some serious questions.
One of the principal current activities of the association is the Co-operative Housing Refinancing Partnership. The short of it is (the whole of it is on their website here) that most co-ops in Canada were set up about 35 years ago with government mortgages that are about to be paid off. As CHF says, many of these co-ops will want to refinance in order to renovate their aging properties. But lenders, who know that their whole history has been under government supervision and tutelage, are uncertain about what newly privatized co-ops will do with new money.
Enter CHF, which pledges that it will supervise borrowing co-ops to ensure they meet the conditions of a loan from a credit union. It might be called a moral guarantee. It certainly can’t hurt. For any co-op that scores less than AAA on the credit check it might make all the difference (only one of 12 in process has got through all hoops so far, with another three expected to close before year-end). And after a while, after a few CHF-secured loans have been made it could become the fast lane to the CU mortgage wicket. Needless to say, it’s a lane with a toll on it.
A few years on, when a number of these CHF-bolstered co-op mortgage loans have been successfully negotiated, will all lenders be asking co-ops, “Is CHF behind this?” and backing off if it’s not? That’s not the intention, but it may be inevitable. While CHF doesn’t offer security, it does offer comfort, and financial institutions have always preferred being comfortable.
In another arena a year ago, a senior CHF executive acknowledged that “the ability to form co-ops has atrophied over the years.” He was describing rationale for the Social Purpose Development Partnership that has since been announced in Vancouver, bringing together CHF-BC, a credit union (VanCity), a developer and the city to build separate but connected rent-to-income and co-op housing projects. The connection comes through an element of cross-subsidization, with co-op members subsidizing rent-to-income tenants. This is very close to a core principle of cooperation, to help others in the community. But unfortunately, as the CHF exec put it, “it means somewhat less member involvement.” CHF-BC is in the driver’s seat even before ignition. It will determine how much of co-op member fees goes to subsidization. It may not appear to be of much importance, but in fact it’s no little thing. It flies counter to the very first item in the “overarching agenda” for the cooperative decade now in progress, which is “to elevate participation within membership and governance to a new level.”
Finally, there is the Bridlewood story (told in this post). This co-op near Windsor was facing bankruptcy last year (2012) because members kept their unit fees much too low for much too long and then attempted to privatize their units at distress prices. CHF fought the rogues in court, won, and bought the place for a bargain $6 million. So CHF is now landlord of a 131 unit low-income housing development. Some tenants will be former co-op members, paying 50% more per month for their units than previously, but the Bridlewood Co-op per se has been dissolved. CHF absolutely did the right thing here. The alternative was to see the development taken out of the social housing sector altogether and exploited by commercial interests. But CHF itself has now removed these homes from the co-op sector, and has said nothing about how, or indeed whether, Bridlewood will be restored to co-op status.
All of this is incremental. It’s impossible to believe that there’s any ulterior motive involved or even conscious deliberation. But the tendency is clear. CHF isn’t just leading the sector. It’s taking over.
That strong and visionary leadership can work for the co-op housing sector has been clearly shown south of the border. Public-private partnerships in the U.S. have built an average of 10,000 co-op housing units each year for the past 25 years. If this were ten times the Canadian average it would be as expected. But it’s a hundred times more, or more than a hundred, because there is no such growth here. There are no PPPs for co-op housing in Canada.
It’s up to CHF now to show what it can do with the power it’s accumulating. So far, the association’s efforts have bent mostly to preserving what we’ve got. This is necessary for the sector’s survival, but it’s not sufficient for it to thrive. For that to happen, for co-ops to lead the market for affordable housing in Canada, CHF will have to lift its sights much higher.