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L . B. Schwellenbach, Secretary
A . F . Hinrichs, Acting Commissioner

Organization and Management
o f Cooperative and
Mutual Housing Associations

Bulletin No. 85 8
(Revision of Bulletin No. 608)

For sale by the Superintendent of Documents, U . S. Government Printing Office
W ashington 25, D. C. - Price 20 cents


Letter o f Transm ittal

U nited S tates D epartment of L abor,
B ureau of L abor S tatistics,

Washington, February h 1946.
T he S ecretary of L abor :

I have the honor to transmit herewith a pamphlet setting forth the
proper methods o f procedure for the organization and management
o f cooperative and mutual housing associations. The present report
is a revision o f the Bureau’s Bulletin No. 608, bringing the subject
matter into conform ity with present practice.
Many persons within and without the cooperative movement,
qualified by experience and training, have contributed to this manual.
Their number includes housing experts, architects, and attorneys,
as well as cooperators who have participated in one or more housing
projects. In addition to Florence E. Parker and Alexander Findlay
o f its own staff, the Bureau wishes especially to acknowledge the
valuable contributions and suggestions o f Dale Johnson, Huson
Jackson, Dorothy Kenyon, and Udo Rail.
A . F. H inrichs , A cting Commissioner.
Secretary o f Labor.


The present bulletin is a revision o f Bulletin No. 608, issued in
1934 at the request o f the Consumers Advisory Board o f the National
Recovery Administration. It was one o f a series o f three pamphlets
dealing respectively with the organization and management o f
consumers5 cooperatives in general, cooperative petroleum associa­
tions, and cooperative housing associations.
The Bureau o f Labor Statistics, in pursuance o f the directive under
the law creating it, to “ acquire and diffuse * * * useful inform a­
tion on subjects connected with labor in the most general and com­
prehensive sense o f that word,55 had for many years been collecting
information on the consumers’ cooperatives. This inform ation
covered, among other things, statistics o f membership and business,
methods o f operation, and causes o f success or failure.
The Bureau’s studies had shown that one o f the most prolific causes
o f failure o f cooperative associations was failure to organize on a
proper basis, with an understanding o f best methods and sources o f
T o provide such information Bulletin No. 608 was issued. F or the
material in that bulletin the Bureau was especially indebted to the
late Agnes D. Warbasse, then secretary o f the Cooperative League.
A t that time apartment buildings were the only form o f cooperative
housing in this country. The pamphlet was therefore drawn up with
them in mind. Since then several cooperative housing projects have
erected individual dwellings, which involve their own problem s; pro­
tection o f both member and lender has become available through
Government insurance o f m ortgages; and mutual ownership o f pub­
licly built housing has developed.
The present report therefore revises the form er one, bringing it
into conform ity with current conditions and practices. It covers
certain aspects o f planning, construction, financing, and operation
which go beyond the single step o f cooperative ownership o f real
estate. Model bylaws, together with explanations (where necessary)
o f the reasons why certain provisions are desirable or important, are
given. A model lease and a member’s share subscription agreement
are also included.



P r e fa c e _________________________________________________________________




General characteristics o f cooperative housing__________________________
Cooperative principles______________________________________________
Deviations from standard cooperative practice_________________
Advantages and disadvantages o f cooperativehousing________________
Adequate planning____________________________________________
Opportunities for savings_______________________________________
Elimination of speculation______________________________________
Safeguards for members and association________________________
Collateral cooperative activities________________________________


Desirable prerequisites for successful cooperativehousing________________
The membership g ro u p ____________________________________________
Preliminary exploratory study______________________________________


Considerations o f site and type o f p ro je ct_________________________________
Purchase o f existing building_______________________________________
Suburban residential projects_______________________________________
Urban redevelopment p rojects________________________________________
Mutual home ownership_____________________________________________


Considerations relating to community *md architectural planning___________
Community planning______________________________
Building design______________________________________________________
Construction operations_____________________________
Thorough utilization o f cooperative techniques________________________



Starting the association__________________________________________________
Incorporation of association________________________________________
Articles and bylaws o f the association_____________________________


Financing the enterprise__________________________________________________
Initial expenses_____________________________________________________
Mortgage procedures_________________________________________________
Initial financing_____________________________________________________
Members’ subscriptions for shares________________________________
Bond issues_______________ ________________________________ ;-----Preferred stock ________________________________________________
Personal loans obtained by members____________________________


The member in relation to the organization______________________________
Ownership o f shares, not o f dw elling_______________________________
Member’s lea se_____________________________________________________
Rental charges or monthly maintenance payments___________________
Voting pow er_______________________________________________________
Withdrawals of members____________________________________________





Administration and management________________________________________
Administration of the association___________________________________
Management o f the property_______________________________________
P o lic ie s ___________________________________________________________
Subletting or subleasing to nonmembers________________________
Rental of commercial property_________________________________
Interest on share capital_______________________________________
Members’ deposit account______________________________________
Effect of increase or decrease in property values________________


Tax status o f cooperative housing associations_________________________


Use of surplus savings_________________________________________________


Dissolution o f association______________________________________________


Central cooperative housing organizations______________________________
Supervisory agency and cooperative housing fu n d ____________________
Federated activities o f cooperative housing associations--------------------


Appendix A.—Model bylaws for a cooperative housing association------------Appendix B.— Sample share subscription agreem ent____________________
Appendix C.—Model lease for a cooperative housing association--------------Appendix D.— Citations of la w s _________________________________________
Appendix E.— Cooperative leagues and wholesale associations___________
Appendix F.—Where the housing dollar g o e s____________________________





Bulletin l^o. 8S8 of the
United States Bureau of Labor Statistics

O rganization and M anagem ent o f C ooperative and
M utual H ousing A ssociations
TH E chief purpose o f consumers’ cooperative and mutual housing is
to furnish the participating members with the best possible housing
for the cost, under conditions which will insure the maintenance o f
community values. These aims are facilitated in part by the nonprofit
nature o f cooperative or mutual enterprise, in part by the elimination
o f unnecessary expenses, wastes, or profits, in part by good planning,
and in some cases by increasing the owner’s opportunity to furnish a
part o f the labor or materials required for his dwelling. The economies
are not sought at the expense o f labor, as cooperative enterprises should
expect to pay the prevailing wages applicable to construction in their
vicinity. The members’ motivation lies in the desire to obtain housing
fo r their own use, without expectation o f speculative profits to them­
selves from the sale or rental o f their dwellings to others. Although
fully cooperative housing does not provide for outright individual
ownership o f a particular dwelling, it offers the virtual equivalent—
security o f possession and occupancy—at a saving to the fam ily budget
which more than makes up for the largely illusory advantage o f being
able to display a title deed to the dwelling unit occupied. This bulletin
deals in some detail with the suggested solutions for many o f the prob­
lems which w ill confront groups seeking to apply the principles o f con­
sumers’ cooperation to the field o f housing.
Housing is one o f the most important fam ily needs. Next to food it
looms largest in the budget. Ownership o f a dwelling is probably on©
o f the most widespread fam ily ambitions. Cooperative housing there­
fore represents a field offering great potentialities, but it is one in
which as yet comparatively little has been done in this country. The
European countries, in which housing associations form an important
part o f the cooperative movement and in which not only individual
dwellings but whole communities have been built cooperatively, illus­
trate what can be done.
In the United States, until a few years ago, the only cooperative
housing consisted o f apartment dwellings which cooperatives had
bought or constructed in Greater New York. In the. few years imme­
diately preceding the Second W orld W ar, several housing projects
were started for the construction o f individual dwellings and in two
cases an entire new community was formed. Some o f these groups, for
reasons set forth later, have been unable to proceed on a thoroughly
and consistently cooperative plan. Their activities and the plans o f
others were halted by the war and the building restrictions that were




