Earlier versions of this article appeared in Cooperative Housing Quarterly and Divisible.

The housing crisis in the US has hit households with low to moderate income the hardest.

While the Low Income Housing Tax Credit program plays a valuable role in increasing housing supply for low-income families, there is no similar source for moderate-income households. Without a targeted funding system, supply is negligible, and so demand for moderate income housing continues to grow. In many urban environments, moderate-income households are priced out of home ownership of any kind.

Limited equity housing cooperatives (LEHCs) could be a provider of permanent affordable home ownership for moderate income households. But the format is just a dream without government funding and entities that can build cooperative development capacity. Where should housing activists in the US look to solve the problem?

One model that we could replicate is Sweden’s social housing, a category that includes non-profit, cooperative and municipal housing.

In the United States, we use tax credits to subsidize low-income rental housing (for residents earning 30 percent to 80 percent of the area median income, or AMI) and we subsidize for-sale housing for those people who can afford it through tax credits. However, we do not have government funds to house middle- and middle-income families (or those earning between 80 and 120 percent of AMI). In Sweden, low- and middle-income families have shares in the same apartment building. Together with other social housing companies, the Swedish cooperative sector is an important active housing developer.

Sweden’s condominium associations

Sweden has the most condominiums per capita in Europe (based on countries with data reported by Cooperative Housing International) make up almost a quarter of all homes in the country.

About 350,000 of these units are part of HSB Riksförbund and 200,000 are part of National building. HSB and Riksbyggen are two different national cooperative organizations that develop new condominiums and convert existing public and private multi-family buildings into condominiums. In recent years have condominium associations have had the greatest growth of the multi-dwelling sector.

Let’s take a look at the biggest one, HSB. As of 2022, HSB’s cooperatives had over 675,000 active members in over 4,000 condominium associations, which own and manage close to 350,000 apartments and over 25,000 rental units.

Do you want to live in one of the cooperatives? First, get your name on the waiting list. These waiting lists can be long in larger cities, but shorter in small to medium-sized cities, says Linn Matic at HSB.

Want to jump ahead of others on the waiting list? Join HSB, open a savings account and start depositing. There are close to 125,000 people in HSB who save for condominiums, their savings amount to 4.8 billion kroner, or almost 500 million dollars. The majority of these funds are used by HSB to develop new condominium associations.

The consequences of the recession in Sweden on the moderate housing market

Year 2023, Sweden entered a recession. As a result, there was a series of upheavals in the housing sector. Before 2023, to balance their books, many cities sold off their council-owned apartments to private investor pools. SBB, one of the largest private real estate companies in Sweden, bought thousands of these tenancies of former municipal housing, but was immediately insolvent by rising interest rates. With his shares lose 90 percent of their valueSBB had to act to reduce the debt.

SBB has borrowed new funds and sold some of its shares. It seems likely that it will put the rest of its apartments into a new company by selling shares and using the capital coming in to pay down its debt. It is not yet clear whether that transfer will dissolve the apartments’ rent protection. SBB subsidiary Svea properties is now Sweden’s largest listed housing company. The company has approximately 14,500 apartments and another 7,900 in project development or under construction.

House prices and interest rates are rising in a very thin market and housing production is falling. But now, with limited social housing options, there are significantly fewer council-owned housing apartments at a reasonable price or rent for middle-income families.

Regardless of the outcome, this housing market crash will test the stability and reliability of the 100-year-old condominium model for Swedish households with moderate incomes.

Lessons from Sweden’s model for the USA

What can we learn from a nation where a quarter of housing is in cooperatives?

1. To meet the needs at the local level, Sweden built up a national organization with a regional structure consisting of independent condominium associations.
2. HSB benefits from a savings plan that rewards depositors with a home purchase priority and uses the nearly $500 million the pre-owners have saved as their development capital. Owner savings roll over to ownership shares when new residents move into their apartments.
3. The HSB organizations have the capital, resources and staff to pursue housing development opportunities themselves or in partnership with municipal authorities, private entities or non-profit organisations.
4. HSB and other cooperative housing groups have the political clout to ensure they have the same access to government housing dollars and programs as private, nonprofit or municipal entities.

US Housing Cooperative Development Efforts

A condominium association with limited capital owns an entire plot of land and all the apartments and buildings on it. Each family living in a unit in that cooperative owns a share. Under American law, a share in a condominium gives the share owner the same tax status and benefits as all other home owners. The cooperative members can use their votes to elect the board and approve the annual budget and articles of association. The board then hires a professional management company to manage the day-to-day operations of running the cooperative. All apartments must be owned, so no apartments can be rented out to others or listed on Airbnb.

The maximum price for shares in an LEHC is often determined by state law and typically ranges from 5 to 10 percent of the unit cost of the original completed issue. The original share is also determined by either the square meter surface of the apartment or by how many bedrooms the apartment has. Shares in an LEHC can range in cost from $5,000 to $30,000. Shareholders receive a return of approximately 3 to 5 percent per year. The monthly costs for the cooperative are calculated either by square meters or number of bedrooms.

There has only been a small, measurable one development period of cooperative housing for low- to moderate-income households in the United States. The core years during that period were from 1950-1970. During that era, there was a happy abundance of both government funding and development capacity. Key elements were the post-war financing of housing cooperatives (incl Section 213 non-income-tested mortgage insurance programs, and section 221(d)(3), which provided below-market mortgage insurance for income-oriented households; two important development organizations (the United Housing Foundation, formed by several New York-based unions and best known for building 15,372 units Co-op City in the Bronx and the Foundation for Cooperative Housing); and a national postwar political climate supported by labor unions and cooperative organizations committed to the development of low- and moderate-income affordable housing.

Since that era, there have been a couple of citizen-based efforts in the New York City and Washington, DC. Otherwise, cooperative housing is rarely seen, heard or talked about. The few individual condominiums that appear once in a blue moon neither start a sector nor make a movement.

The lack of housing for households with moderate incomes is a crisis and the market cannot keep up with the demand. Limited equity housing cooperatives could provide permanently affordable, moderate income, owner-occupied housing in the United States

But currently we do not have the institutional capacity in the United States to develop new cooperatives to meet the need. We clearly require many parts of what Sweden has built. American housing activists, unions, and partners must fill the gap with local, state, and national capacity and a well-funded government program that promotes moderate-income homeownership.

About the author

David J. Thompson

David J. Thompson, together with Thompson Housing, has developed non-profit and cooperative housing that accommodates over 10,000 people. He was one of the founders and former regional director of Kooperativa Banken.