Sky’s the Limit!
Housing co-op opens doors
for first-time ownership
By Dan Campbell, Editor
high percentage of homes
occupied by owners is a
vital ingredient for healthy
neighborhoods. When
people have an ownership
stake in their homes, they naturally tend to
take better care of them and get more
involved in civic affairs.
So with the renter-vs.-ownership ratio
nearing 50:50 in Bath, Maine, community development
director Al Smith began thinking about a housing
cooperative as one way to open doors to homeownership for
people who would otherwise be renters.
“Maine is a very rural state, and like most rural areas, it
tends to have a high percentage of homeownership,” says
Smith, talking over a cup of coffee in Bath’s lovely old city
hall building. “I was intrigued by the idea of a co-op to
provide easier access to homeownership and as a tool to
strengthen and maintain our wonderful neighborhoods. The
idea of a co-op just seemed to make a lot of sense for a
community like Bath.”
Shipbuilding roots
Bath is a city of about 10,000 people on the Kennebec
River in the Midcoast region of Maine, but the population
swells greatly during the summer tourism season. It has a
proud history as one of the nation’s primary shipbuilding
centers, having built and launched more than 5,000 oceangoing
ships since the 1700s.
Bath was a major builder of clipper ships, beautiful sailing
vessels that were the fastest of their day. At one time, it was
home to more than 200 shipbuilding firms, and by the mid-
1800s it was the nation’s fifth busiest seaport.
This tradition is carried on today by Bath Iron Works
(BIW), one of the state’s largest employers, with a workforce
that ranges from about 5,000 to 6,000 (depending on current
contracts). This is down from a peak of about 12,000 in the
1980s, Smith says.
Booms in shipbuilding during the two world wars and
again after World War II resulted in construction of a
number of public-financed housing developments in Bath.
“Being an older city [Bath incorporated in 1781], the
housing stock is older, and renovation is an issue for many
homes,” Smith says. “So we have fair amount of affordable
housing and multifamily properties, but with a fair amount of
absentee landlords.”
His plan was to find an older property that could be
converted to co-op ownership.
Co-op model studied
Before a property was selected, city planners first looked at
the co-op model and studied how a housing co-op could be
developed and promoted in Bath. Funding was then secured
for a project that would accommodate low-to-moderate
income people.
“We saw this as an opportunity to showcase the idea of a
limited-equity co-op as a path to ownership,” says Smith.
“The way we did it may not be suitable everywhere, but I
believe this model could be replicated to provide access to
ownership and lead to greater stability for neighborhoods.”
A Community Development Block Grant was secured
from the Maine Department of Economic Development,
which was matched by the Federal Home Loan Bank of
Boston. The effort was also backed by several other
organizations in the community, including the Bath Housing
Authority, which acted as the project developer. Coastal
Enterprises assisted with home homeownership and budget
management classes.
“The city’s role was organizing the co-op and training the
members — a fairly long process,” Smith says.
Attention first focused on a 35-duplex development in the
Lambert Park neighborhood. “It was being operated by a
nonprofit, but the property needed a lot of improvements
and a large balloon payment was near due, so the owner
basically wanted out,” Smith says.
This effort eventually stalled. Rather than risk losing the
funding already secured, the group started looking for
another property.
This was in 2005, and the real estate market in Bath was
still fairly strong. But reports that the nearby Brunswick
Naval Air Base was slated for closure resulted in a number of
properties being placed on the market as the owners tried to
beat the base closure.
Five-unit building selected
A multifamily property with five units in two adjacent
structures caught Smith’s eye. Although this would be a
smaller project than he originally conceived, it was an
attractive property for a number of reasons.
The original building dated to 1858, the other to about
1900 (they form an “L”-shaped structure), but it was in
reasonably good repair. “It is a great location – right on edge
of downtown, with short walks to the library, city hall, a food
market and other stores,” Smith says. “And most units have a
water view.”
It needed electrical renovation (which turned out to be a
bigger job than originally thought) and painting. Drains had
to be installed around the foundation to dry out a damp
basement.
Members did much of this work themselves under a sweatequity
program, which allowed them to cut in half the $2,000
co-op membership fee. Members had to show that their
income was no higher than 50 to 80 percent (depending on
the unit desired) of Bath’s $38,000 median income.
Smith says buying and renovating the property ran
roughly $450,000, of which about $240,000 was financed
through the Cooperative Fund of New England, which is
charging no interest for the first three years. “That gave us a
nice jump start.”
The Oak Street Cooperative of Bath Inc. has nine
members living in five units: one three-bedroom unit, two
two-bedroom units and two one-bedroom units. The co-op
has been fully occupied since November of 2007.
Part of a members’ monthly payment goes against
principal, creating equity. “Our lease-sale formula provides
that people can earn up to five years of the principal. We
wanted them to gain equity, but to keep the overall property
affordable.”
Like a family
The camaraderie among the members, and pride of
ownership, was evident when Smith led a visitor on a tour of
the property. All households are co-op board members,
which Smith says has helped develop “a sense of family” and
mutual support among the members.
Some structural work still needs to be done, including a
stone wall along the street frontage that will likely have to be
replaced at some point. The co-op has limited cash reserves
at this point, so the board has had to come to grips with
budgeting for repairs as funds allow.
“It would have been very hard for
me to buy a place without this co-op,”
says Steven Cummings, the co-op
president and a first-time homeowner.
“It feels awesome — I love it here. It’s
got a view, and the heating cost is
reasonable.”
Cummings, like all the other
members, has never served on any type
of board of directors before, so the coop
classes and sessions on budgeting
were very helpful, he says. “I highly
recommend co-op living for anyone
with lower income or poor credit.”
Solo Martin, who works at a
preschool, couldn’t agree more. “It’s
beautiful here and we [she shares a unit
with her sister] are very happy. I’ve
never been a homeowner before, and
being on a co-op board and working so
closely with the other members is an
entirely new experience for me. We all
sort of look after each other!”
Since the Bath co-op was formed,
another small housing co-op, Faire
Brande, has been developed in the city
of Lewiston, about 26 miles away.
Co-op housing opportunities
“I see tons more opportunities for
similar co-ops in this region,” says
Smith. “Rockland, Belfast — and
Brunswick with its large student
population — would all be good places
for housing co-ops.”
The concept of small housing co-ops
like the Bath model might even have
applicability for meeting the need for
group homes for handicapped people
around the nation, many more of which
are needed as more large residentialtype
institutions are phased out.
“I would love to see some other
housing co-ops formed around here so
we could explore going in together on
purchasing heating fuel and on
maintenance work,” Cummings adds.
“The sky’s the limit for this co-op!”
