A novel approach to the housing shortage — the Livable Real Estate Cooperative

Businesses throughout the region are in urgent need of employees, and this ought to be spurring the development of workforce housing. For the average developer, however, modest housing units for people like teachers and nurses, especially outside of urban centers, are just not profitable compared to large-scale, luxury homes that do not cater to the workforce.

To quote Maura Collins, executive director of the Vermont Housing Finance Agency, “It’s too expensive to build a modest home that’s affordable to Vermonters… In some communities it costs $425,000 to build a home that is going to appraise — a professional’s valuation of the home — for only $375,000.”

Building lots themselves are expensive and hard to come by. So rather than look to build brand new homes, why not convert or add to existing properties? There are homeowners who would be interested in doing this for a variety of reasons, but who lack the downpayment for a construction loan. They may also feel intimidated by the idea of handling the planning, permitting, and legal aspects of a construction project.

An idea, new to this area, addresses the barrier of having zero capital, as well as the other concerns. It’s called cooperatively-developed housing.

The idea began with a group of Thetford residents brainstorming an attempt to convert the North Thetford Church — which was being offered for free to support community needs — into housing units. While septic limitations eventually scuttled the project, a seed was planted to explore a type of legal structure that could affordably use existing buildings to provide housing.

The Livable Real Estate Cooperative grew from that beginning. This organization proposes to use the co-op model as a means to develop much-needed housing. It is the first of its kind in our region, inspired by our local cooperative food stores and modeled after cooperative principles, such as democratic control and concern for community, that are common to every co-op. It was put together by none other than Thetford’s Nick Clark. While the co-op would create housing units like any other developer, the motivation would be social benefit, rather than monetary profit.

The founding Board of Directors includes another Thetford resident, Rep. Jim Masland, who has a degree in architecture, a masters in engineering, and years of building experience. They’re joined by Jill Davies, President of the Woodstock Community Trust and advocate for missing middle housing; Conicia Jackson, a Vermont Law student and employee at NeighborWorks in western Vermont where she aids landlords in obtaining grant funding to rebuild their vacant/blighted apartments; Karen Liot Hill, an 18-year Lebanon City Counciler who, among many other things, was the general contractor for the redevelopment of the former School Street School; and Jonah Richard, a small-scale developer operating in Bradford and Fairlee and founder of Brick + Mortar, a small-scale development newsletter.

This cooperative real estate organization works by leveraging social capital. That is, it revolves around amassing co-op memberships rather than raising money from a few wealthy investors. The membership fee in itself — $50 — is intentionally inexpensive. Instead, it’s the membership numbers, providing proof of community support, that will be used to attract a building loan from a financial organization that specifically lends to cooperatives.

Livable Real Estate proposes to start small. There’s a homeowner in Wilder who approached Nick and is now partnering with the co-op to build an ADU or accessory dwelling unit, as soon as financing is available. Indeed, ADUs appear to be the low-hanging fruit as the most expeditious provider of housing. Compared to the impact of new construction, ADUs are built within the footprint of an existing structure. This could be done by converting part of a house into a separate living unit or converting a garage into an apartment. It would minimize the change to a neighborhood’s appearance, perhaps adding no more than an extra car. No subdivision or land clearing is involved.

Permits would be less onerous than for new construction, so long as septic capacity is not exceeded. The main house would give up a minimum of one bedroom (the state uses the number of bedrooms to determine septic capacity), and that would be transferred to the ADU. The driveway would need minor to zero change. All this makes an ADU an affordable prospect, which could translate into rents that are more affordable.

The idea so far is that the management of the ADU would be provided by Livable Real Estate. The homeowner leases the ADU space to the co-op, and thus receives some income without the burden of being a landlord. The co-op constructs the ADU, rents it to the tenant, manages the unit, and uses the balance of the rent to pay off the loan and other expenses. This is where the co-op model becomes important. Co-ops are member-owned, and every member has a voice and can help guide the rules for management of rental ADUs, for instance, to prevent them from swelling the tide of investment AirBnBs. And as Nick says, “If the tenants are also members of the co-op, they have an incentive to be good neighbors because that relationship is how they can keep living affordably in the Upper Valley. It transforms the rental relationship into a community versus a one-off, met-on-the-listserv type thing.”

Reasonably priced rental ADUs can offer an entry into the regional housing market, although, under current regulations, an ADU cannot be sold. The entire property would first have to be converted into a condominium, a lengthy legal process generally applicable only to a building containing five or more housing units. However, the housing crisis may inspire a change in legislation. For now, any new unit to rent or own will help alleviate the shortage of housing.

Cooperative housing keeps development squarely in the hands of local people, rather than being driven by developers who may or may not understand the community or who may value financial profit over social profit. Local control would be a way to avoid the type of gentrification and upscale building that keeps housing out of reach for many. Our housing crisis is multi-faceted and will require many different solutions. The Livable Real Estate Cooperative is offering one such approach that is fresh and inventive. While the co-op may pursue more than ADUs in the long-term, for now it is hoping to complete the unit in Wilder as a demonstration of feasibility.