Indications are that the housing field w ill witness considerably in­
creased cooperative activity, if some o f the outstanding difficulties can
be overcome. Some o f these difficulties are inherent in the nature o f
the building industry; others stem from the economic uncertainties
and temperamental characteristics o f American wage earners. The
building industry is one in which prices o f materials continue high
even in times o f depression and otherwise falling prices, in which
hourly wage rates are high (though annual earnings are comparatively
low, because o f seasonal unemployment), and in which technological
improvement has thus far been slight, resulting in the continuance o f
costly hand methods.1 The resulting high cost o f dwellings has been
the first and probably the greatest bar to home ownership. The wage
earner faces in many cases the prospect o f unemployment, inability to
meet his payments, and possible foreclosure with loss o f equity. F ur­
ther, Americans are a restless people, moving about in search o f work
or change o f environment; many hesitate to tie themselves to any one
spot by investing their savings in a house, not recognizing that such a
tie can be cut with less trouble and less risk o f financial loss i f legal
ownership is vested in a cooperative association instead o f an indi­
vidual householder.
M ajor barriers to housing on a cooperative basis have been lack o f
knowledge and inform ation about the essential principles o f cooper­
ative housing in its broadest sense, and the reluctance o f some lending
agencies to grant mortgage loans to cooperative associations, especially
on detached residences which have usually been financed by an ownerexecuted mortgage. It is possible also that cooperative housing in the
United States has been retarded by a mental attitude based on an over­
valuation o f the benefits o f speculative individual ownership and an
inadequate understanding o f the advantages offered by nonspeculative
cooperative ownership to the fam ily concerned prim arily with obtain­
in g the best possible housing fo r every dollar spent.
Nevertheless, the diverse and numerous benefits which can accrue
to the consumers o f housing through cooperative techniques have
prom pted the organization o f dozens o f groups seeking to use this ap­
proach to the fulfillment o f their needs. One o f the chief purposes o f
this pamphlet is to assist such groups in studying the subject o f coop­
erative housing. The field is complex, dealing as it does with the numer­
ous problems o f group action, land purchase, planning, construction,
financing, and operation and maintenance o f housing accommodations.
W ith relatively so little published regarding the cooperative principles
or solutions which have proved themselves in successful use, it is under­
standable why there have been such diverse policies and thus fa r so
few accomplishments in the field o f cooperative housing.

General Characteristics o f Cooperative Housing
Genuine democracy is essential to the effective functioning o f a co­
operative housing association. Except as necessitated by the space
limitations o f available or projected housing facilities, by the cooper­
ative’s obligations to its members to safeguard their investments, and
by its obvious responsibility to promote a harmonious community,
membership should be open to any persons desiring to participate.1
1 Techniques o f mass production and prefabrication promise some alleviation o f this difficulty.



Each member or fam ily should have one vote, regardless o f the amount
o f stock owned. Safeguards should be provided against speculation.
In a completely cooperative housing association, the member does
not receive title to any individual apartment or dwelling. H e owns
shares equivalent to the amount o f the equity required for the apart­
ment or dwelling he occupies. H is evidence o f ownership consists o f
a stock certificate which indicates the amount o f his investment and
entitles him to lease his apartment or dwelling from the association.
Legal ownership o f the apartment or dwelling is vested in the associ­
ation as a whole. A member, in withdrawing, gives his association due
notice that he wishes to dispose o f this equity and give up his apartment
or dwelling. The withdrawing member is entitled to the fixed par value
o f his paid-up shares (minus any debts due his association fo r rent,
damages or the like) provided this is permitted by law and is possible
without endangering the financial position o f the association. I f addi­
tional funds have been deposited with the association, or if the member
has amortized the indebtedness against his dwelling more rapidly than
the property has depreciated, this account should also be settled. In
some types o f projects, especially in single-fam ily residences, the indi­
vidual may have made significant permanent improvements for which
an adjustment might be allowed. In no case, however, should the in­
creased value resulting from the group’s activity from the benefits o f
cooperative principles, or from fluctuation in the read-estate market,
be a basis fo r a withdrawing member’s claim.
The corporate earnings o f the association, after establishing such
reserves as may be required by law or prudent business practices, are
usually paid to the members as a patronage or rent refund (this is also
called a ‘‘savings return” ) . The effect o f this disbursement is to reduce
the members’ net payment fo r the housing accommodations to the
actual cost involved, and to reduce the corporation’s net earnings.
These policies are follow ed in consumers’ cooperative housing associ­
ations because the purpose o f such associations is not to make money
but to obtain for the members desirable dwelling units on a service
basis, thereby giving the members fu ll value fo r their payments. I f a
member elects to withdraw from the group and its benefits he may do
so in a manner which is fa ir to him. However, members o f a genuine
consumers’ cooperative housing association should recognize that the
primary purpose o f the association is to furnish the members, in their
capacity as consumers, good housing at cost. No member is entitled to
claim an individual financial profit from any phase o f the association’s

Cooperative Principles
The follow ing are the specific cooperative principles to which hous­
ing associations should conform :
1. Democratic control; one vote only for each member, regardless o f
the amount o f stock owned. Responsibility fo r administration to rest
with the board o f directors elected by the owners. This means decen­
tralized control fo r purposes o f democracy and centralized administra­
tion fo r purposes o f efficiency.
2. Any interest paid on invested capital to be at a fixed rate not
exceeding the current legal rate. However, i f the ratio o f capital in­
vestment to value o f occupied dwelling is the same for all members,
684613°— 46-------2



the payment o f interest on shares becomes not only superfluous but un­
desirable. This is explained on page 35.
3. Legal ownership o f the property to remain vested in the associ­
4. Shares in the association’s capital stock to be nontransferable ex­
cept with the consent o f the association, and never at more than par
5. Surplus savings accruing from the association’s operations,
which are not used for expansion or collective purposes, to be returned
to the tenant-members as savings returns in proportion to the amount
o f their patronage or monthly payments.
6. Neutrality, on the part o f the association, as regards political,
religious, and other extraneous matters on which the members may
entertain differing opinions.

Many organizations in different parts o f the world, which are called
“ cooperative” but are not entirely so, deviate from the above policies
in one or more respects, enumerated below. From the standpoint o f
genuine and complete consumer cooperation, such practices are unde­
sirable and should be avoided i f at all possible. They tend either to
increase the ultimate cost o f housing to the consumer or to have a di­
visive effect on the housing community by destroying the identity o f
self-interest with community interest and stressing the form er at the
expense o f the latter.
1. Some associations build cooperatively but sell homes or apart­
ments outright, giving title to the property owner. Such a policy, al­
low ing individual sale o f the home at a profit, obviously encourages
speculation, promotes instability o f residence, and destroys the cooper­
ative aspects o f the enterprise. This deviation has been adopted in
some cases because the members have never thoroughly agreed with
the fundamental aims o f cooperative housing. In others, especially in
projects involving individual houses, the association found it necessary
to give members title, in order to obtain the required financing. As a
measure o f protection to the project some associations under these cir­
cumstances require the member to execute an option, perm itting the
association to have first opportunity to buy back the dwelling at a price
previously agreed upon.
2. Some associations which do not give title to the property never­
theless allow the members to sell their shares to the public at their own
valuation. This also makes speculation not only possible, but inevi­
table. Ultimately the cooperative plan is destroyed. This policy,
which is widespread among the so-called “ cooperative” apartment
houses sponsored by real-estate interests, subjects the incoming mem­
ber to the risk o f buying at inflated prices and perhaps o f having to
sell later at greatly depressed prices.
3. Some associations own the land cooperatively but give the indi­
vidual member a 99-year lease on which he may build his own home
and sell it at his own price. This practice also fails to provide against
4. Some allow voting by shares instead o f lim iting the vote to one
per member. In such cases investment—ownership o f property—de­
termines control.



5. Some associations observe all other rules o f cooperation except
that they permit their members to sublet their apartments or dwellings
at a profit which the member is permitted to keep. Properties have
been completely emptied o f owner-members as a result o f such a policy.
Subleasing should not be permitted except fo r brief periods o f an
emergency character, as it effectively eliminates the association’s con­
trol o f its facilities.
6. Some societies rent as many as h alf o f their dwellings to non­
members, at a profit which they apply to the reduction o f the members’
monthly payment, thus exploiting the tenants fo r the benefit o f the
members. Renting apartments to nonmembers should be considered
only i f vacancies compel this action; i f renting is resorted to, it should
be with a view to recruiting the tenants as members.
7. Some accept philanthropic grants or funds from civic bodies and
permit the grantors to control and administer the property. Mutual
ownership (later described), as originally proposed, gave Government
and public representatives two-thirds control. Generally it would be
better for the association to stand on its own feet, and retain control o f
its activities. However, the election or appointment o f a cooperative
housing expert to serve on the board o f directors, perhaps without vote,
might be o f considerable help to the association.
8. In some cooperative associations there is no safeguard against
dissolution o f the association for the purpose o f enabling the members
to realize their pro-rata interest in the association’s assets. This has
destroyed some cooperative associations. Mutual housing associations
and the lim ited-dividend housing laws provide that, upon dissolution
o f an association, all gains beyond an authorized return on capital must
be paid into a public agency such as a housing authority. Several o f
the more recent consumers’ cooperative laws also contain provisions
designed to meet this situation.2 Cooperative housing associations
which are w illing to assign, for the prom otion o f cooperative housing,
any net value above shares at the time o f dissolution should communi­
cate with the Cooperative League o f the U .S.A., 343 S. Dearborn
Street, Chicago 4, 111. The League is w illing to handle, as trustee, any
such funds a dissolving asociation may assign to it.
Advantages and Disadvantages o f Cooperative Housing

The advantages o f living in a cooperative housing development vary
with the degree o f utilization o f cooperative techniques and the wis­
dom o f the members’ decisions. Through cooperative housing, mem­
bers should be able to live in well planned and constructed dwellings,
in better communities with a measure o f security and neighborliness,
and at a fairer cost than in housing operated for profit to investors.

