This open letter is a project of the 2012 Presidio Graduate School’s Capital Markets class. To read more letters, visit the project page here.
Dear Chairman Menendez,
We are MBA candidates at Presidio Graduate School, and are committed to reshaping the economy in more sustainable and equitable ways. In many areas of the U.S., including our city of San Francisco, regular citizens with decent paying jobs cannot afford housing. Income levels have stagnated over the last thirty years. During the same time period, housing prices in the U.S. have appreciated an estimated 5-6 percent each year on average. A family making the median household income isn’t able to afford a home at the city’s median price in half of America’s cities.
As a result, low and modest income earners are being stretched too thin to afford a mortgage or they are simply eliminating homeownership as an option altogether. This affordability crisis will continue to worsen unless more flexible and creative forms of ownership are developed. Homeownership represents a pathway to pride and prosperity for many families, encourages values of responsibility and sacrifice, creates stability for neighborhoods and communities and generates economic growth that helps strengthen the entire nation.
This is why we are writing to urge you to enable Limited Equity Housing Cooperatives (LEHCs) to receive funding under the Low Income Housing Tax Credit (LIHTC) program.
The LIHTC program is one of the most successful vehicles of affordable housing creation, yet it is too limited in scope. Currently the program does not allow for tenant ownership through cooperative ownership models, which could greatly increase the stock of affordable housing.
In a limited equity-housing co-op, residents are tenants of the corporation that owns the building, as well as shareholders. For more background on LEHCs, see this website. Residents maintain control over how the building is run through voting rights, thereby gaining experience in democratic decision-making and having greater influence over decisions that affect their homes.
Even though LEHC residents do not “own” their units, they own equity shares in the building and receive many of the positive benefits associated with homeownership. Residents often remain in LEHCs for decades due to stable and affordable payment structures that enable them to establish lasting roots in their neighborhoods. Accordingly, they experience greater benefits than those experiences by rental tenants. This includes higher self-esteem, greater involvement in community organizations, and better educational and occupational outcomes. There are several successful examples of LEHCs in New York City, Washington D.C., and Boston. This is why we urge you to make limited equity co-ops eligible to receive funding through Low Income Housing Tax Credits.
Thank you for your time and consideration of this proposal. If you have any questions we would be happy to speak with you more on this topic and further explore the potential benefits of providing funding for limited equity co-ops under the LIHTC program.
Melissa V. Barnes, Arif Hasyim, and Mara Slade
MBA Candidates, Presidio Graduate School