Boston plan promotes conversions to co-ops rather than condos

The word was out -- the building was up for sale. STunned, it meant only one thing to the moderate-income residents at 49 Symphony Road: The building was being turned into a condominium.

It also meant that the residents would be turned out and replaced with people who could afford the price; in other words, by those who could buy their apartments.

It's a stale scenario to the people in the Fenway section of this city.

But this time the story is going to have a new ending. With guidance and financing from the newly formed Boston Mutual Housing Association (BMHA), the residents at 49 Symphony Road are going to buy their own building and turning it into a cooperative.

As a result, they will be able to stay where they are and at rents they can afford to pay.They also will have the added benefit of home ownership.

The Boston Mutual Housing Association is a promising experiment on an old European idea. The result is a not-for-profit corporation which provides cooperative housing for people of middle income and below.

A long-respected instituition in Europe, the mutual housing association is starting to draw serious interest in the US. Associations such as that here in bosto have been tried successfully in Chicago, Detroit, Cincinnati, New York, and Washington, D.C.

Some people feel that mutual housing may be a solution to both the chronic failure of public housing and the high cost of private housing. At the very least, it can help middle-income communities hold their ground against the onrushings tide of condominium conversion, a trend that has forced many families to give up their homes when they don't have the will or the money to buy.

The Fenway section of Boston has long been a haven for students, the elderly, and people of modest means. But now, with the upward grind of inflation and urban revival, plus the area's proximity to downtown, it also is becoming more attractive to young, affluent professionals. In response, the market is heating up, longtime landlords are selling out, and rents are escalating.

The Boston-Fenway Program Inc., a consortium of 11 nonprofit institutions in the area, has been monitoring the housing situation for the last two years. Clare Cotton, head of the group, sums it up this way:

"The Fenway is an incredible location. We know for a fact that the major realestate speculators are turning their eyes to this area. If somebody doesn't do something soon, the buildings that aren't subsidized will be sold and converted to condominiums."

The area, he explains, would quickly polarize into two kinds of housing: (1) expensive market-rate housing, and (2) subsidized low-income housing. This would leave no place for the people who fall in between these two extremes.

Most of the Fenway's current residents would have no choice but to move out.

"To solve the problem," Mr. Cotton says, "we needed a mechanimism that could buy and rehab a building at minimum cost. It had to be a nonprofit entity that would start middle-income and stay middle-income. So we would wind up reinvesting the mutual housing association of Sweden and West Germany."

The Boston Mutual Housing Association is an independent corporation, although at the beginning it is being sponsored by Boston-Fenway through grants from the Permanent Charity Fund of Boston and the RAytheon Company. BMHA's purpose is to plan, develop, arrange financing, and buy buildings that can be turned into cooperatives.

In addition, BMHA will provide management services to the cooperatives.

The Symphony Road development is its first venture and was acquired through a loan from the National Consumer Cooperative Bank. Other purchases are in the works.

BMHA housing will differ from traditional cooperatioves in some significant ways. First, while each unit will be a corporation in its own right, they will all be permanently linked to the association. For a yearly fee of $10, prospective residents are required to become members, or stockholders, in the association.

This centralized approach provides the working capital to get more co-ops started and ensures that they will have the professional expertise they needed to prosper.

Another difference from traditional coops is the resale value of apartment will be controlled by a "structured equity" policy. When a member moves, the low down payment which he made on entering the co-op is returned, along with a fixed annual increase and an adjustment to cover the value of any improvements he may have made in the apartment.

In this way the resident can gain the same degree of equity as if he bought his own home, but he will not be able to make a speculative profit.

The next occupant, in turn, pays a similarly low down payment, ensuring that the unit remains affordable to those of middle to lower income.

The key to developing middle-income cooperatives is finding low-interest mortgage loans.

"We talked to every major financial institution in Boston about mortgages," declares Mr. Cotton. "They are essentialy out of money at anything under 14 percent," he reports. "And the difference between paying 8 and 14 percent on a mortgage is enormous in the monthly payment. It's the difference between middle-income and market rent."

Mutual housing associations, however, have an edge in the tight money market, partly because of their impressive success record. The National Consumer Cooperative Bank takes a special interest in them, according to New England regional director Harriett Tee Taggart.

"Mutual housing associations are a longtime proven way of establishing the financial and legal expertise so critical in setting up co-ops," she conclude s.