A cooperative group, being assured in advance o f the demand for and
rentability o f the housing which it is going to create, need not seek the
most convenient or fashionable location, fo r competitive commercial
2 Thus, the laws o f the D istrict of Columbia, M aine, and New Mexico provide that after pay­
m ent of the association's debts and par value of shares (including shares partly paid u p ), any
money remaining must be divided “ in either or both o f the following ways as the articles [of
incorporation] may provide: (a ) Am ong those patrons who have been members or subscribers
at any tim e during the past 6 years, on the basis o f their patronage during that period; (b ) as
a g ift to any consumers' cooperative association or other nonprofit enterprise which may be
designated in the articles.”



advantage. I t can safely choose lower-cost land, with consequent sav­
ings and more plentiful space. Likewise, better utilization o f the site
and better planning are possible when the housing is created to be lived
in rather than to be sold or rented at a profit.
The buildings erected in New Y ork City by the Amalgamated group
are examples o f well-planned apartment dwellings with adequate space
fo r light, air, recreation, gardens, and lawns. The Crestwood, W is.,
project exemplifies not only excellent selection o f site to provide after­
noon shade, shelter from north winds, and natural drainage, but also
wise lay-out o f straight dead-end streets, which discourages through
traffic and provides quiet and safety besides avoiding the extra expense
fo r longer sewer lines and utility connections entailed by winding
Greater value to the member-occupants in cooperative projects can
also be achieved through the architectural design and other architec­
tural services. A ny well-advised housing association w ill make a care­
fu l choice o f the architects fo r its housing units, its other buildings and
the site lay-out, and as a result obtain architectural services well above
common standards fo r promotional building. Since good value starts
with design appropriate to its purpose, meeting the needs o f the occu­
pants, and using space and materials efficiently, this is a valuable ad­
vantage. Furthermore, the architect fo r the houses is free from any
requirement to include unwise and unbalanced features in order to
increase sales appeal. Expensive materials and ornamental features
(commonly included in small houses built fo r sale) are provided only
at the expense o f features o f much greater value (over-all size, ample
closet space, a heating plant large enough fo r economical operation,
etc.). In specifying the materials and equipment to be used, the archi­
tect, who has a professional knowledge o f the field, is free to select
m inor brands whenever those give a real saving; there is no restriction
to the leading brands which are emphasized so greatly in sales effort.

Cooperative effort, resulting in the provision o f housing accommo­
dations—either apartments or individual houses—for a group o f fam ­
ilies, makes possible considerable savings in cost o f land, construction,
operation, and maintenance. Speculative profit o f the real-estate pro­
moter, amounting generally to 10 percent and often more, is eliminated,
as are also large salaries paid to landlords or agents. Construction o f
a group o f houses simultaneously is more economical than construction
o f one house at a time and makes possible substantial savings through
bulk purchase o f materials as well as interior fittings. In one possibly
unusual case, it is reported, a 10-percent saving in construction cost
was effected on a group o f 5 dwellings built simultaneously. It has
been found in large-scale enterprises in New Y ork City, in which the
•full benefit o f low cost in purchase, construction, and maintenance is
obtained, that at least 12 percent can be saved in annual operation and
maintenance costs. Some cooperatives’ contracts have specified that
any savings over a given amount or percentage o f the estimated con­
struction costs shall be divided equally between the contractor and the



cooperative. In one case a crew o f expert building mechanics was hired
on such a basis and was guaranteed annual employment.8
In a large project some economies in maintenance cost might be
effected by the hiring o f all-round full-tim e workers to service all the
dwellings, thus spreading the maintenance work evenly throughout
the year. In that way the workers would have full-tim e employment,
the individual dwelling would receive continuous service, and the in­
dividual owner would be spared the hiring o f workers tor sporadic
jobs, at hourly rates set high in order to compensate fo r off-season
unemployment. The National Housing Agency notes that continuous
employment is to labor’s advantage and that in some cases “ incentive
wage scales” as much as 30 percent below current hourly rates have
been established in consideration o f guaranteed full-tim e employment.*4
Instead o f rents increasing steadily, it is the general experience that
the monthly charges for cooperative housing decrease each year. Thus,
a cooperative association on whose homes the original carrying charge
is $50 a month may estimate that, at the end o f 20 years when all loans
are repaid, the carrying charge may be as low as $22.50 per month.
Cooperators are usually permanent residents. This eliminates a
high turn-over in tenancy. Vacancies are a great waste and a cause o f
added costs in any sort o f housing. A s cooperators take a greater inter­
est in their homes than do rental tenants, the property does not deteri­
orate so fast as it does under usual tenancy. The losses from rent
receivable are extremely low in cooperative housing projects, as the
member’s shares serve as collateral for his debts to his association. In
some cases combined losses from vacancy and rent defaults have been
less than 20 cents per room per year.
Additional savings fo r the members are possible through contribu­
tions o f their time and labor. Although in apartment-house construc­
tion, much self-help is not feasible, on the erection o f individual
dwellings many small jobs can be done by the members. Members have
effected economies in cash costs by excavating for foundations and
basements, doing rough concrete work, carpentry, painting, sanding
and varnishing floors, etc., and in several cases even by building the
entire dwelling on a labor-exchange basis. Many variants o f the selfhelp method are possible. In Tulsa, Okla., under a nonprofit arrange­
ment worked out by one o f the building-trades unions, F H A accepted
20 percent o f the property loan valuations in labor, and a local lending
agency supplied a loan o f 80 percent o f the appraised valuation in
cash. In a California town, FHA-insured mortgages also permitted
the purchaser to make his own down payment (at least 10 percent o f
the purchase price plus closing charges) in labor; this was a plan de­
veloped by private promoters, but is adaptable to cooperative methods.
In some cases (fo r example, at Iona, Idaho, Penn-craft, Pa., and Nova
Scotia) practically the entire construction was done by the members,
working on their own and other houses in the project.
Some or all interior and exterior maintenance by members is also
feasible (see p. 29).
» This experiment was carried on for nearly 3 years, being then interrupted by the w ar. Its
sponsor states that the results were “ most promising” ; he emphasized, however, the necessity
for “ very competent managerial and professional leadership.”
4 National Housing Bulletin N o. 2 : Housing Costs, W here the Housing Dollar Goes, W ashing­
ton 1944 (p . 3 0 ).



A variety o f legal methods may be employed to eliminate the element
o f speculation. W ithout such provisions, the charge for the housing
w ill be inflated by speculative profits taken by members selling their
shares above par, or subleasing at more than the maintenance charges,
and w ill operate to remove the housing facilities from the reach o f the
moderate- or lower-income group originally to have been served. In
eliminating the possibility o f incoming members’ buying at specula­
tively inflated prices, cooperative housing removes one o f the principal
hazards prevalent in home ownership. I f a member is to forego poten­
tial gains, he is entitled to increased security against loss. This can be
achieved partly by establishing reserves fo r this purpose, and partly
by the fashioning o f sounder legal, financial, business, and administra­
tive policies than prevail under profit-seeking institutions.

The member is safeguarded by incorporation o f the association,
which thus limits his personal liability to the amount o f his share sub­
scription;5 by the terms o f his lease, which give him the right to occu­
pancy o f the dwelling he selects, as long as he is acceptable to the other
members o f the association and fulfills the obligations set forth in his
lease; by the opportunity, given him and the other members collec­
tively, to build up a reserve m the association to cushion against times
o f depression or unemployment; and by the maintenance o f the long­
term value o f the property at a high level through a policy o f proper
upkeep o f the buildings. I f the members so desire they may have the
further protection o f inclusion in the mortgage o f a provision releasing
individual dwellings from the mortgage as they are paid for, and o f
insurance protecting the fam ily in case o f the breadwinner’s death or
The association and the property as a whole are safeguarded by
retention o f legal ownership o f the property by the association, by con­
trol over the land and facilities devoted to community purposes, and by
the execution o f members’ options, giving the association the right to
repurchase a withdrawing member’s equity. Legislation pending in
Congress would safeguard the association further by permitting exten­
sions o f mortgage loans, in case o f “ unemployment, economic condi­
tions, or misfortune” beyond the mortgagor’s control, up to a total
o f 3 years.

Cooperation is not just a way to save m oney; it is the basis o f a
better way o f life. Wherever people o f similar circumstances and
interests live in a close-knit group, that fact makes possible many joint
enterprises. Am ong them may be cited such activities as housekeeping
service fo r working couples; repair o f radios, washing machines, re­
frigerators, and other electrical appliances; laundry service; nursery
schools for the children and classes o f various kinds; commercial
enterprises (stores, garages for automobile storage service and repair,
bakeries, e tc .); joint purchase o f utilities (water, gas, electricity, tele­
phone, e tc .); and buying clubs for furniture, and electrical and other•
• When his share subscription is paid in fu ll, he has no additional liability; his paid-in funds
then represent his total liability.



household appliances. The ground space (generally larger than in
a comparable profit-making enterprise) can be utilized for lawns, gar­
dens, athletics, and recreation o f various kinds. Such activities can be
financed through use o f surplus savings resulting from the monthly
charges or through one or more share-capital associations form ed for
the purpose. These collateral activities offer an opportunity hereto­
fore little utilized in this country, although their advantages have been
widely recognized in Sweden and other European countries where
many such services are provided in connection with housing projects.

Most o f the disadvantages o f the genuinely cooperative method, as
regards housing, arise from members’ incomplete acceptance o f that
method. It is important to recognize that membership in a cooperative
housing association is for those who desire continued security o f occu­
pancy o f a dwelling rather than title to a particular dwelling. The
person who is by nature a transient and a “ renter” is not a good pros­
pect; neither is the person who wants to invest in real estate for specu­
lative profit, since participants in a housing cooperative specifically
waive the right o f making a profit on enhanced values-resulting from
the association’s activities.
A real disadvantage that may eventuate unless reserve “ cushions”
are provided is that, under the accepted Rochdale practice o f retention
o f title by the association, with the tenant-member merely owning stock
to the value o f the equity required for his dwelling, all members sink
or swim together. Thus, in a cooperative apartment house, one mem­
ber may be able to finance the purchase o f his own apartment, but the
whole project may fa il (w ith consequent loss to all) if a sufficiently
large proportion o f the members, through unemployment or other mis­
fortune, are unable to maintain their payments. This risk is greater
i f all or most o f the members are engaged in the same industry than if
the source o f income o f the members is more diversified. In a project
consisting o f individual dwellings, severance o f one or more houses
whose purchasers were solvent and current might be possible, but this
might necessitate individual titles.
D esirable Prerequisites fo r Successful C ooperative H ousing
The M em bership Group

Preferably, the prospective members o f the cooperative housing as­
sociation should have certain common interests which w ill help to give
cohesion to the association. Many o f these interests can be developed
in the process o f planning, building the houses, and living in the com­
munity being created. Generally it is desirable to have a fairly repre­
sentative sampling o f age and fam ily groups, which w ill tend to pro­
vide a varied supply o f housing accommodations adapted to the contin­
uing needs o f the group. I f almost all o f the members are young
newlyweds, for instance, most o f the group w ill be needing larger ac­
commodations at about the same time, and w ill later cease to need them
at about the same time. In a representative group, families needing
larger accommodations may lease vacancies which occur in the larger
quarters, and vice versa. This eliminates a rather important waste



prevalent in single ownership o f homes (that o f expanding into what
is later too large a house) and can be accomplished with very little
expense and no loss in a well-planned cooperative or mutual develop­
It is also highly desirable that the economic base o f the group be as
diversified as possible. This is necessary to minimize the impact o f
seasonal, cyclical, or industrial unemployment upon the association.
N o form o f home ownership, either single or cooperative, should be
regarded as financially sound, as long as the ability o f the owners to
maintain their mortgage payments rests upon the employment fu r­
nished by a single industry. There may be some exceptions to this rule
i f the industry itself is exceptionally strong and stable. Even in this
situation, protracted strikes or lock-outs may have a devastating effect
on the housing association.
The facilities furnished by the association should serve a moderateincome group. Then, if members are forced to withdraw in times o f
economic depression, there are potential new members from higherincome groups who would probably find the association’s housing
within their economic reach. Housing associations serving the rela­
tively small proportion o f families in higher-income groups are likely
to be hit very seriously by withdrawals in times o f economic depression.
Tolerance o f the views o f individual members is important in a
cooperative association. The organizers o f the housing association
should keep in mind the traditional neutrality o f cooperative organi­
zations as regards extraneous divisive issues.
From the viewpoint o f the individual member, a number o f factors
should be considered in advance. H e should bear in mind that (1 ) the
total cost should not exceed from l 1/? to 2 times the annual fam ily
income, and the monthly charges for shelter rent should not exceed 20
percent o f the income, (2) the fixed charges continue, inexorably, in bad
times as well as good, and generally at the same rates, unless reserves
have been established which may be utilized to help meet the monthly
payments, (3 ) he should have reasonably good prospects for an income
steady enough to insure ability to make payments over a long period
o f years, and (I ) he should have a reasonable likelihood o f being able
to remain indefinitely as a resident.
Prelim inary Exploratory Study

P rior to the holding o f the first organizational meeting, a small
group o f prospective cooperators should have studied the possibilities
and difficulties inherent in the cooperative solution o f their housing
problems. Though an association may adopt the essential principles
o f cooperative housing, the variety o f legal, financial, site and building
planning, construction, and income factors w ill very likely require
that each group arrive at its own unique solution to the whole problem.
Members o f this nucleus ought to have some conception o f the various
closely related problems involved in carrying out a cooperative hous­
ing program, and possible solutions to these problems which would
help furnish the members better, more secure, or more reasonably
priced housing than would otherwise be possible. The degree o f suc­
cess o f a cooperative housing association w ill be influenced by each o f
a great many decisions. A group working collectively must make wise



decisions, and carry on its business activities on a sound basis, or it
faces the same reckoning as an ill-tidvised individual. The cooperative
character o f the housing program is, o f itself, no guaranty o f success.
Hence, it is advisable that this original nucleus include individuals
with a grasp o f the various problems mentioned above, or if that is not
possible, that such persons be available in an advisory or consultative
Prospective members should be queried to ascertain the number o f
persons in the fam ily, the type and size o f housing desired, the average
cost they could meet, and preferred location. Preliminary group dis­
cussions would am plify the data on these points and bring about a
meeting o f minds. A primary point to be settled would be a choice
between apartments and individual houses. A large project could
combine the two, but might not be possible for the average group.
Considerations o f Site and T ype o f P roject
A t an early stage a temporary housing association should be formed
and one or more committees appointed to investigate and report on
land sites if new buildings are to be erected, or to find desirable build­
ings if existing structures are to be purchased and remodeled. These
preliminary investigations should be made with discretion, to prevent
a speculative mark-up in price by the owner or his agent.
It is important that care be taken to buy property whose value has
not been inflated and whose future character, from a residential and
social standpoint, is reasonably secure. The advice o f experts on realestate values and on regional and site planning is desirable at this stage.
A fter a satisfactory site has been found, the title should be searched
(this w ill reveal any existing mortgages, liens, or assessments against
the property). The committee should also inquire as to all the types
o f taxes (local, county, and State) to which the property w ill be sub­
ject and any contemplated improvements in the neighborhood that
might result in additional levies. The association should then incor­
porate under a suitable law, the required shares should be paid in, and
the purchase com pleted; in this process it is desirable that the services
o f an attorney be obtained.
Purchase o f Existing Building

In buying an existing building, costs can usually be determined
rather accurately in advance, which in turn permits very close esti­
mation o f the initial investment and the monthly charges. This in­
form ation should be obtained by a small investigating committee, fo r
fu ll and detailed report to the prospective members. However, pur­
chase o f a building erected or being sold under profit auspices should
be undertaken only when the members o f the association are convinced
that the purchase offers a good long-term value for the cost. Inexperi­
enced buyers need to be cautioned not to overlook the possibility that
m ajor repairs and replacement o f plumbing, heating, and wiring sys­
tems may be impending in an old building offered for sale. Such repair
costs should be taken into consideration in arriving at a purchase
price. Purchase and renovation o f existing buildings from which
profits have been eliminated by obsolescence or depression constitute
684613°— 46------ 3



an economic gamble unless the whole o f a block or neighborhood can
be acquired (which requires greater financial strength than the aver­
age housing cooperative can muster). In any case, appraisal by a
disinterested expert is desirable. Purchase at an unduly high price
w ill handicap the association throughout its life, and may be a m ajor
factor in determining its ultimate success or failure. I f the members
are satisfied that the building meets their needs and is reasonably
priced, they may then proceed to purchase.
Suburban Residential Projects

In case the association plans to buy undeveloped or partially devel­
oped land in a suburban location, research should include prospective
costs o f the many factors entering into the total eventual cost o f the
housing. A knowledge o f these costs and o f prevailing and long-term
land values w ill help in setting the association’s budget for land in its
various stages o f development. In some instances it may be possible
fo r a group to buy lots sold at tax foreclosure, or a subdivision avail­
able at a reasonable price. This, however, may become a serious handi­
cap in progressive planning o f the site development, and could con­
ceivably subject the cooperative housing association to the severe
obsolescence resulting from previous poor planning.
In any event, a land-purchase committee should be form ed to study
and investigate potential sites. In large urban areas where a large
number o f sites might be under consideration, several such committees
m ight be formed. Many factors such as suitability o f land fo r hous­
ing use, its cost, the cost and availability o f transportation, schools,
community and shopping facilities, water, electricity, and perhaps gas
and sewer connections, the rates o f assessment and taxation, and the
robable costs o f roads may enter into site-selection considerations.6
'he number o f families to be served by the association, and their land
requirements, the zoning requirements relating to land use, plus any
land reserved for community use or for expansion, w ill affect the
amount o f land to be bought. It is likely that land costs w ill rise
in the vicinity o f any new development, cooperative or otherwise, as
speculative landholders see the possibility for sale o f land for resi­
dential or commercial use. It is therefore desirable, at the beginning,
to select a site suitable for the probable maximum size and long-term
needs o f the group, if these can be determined. In many cases, it may
be desirable not to improve the complete site immediately, but to con­
centrate on that portion necessary to fulfill the needs o f the imme­
diate members plus a small expansion. Such partial development may
have the slight disadvantage o f imposing smaller-scale developmental
operations, with possibly a slightly higher unit cost, but the expense
o f making improvements for all o f the site w ill be a very heavy burden
on the original members. The continued expense o f interest and in­
creased taxes on the improved and subdivided land have bankrupted
many land speculators.
In connection with the development o f outlying land, it should be
borne in mind that the advantage gained from lower initial tax rates
w ill be transitory; when the area attains urban density o f population,•


• Costs may sometimes be cut where land can be obtained at farm -land rates; in such cases
the housing cooperative must be able to undertake the subdivision o f the land, lay-out of streets,
installation of utilities (water, sewer, gas, electricity),



urban services w ill be demanded and urban tax rates become necessary.
Also, the fu ll cost o f community improvements (water supply, sewer
system, school buildings, etc.) must be borne by the local property
owners, o f which the cooperative would ordinarily be the largest,
whereas in adjoining city property a large part o f the improvement
cost w ill already have been paid. Outlying property within city
lim its usually is worth serious consideration. It has city services
(fire and police protection, etc.), city rather than suburban utility
and transportation rates, protection o f city zoning laws against the
intrusion o f shanties, hog farms, night clubs, and the like; although
new investment is needed for site improvements such as sewer, water,
paving, etc., these w ill be used in connection with parts o f the system
already installed and probably already largely paid for, such as water
source, pumping and filtration plant, and sewage-treatment plant.
I f an option is obtained on the approved parcel o f land, sufficient
time should be allowed fo r com pleting the incorporation o f the asso­
ciation, the registering o f securities (which may be required under
State law s), their sale to the members, and perhaps a promotional
campaign to enlist sufficient members. It is conceivable that certain
landowners might be found who would be so friendly to the idea o f
assisting in the development o f a cooperative housing project that
they would be w illing to handle the sale in a manner wholly acceptable
to the association.
Urban Redevelopm ent Projects

The initial steps o f a third type o f cooperative housing endeavor,
utilizing urban redevelopment laws, would be more complicated. The
steps involved may be illustrated by the experience o f the first co­
operative housing project in the United States to proceed under urban
redevelopment laws—i. e., the East River Cooperative Apartments in
New Y ork City. _ The New York State Redevelopment Companies
A ct permits certain types o f investing institutions to own 100-percent
equities in redevelopment projects; thus, the investing institution may
engage in some o f the preliminary work. In the association under
discussion a waiting list o f several hundred applicants for apartments
in an earlier project was circularized on behalf o f the board o f sponsors
fo r the new development; o f these, a sizable number filed applications
fo r the new project and made the required $100 deposit to indicate
their good faith. A preliminary agreement was arrived at among
the leading spirit in the enterprise7 (on behalf o f the applicants and
sponsors), the representatives o f the savings banks w illing to make
the 80-percent first-mortgage loan, and the city o f New York. The
agreement established a 4-month period during which the attempt was
to be made to obtain a large percentage o f the tenant-cooperators’
stock subscriptions as well as subscriptions from such other civic or
cooperative agencies as m ight be w illing to assist in the financing o f
the new development. W hen approximately two-thirds o f the total
subscriptions were in hand, the investing banks proceeded to incor­
porate the redevelopment company and make application fo r city ap­
proval (prelim inary studies o f the site and building plans must be
prepared fo r submission to the city before final approval is granted).
7 A man o f 20 years' experience in cooperative housing.



The interest o f the investing banks w ill eventually become the firstmortgage loan.
The redevelopment technique, as above described, offers many op­
portunities fo r urban cooperative housing associations, but is the most
difficult o f all form s. Since it is essential that such projects be
undertaken on a scale which re-establishes the desirable character
o f the community, it seems probable that cooperative projects o f this
type would have to be promoted in connection with existing coopera­
tive, lim ited-dividend, philanthropic, public, or mutual housing enter­
prises. Such agencies have in most cases a surplus o f applicants for
housing, which could be referred to the cooperative association. They
also have a background o f business and administrative experience
which qualifies them to undertake this com plex approach to coopera­
tive housing. The redevelopment legislation usually provides a
method for the acquisition o f the site, through condemnation i f neces­
sary, and in some States permits w riting down the charge fo r the
land to that consistent with its residential or apartment-house use.8
Sometimes the assistance takes the form o f a tax exemption on the
increased value o f the redeveloped area fo r a fixed period o f years
(up to 25 in New Y ork ). In most cases, some public supervision is
provided, and an upper lim it is set on the rentals to be charged. The
possibilities o f utilizing the urban redevelopment legislation, State
and Federal, are worth investigating for any group which wants to
rebuild a “ slum” area to provide good housing for a moderate-income
Mutual H om e Ownership

A fourth approach to group housing is provided by the technique o f
mutual housing.
A fter the inauguration o f the defense housing program a plan was
formulated whereby permanent housing projects could be acquired,
after the end o f the emergency, by the residents under a mutual owner­
ship arrangement. The plan now operates as follow s: In a project the
residents in which vote for mutual ownership, a Mutual Ownership
Corporation is formed. It then takes over the operation o f the project
fo r a transition period o f 2 years, with an option to purchase at the
end o f that time. I f , at the end o f the period, the association exer­
cises its option, a purchase agreement is drawn up giving it 45 years
in which to amortize the sale price (fixed by joint appraisal by an
appraiser appointed by the F P H A and one appointed by the associa­
tion) , by regular monthly payments including 3-percent interest on
the unpaid balance. The tenant-member in turn receives a contract
from the association, entitling him to perpetual use o f a dwelling
unit; he makes a monthly payment to the association covering his
share o f the operating expenses and o f the total purchase price. The
members are expected to pay off their debt in 30 years, and at a some­
what higher rate o f interest than that paid by the association. The
margin provided by this and by the tenant’s relatively larger amorti­
zation provide a reserve cushion from which the association can buy
up the equity o f members who must withdraw and can assist members
over periods o f hardship.*
* The market price o f blighted property is ordinarily so much greater than a reasonable use
value that an urban redevelopment project would start with an excessive debt burden unless a
large part o f the deflation loss were m et from public funds.



Eight projects were built with the idea o f their postwar disposal
under the mutual housing plan. In six o f these, mutual ownership
corporations have been form ed; the other two are operated by F P H A
managers. O f the first six, the 2-year transition period has elapsed
in two and negotiations are under way for a purchase contract.
The mutual housing plan is also applicable to several hundred other
permanent war housing projects built under the Lanham A ct, which
must be disposed o f within 2 years after the end o f the war emer­
gency.9 A mutual housing association, as a consumer body, would
be given preference over groups or individuals offering to buy the
project for investment purposes. Its application must be signed by
occupants or prospective occupants o f the dwellings representing at
least 25 percent o f the total units in the project. T o be eligible to
purchase, the association must demonstrate that the occupants or
prospective occupants who are members o f the association equal at
least two-thirds the number o f dwellings in the project.
The sale regulations101require a cash down payment o f at least 5 per­
cent, with the balance secured by a mortgage for no longer than 40
years and bearing interest at the rate o f Sy2 percent per year.11 I f the
tenants are not interested in buying the accommodations, they may be
offered to a local housing authority, a limited-dividend corporation
(which conceivably might also be a cooperative housing association),
and finally to private bidders on sealed bids. I f the appraised value
is excessive, the tenants might be able to buy the property at public
Advantages o f the plan, from the purchasers’ point o f view, are
that a down payment o f 5 percent or less is required,12*all the initial
capital is furnished by the Government, and all the planning and
construction are done by it; the members o f the association are
fam iliar with the property, know the employment situation in the
neighborhood, and know within close limits the purchase price, in­
vestment and monthly charges. It is possible, also, that under tenant
administration the costs could be held at a lower level than under
public housing.18
This mutual-ownership type o f approach has received a great deal
o f support from organized labor as one solution for furnishing new
housing for working-class groups. Postwar housing legislation (S.
1592) introduced by Senators Wanner, Ellender, and T aft would
make specific provisions for financing mutual cooperative housing
associations or nonprofit corporations building small houses for the
middle-income groups not served by public housing or private enter­
prise. The text o f the portion that relates to mutual housing is as
follow s:
• Details regarding the mutual-housing plan m ay be obtained from the Federal Public Housing
Authority, W ashington 25. D. C ., or the Director o f the Research and Inform ation Service of the
Cooperative League o f the U .S .A ., 726 Jackson Place, W ashington 5, D. C.
10 Manual o f Policy and Procedure, 3555:2 (N ational Housing Agency, Federal Public Housing
Authority, W ashington, 1946).
11 It is probable, however, that these term s w ill be changed to conform to the provisions o f the
General Housing A ct of 1945.
12 However, one cooperative housing expert regards this as a disadvantage from the associa­
tion’s standpoint, because members with only a small stake (or none) in the enterprise have less
concern in its success. It is his belief that the member’s equity should in no case be less than
20 percent.
18 Testimony before the Senate Subcommittee on Housing indicated monthly per-dwelling oper­
ating costs of $5.14 and $5.19 in two mutual housing projects, as against $10 in a nearby public
housing project.


ORGANIZATION o f h o u s in g a s s o c ia t io n s

Mutual Ownership and Rental Housing
(A ) A mortgage with respect to a project to be constructed in a locality or
metropolitan area where, as determined by the Administrator, there is a need
for new dwellings for families of lower income at rentals comparable to the
rentals proposed to be charged for the dwellings in such project which without
the insurance provided hereby cannot adequately be met by privately financed
new dwellings currently produced in such locality or metropolitan area may
involve a principal obligation in an amount not exceeding 90 percentum o f the
amount which the Administrator estimates will be the value o f the project when
the proposed improvements are completed; and
(B ) A mortgage with respect to (i) a project o f a nonprofit mutual ownership
housing corporation the occupancy o f which is restricted to members o f such
corporation, (ii) a project constructed by a nonprofit corporation organized for
the purpose of construction of homes for members o f the corporation, or (iii) a
project undertaken by a mortgagor coming within the provisions o f paragraph
numbered (b) (1) o f this section to meet a need (that the Administrator finds
would not otherwise be met) for new dwellings for families o f lower income in
the locality or metropolitan area at rentals comparable to the rentals proposed
to be charged for the dwellings in such project, may involve a principal obliga­
tion in an amount not exceeding 95 percentum o f the amount which the Adminis­
trator estimates will be the value o f the project when the proposed improvements
are completed; * * * except that with respect to mortgages insured under the
provisions of the second proviso o f paragraph numbered (2) o f this subsection,
which mortgages are hereby authorized to have a maturity o f not exceeding forty
years from the date of the insurance o f the mortgage, such interest rate shall
not exceed 3% per centum per annum.

Mutual housing, as usually propose#, utilizes a Government housing
agency or local housing authority to handle the numerous technical
aspects o f planning, site acquisition, and construction o f dwellings.
The buildings are sold to the tenants’ association under the mutualownership plan. The advantage o f this approach is the greatly les­
sened burden upon the initiative and ability o f the leaders o f the
mutual association, as compared to a cooperative association which
must make its own decisions from start to finish.
Considerations R elating to Com m unity and A rchitectural
Community Planning

One great advantage o f cooperative or mutual housing is the possi­
bility o f achieving a well-planned community. T oo often, in the
past, residential design has had little or no relation to the neighbor­
hood in which the dwelling should be an integral part. In this plan­
ning o f the community, a cooperative may gain an increased long-term
value fo r its property, which is seldom possible under usual land
subdivision with each property held in separate, single ownership.
In connection with the development and planning o f the site and
community, forward-looking architectural and engineering talent is
essential. The choice o f the architect best qualified to undertake the
particular project is one o f highest importance; fo r that reason it is
important that the association have consultation service prior to his
selection. One association also had its committee talk with 8 or 10
architects before final choice was made.
In large-scale projects the provision o f space fo r a community shop­
ping and service center, owned by the association, should be part
o f the advance planning. In this way the cooperative w ill be able



to insure architectural harmony, adequate facilities, and control over
the character o f commercial activities, which otherwise might develop
along altogether unsuitable lines.
Building Design

In the design o f the building or buildings, several factors deserve
serious consideration. The relatively near future promises continued
development o f standardized, mass-produced building elements, with
increased processing and some degree o f increased assembly o f mate­
rials at manufacturing plants. Prefabrication o f complete houses is
entirely practical, but its cost-saving advantages are not yet estab­
lished to the satisfaction o f numerous authorities. Sound architec­
tural planning for moderate-income families w ill take advantage o f
new materials and assemblies when they are serviceable and reason­
ably priced. Custom-built housing w ill continue to be out o f reach
o f all but the higher-income families. In view o f the prospect o f
irregular or inadequate supplies o f some o f the basic building mate­
rials, full consideration should be given to utilizing local or readily
available building materials, incorporating them into a well-planned
W ith the increased cost o f postwar construction, associations seek­
ing to serve moderate-income families might explore the possibilities
o f construction, site-improvement, and maintenance economies to be
attained in various types o f m ultifamily dwellings. The duplex or
semidetached unit might serve families unable to afford a single, free­
standing residence. A properly planned row house for from 4 to 8
>families may offer economies o f construction, utility installations, and
heating which deserve serious consideration. Such m ultifamily dwell­
ings can provide privacy and recreation facilities comparable to the
single-fam ily dwelling.
In an association in which there may be a hundred or more families
needing diverse accommodations, the development might include sin­
gle-fam ily and duplex residences, row houses, and perhaps some apart­
ment units. Such an arrangement offers the possibility o f consolidat­
ing portions o f the site fo r recreational, agricultural, or community
use in a manner not possible under individual ownership, while realiz­
ing significant economies on roads, utilities, building construction,
and maintenance. Zoning laws have seldom contemplated this method
o f utilizing a site, and frequently make no provision for such a mixed
development. However, if the project would house no more families
in the given area than would have been housed under prevailing zon­
ing, approval could probably be obtained from municipal authorities.
Much might be said on the subject o f architectural design. Sound
planning and forward-looking architectural design are important fac­
tors in determining the long-range value o f both the individual dwell­
ing and the community. Good architectural design utilizes today’s
building materials in a straightforward, truthful, and functional
manner, to create buildings well suited to serve their intended pur­
pose. The use o f available or native building materials, site and plan
considerations, the variety o f types and sizes o f dwellings needed, and
other design and construction requirements or limitations should give
each development a character o f its own.



Construction Operations

The prevailing practice in the construction o f residential dwellings
is for a speculative (or “ operative” ) builder to buy a tract o f land,
subdivide it into lots, and construct individual dwellings for sale at
the highest price the market permits. This builder uses stock plans
and usually employs some o f the tradesmen directly, but often he
awards most o f this work to subcontractors. This type o f operation
has tended to put land subdivision and construction under one profitseeking entrepreneur, instead o f the two which form erly existed, and
in so doing has probably resulted in a slight, cost reduction to the
ultimate consumer.
I f the owner has some control in the construction program, an
architect is usually commissioned to prepare the working drawings
and specifications for the buildings to be built. These are then sub­
mitted to such acceptable general contractors as may be interested in
bidding on the work provided in the plans and specifications. In this
process, the contract is generally awarded to the general contractor
who puts in the lowest lump-sum 'bid. The owner is thus enabled to
know his total cost in advance, and the contractor guarantees the
price. O f course, if plans or specifications are not sufficiently detailed
or complete, the final cost may turn out to be considerably higher than
the contract price. In competitive bidding, a contractor cannot afford
to include in his bid any work or items omitted from plans or specifi­
cations, regardless o f how essential the omitted items may be. This
means that the owner w ill have to pay extra for such work. Likewise,
a contractor, who finds that his original bid w ill not enable him to
make the hoped-for profit, is likely to try to make up fo r his miscalcu­
lation by raising his price on the extras. The best way to avoid extras
is to employ a competent and conscientious architect.
The contractor’s profit depends upon how cheaply he may be able
to buy the specified materials, how much his labor cost w ill be, and
the extent o f possible contingencies which would increase his costs.
A general contractor, in bidding on an early postwar job, sees prices
rising and increased labor costs or possible strikes in the offing. Most
contractors w ill not have current construction costs to assist them in
their bidding. Consequently, a general contractor in bidding on a
construction job w ill “ play safe” in his estimates o f materials costs,
labor costs, and possible increased expense which m ight absorb his
prospective profits. In addition to this, each o f the subcontractors
who is required to give a lump-sum bid on his portion o f the work
goes through the same process o f setting his labor and material esti­
mates high enough to cover the worst situation that he thinks at all
likely, and still pay his overhead and profit.
It is probable, in this situation, that lower bids are likely only when
this vast risk element is greatly reduced by competitive pricing o f
materials, proven output o f labor, and the elimination o f some o f the
need for such sizable contingency funds to offset prospective price
increases. During the rising market o f the early forties, many general
contractors would bid on construction jobs only on a cost-plus-fixed-fee
basis. This eliminated the risk o f the guaranteed price inherent in
the lump-sum bid, provided for a specific payment to the contractor
for overhead and profit, and virtually put the contractor on a pro­



fessional rather than commercial basis. Under a competent and
faithful contractor, such a contract would probably furnish greater
dollar-for-dollar value than a lump-sum contract, but since the total
price is not guaranteed the owner assumes a greater risk and should
establish a contingency fund fo r this purpose. However, the con­
tractor, who is assuming less risk, is generally w illing to take such a
contract on a narrower margin than he would a lump-sum contract.
This cost-plus-fixed-fee method o f building does not bring about the
cross-interests o f builder and owner which exist in the'usual lump­
sum contract. Cards and figures are face up on the table, and the
contractor has no incentive to cut quality in order to gain additional
profit. It should also be recognized that if the fee is fixed at a per­
centage o f cost rather than at a definite amount, the contractor may
be less diligent in his effort to keep costs down than the owner has a
right to expect.^
Frequently, in residential construction, there are architects who
have constructed residences on the basis o f supervising subcontractors.
Such an architect acts on behalf o f the owner, takes and tabulates the
bids, recommends to the owner the acceptance o f the desirable con­
tracts, schedules the work, supervises (not superintends) the work­
manship and the materials, approves bills for payment, and generally
handles all the details o f construction. Most subcontractors in resi­
dential work have the equipment they need for their part o f the work.
Under this plan the architect does not guarantee the price o f the build­
ing, and the owner consequently assumes a greater risk, but with the
prospect o f a considerably lower cost; in this case also a contingency
fee should be established fo r use i f any o f the costs overrun bids or
Under these tw o arrangements above cited, the architect or con­
tractor becomes, to a far greater extent than is usually the case, the
professional servant o f the owner.
Thorough Utilization o f Cooperative Techniques

W ith the high construction costs in prospect for the latter half
o f the forties, it is important that dwellings erected during this period
shall not have a monthly carrying cost too greatly above that o f pre­
war houses. Dwellings on which these monthly charges are greatly in
excess o f other sound housing o f good design w ill be at a competitive
disadvantage when vacancies begin to appear in essentially competi­
tive housing. It is therefore important that as “ good buys” as possible
be made at each stage o f creating this new housing. The principal
decisions w ill relate to land purchase, land planning and improve­
ments, building design, construction methods and costs, financing,
maintenance, and administration. Since, in a consumers5cooperative
housing association, the users o f the dwellings w ill have gained a
degree o f control o f the housing process which they have not ordinarily
had, it is highly desirable that they utilize this control w isely to bring
the best housing possible within the reach o f moderate-income families
previously not adeqUdtely served by profit-seeking enterprise. The
economies or gains from utilizing cooperative principles for just one
aspect in the procurement o f housing, such as land subdivision, or
administration, are likely to be relatively small. It is highly desirable
684613°— 46------1



that cooperative housing associations use the techniques o f consumers’
cooperation in as many o f the phases o f this process as have promise
o f furnishing better housing for the money. Otherwise, dwellings
built in the early postwar years may be priced entirely out o f reach
o f the moderate-income families seeking them.
Starting the A ssociation
Incorporation o f Association

The type o f development planned may have a great deal o f bearing
on the type o f incorporation which is most desirable. F or a suburban
residential type o f development, incorporation under the local coopera­
tive statute might prove to be entirely satisfactory if the terms o f the
law are broad enough to cover cooperative housing associations.15
In the event that the State in which the group expects to operate has
no cooperative law or an inadequate one16a possible alternative is incor­
poration under the District o f Columbia Cooperative Law, whose terms
are broad enough to permit incorporation under it by cooperative
groups in other States; in such cases, however, an attorney should be
consulted in order to ascertain any disadvantages that might accrue,
under State laws, to associations o f such “ foreign” incorporation.
Many cooperative housing associations may qualify for incorpora­
tion under a limited-dividend housing law,17 or in some cases an urban
redevelopment law.18 In most cases o f this sort, there are specific
benefits, generally in the form o f partial tax exemption or assistance
in site acquisition in slum or substandard areas, which may be o f ma­
terial value to the association.^ The supervision by the State’s housing
director may require furnishing detailed inform ation from time to
time about the association’s fiscal activities, but such limitation or
regulation should not be onerous to a genuine cooperative housing
association. Associations incorporating under housing laws must
provide fo r their own cooperative operation, taking care o f this as
far as possible in their articles o f incorporation and in their bylaws.
Even though associations incorporating under the housing law may
function as cooperatives, most State laws prohibit inclusion o f the
» The consumers* cooperative laws o f Maine, New Mexico, New Y ork, N orth Dakota, Pennsyl­
vania, Verm ont, and the District of Columbia specifically authorize building; those o f the first four
also authorize operation o f buildings, and that of Verm ont authorizes any services in connection
therewith. The carrying on of “ any lawful business” is authorized in Alabama, California,
Colorado, Florida, Michigan, Nebraska. Oregon, W ashington, and W isconsin (in W isconsin with
certain exceptions not applicable here). Kansas law permits cooperatives to carry on “ any
business or industrial pursuit,” Massachusetts any business, Montana any branch o f industry,
and Idaho any business not conducted for pecuniary profit. In Nevada the types o f business
are not specified, but the association is authorized to “ carry on any and all operations necessary
or convenient in connection with the transactions o f any of its business.” The District o f Colum­
bia law authorizes all types of services for the benefit of the members as ultimate consumers.
i« There is no consumers* cooperative law in Arizona, Delaware, Georgia, Indiana, Louisiana,
Maryland, New Hampshire, Rhode Island, Texas Utah, W est Virginia, and W yom ing. The types
o f business specified in Illinois, Missouri, and Ohio are not broad enough to cover housing co­
operatives, and in Tennessee the single section providing for cooperatives merely authorizes the
incorporation o f “ non-profit cooperative associations.** In New Jersey, housing is not included
in the pursuits authorized; the enumerated powers o f a cooperative association formed under
the act include those o f “ owning, leasing and improving real estate and erecting buildings,** but
whether this would be construed to authorize housing activities is uncertain. It also seems doubt­
ful that cooperative housing associations which construct (m anufacture) dwellings, could qualify
under the “ manufacture** clause of the Arkansas, Connecticut, Iowa, Kentucky, Minnesota, North
Carolina Oklahoma, South Carolina, South Dakota, and V irginia laws.
it Such’ laws are on the books in at least 13 States (Arkansas, California, Delaware, Florida,
Illinois, Kansas, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, South Carolina, and
T cxsls) •

18 About 20 States have such laws. (See Comparative Analysis o f the Principal Provisions
o f State Urban Redevelopment Laws, published by National Housing Agency, 1045.)



word “ cooperative” in their name if they are not incorporated under
the cooperative statute.
Incorporation under the State nonprofit corporation law (if such
exists) may be worth investigating. In some States the terms o f these
laws may permit incorporation by genuine consumers’ cooperative
societies, which operate as a type o f nonprofit enterprise,1
19 and also by
mutual housing corporations.
Incorporation should precede the purchase o f the property, as it
usually prevents individual liability for the debts or obligation o f the
association. In an incorporated association each member is, in the
m ajority o f States, liable only to the extent o f the total amount (paid
or unpaid) o f his share subscriptions,20 whereas in the absence o f
incorporation he is liable for the fu ll amount o f the association’s
Articles and Bylaws o f the Association

The articles o f incorporation establish the legal status o f the asso­
ciation. The law under which incorporation takes place w ill specify
the essential information which is required in these articles. Although
most o f the cooperative statutes specify what the articles must con­
tain, their final drafting is a job for an attorney fam iliar with laws
governing cooperative corporations.
It is generally easier to amend the bylaws than the charter (articles
o f incorporation). F or this reason, cooperatives sometimes specify
in the charter certain provisions considered essential to assure sound
cooperative functioning, even though the law may not require them
to do so. This is particularly worth considering if incorporation must
take place under a law which does not make adherence to consumer
cooperative principles mandatory. It also offers some protection
against hasty, ill-considered changes in the bylaws, since no bylaw
amendments may be adopted which are in conflict with charter pro­
visions. However, the charter should not be so detailed that it w ill
prevent the amendment o f bylaws in minor matters as may be found
expedient for reasons o f practicability.
The bylaws21 are the common rules governing the relations o f the
members, their officers, and their employees. They bind the members
together as an association. The bylaws should contain all the co­
operative provisions applicable to the association, whether or not they
are in the articles o f incorporation.
The chief points to be covered in the bylaws are the follow ing :
Name and location of association.
Membership.—Rights, limitations, duties, and responsibilities.
Fiscal year.
Capital.—Total amount authorized, interest to be paid, value of the share,
how subscribed and paid, how transferred, etc.
Meetings.— Date, how called and conducted, quorum, special meetings, etc.
Directors and officers.—Number, how elected, duties, disqualifications of,
vacancies, meetings, etc.
Surplus savings.—How distributed.
18 The Michigan cooperative law makes specific provision fo r nonprofit enterprises.
20 He may also, o f course, lose what he has already invested if the association should liquidate
at a tim e when its debts exceed assets.
21 See Appendix A (p . 42) for suggested bylaws.


Committees.—Designation of and duties.
Bookkeeping and auditing.
Miscellaneous provisions, such as amendments to bylaws, dissolution of asso­
ciation, etc.

Bylaws have certain limitations as to the degree to which they bind
the members. Provisions relating to the transfer o f stock must in
most States be printed on the stock certificate to be binding. Bylaw
provisions are not adequate to require that a member who owns (i.e.,
has title to) his dwelling (as is the case in some associations only
partially cooperative) shall offer it to the association before trying
to sell it to an outsider or nonmember; in such case an option must
be executed. The provisions o f the lease also are not covered in the
bylaws. In these latter two cases a separate legal instrument must
be drawn.

Financing the Enterprise
Initial Expenses

The expenses connected with the purchase o f the property are gen­
erally five in number, as follow s:
1. Incorporation charge; this varies in the different States (in New
Y ork State it is $40). There w ill also be attorneys’ fees in connec­
tion with incorporation22 and purchase o f land and other real estate.
2. Payment to close the contract o f sale, usually an amount ranging
from one-twentieth to one-fifth o f the purchase price must be paid.
3. Fee for examination and insurance o f the title. This also varies
in amount but is usually not large.
4. Payment to close the title. The remaining amount o f the contract
price must be paid in full, or such other payments must be made as
are arranged fo r directly with the owner.
5. Commission on the sale o f property. I f a real-estate agent is
employed, there w ill be a commission for his services; generally the
upper lim it is regulated by the State law or standard real-estate
The National Housing Agency estimates the closing fees and com­
missions at about $100 on an individual $5,000 house. The “ closing
charges” fo r a single purchase o f a group o f buildings could be re­
duced very materially from this figure.
Mortgage Procedures

A variety o f mortgage procedures is open. The association may
elect to obtain (1) a single, with minimum amortiza­
tion over a long period, (2) a very small mortgage with rapid amorti­
zation, or (3) a combination o f first and second mortgages. A ll have
advantages and disadvantages.
O f late years the widespread use o f the single long-term, low-interest
mortgage has largely eliminated the older method o f placing both
first and second mortgages against the property. This first and only
mortgage may run as high as 66% to 80 percent o f the value o f the
w Assistance on incorporation may be obtained from the nearest regional cooperative league
or wholesale association. For list of such organizations, see Appendix F (p . 5 9 ).



property when made by banks or insurance companies. The exact
amount w ill depend upon applicable legislation controlling the lender,
the method o f appraising the property, and the willingness o f the
lender to make the maximum loan.
The Federal Housing Administration w ill insure mortgage loans
to cooperative housing associations only i f they can qualify under the
title applying to rental housing. It has been unwilling to insure the
mortgages on the individual-dwelling type o f cooperative development
on a basis comparable to the terms the individual home owner could
get. Nevertheless, it is possible for a cooperative to obtain F H A insur­
ance on a blanket mortgage covering a number o f dwellings, the title
to which is held by the cooperative association.
Legislation introduced in the U. S. Senate in the fa ll o f 1945 pro­
vides fo r the insurance o f mortgages o f mutual housing associations,
or nonprofit corporations financed on a long-term low-interest basis.
I f this legislation (previously mentioned) is enacted, suitable financ­
ing would probably become available fo r building new cooperative
and mutual housing.
Another potential source o f mortgage financing is that o f the sav­
ings and loan associations. The United States plan, in use by some
savings and loan associations, provides fo r prepayment i f desired by
the mortgagor, establishes cushions or grace periods in the case o f
default, and calls fo r a decreasing interest rate as the principal is
reduced. The maximum mortgage may be lim ited, requiring separate
mortgages on each parcel o f property.
Mutual savings banks and insurance companies are also potential
mortgagees. Trust funds or endowments or other sources o f capital
might be available fo r mortgage financing o f cooperative housing
enterprises. However, each o f these sources o f funds has certain lim i­
tations which affect the mortgages upon which it can make loans.
Ideally, a mortgage-financing system fo r cooperative housing asso­
ciations would provide fo r a maximum debt equivalent to 90 to 95
percent o f the original appraised value. This mortgage should estab­
lish the maximum indebtedness permitted at any time during its life,
based on a long-term depreciation factor. This schedule might be
the monthly schedule o f balance due, based on a 25- or 30-year level
annuity or on a uniform amortization schedule, or a combination o f
these, depending upon whatever maximum loan the mortgagee was
empowered to make.
In order to increase the security o f both the borrower and the lender,
this ideal mortgage-financing system should make provision for the
exigencies o f the business cycle. T o be specific, it seems likely that
within the life o f such a mortgage there w ill be one or more periods
o f economic depression in which the incomes o f home owners w ill be
so drastically curtailed as to prevent their keeping abreast o f pay­
ments, with the result that, under prevailing formulas o f ownership
and mortgaging, there w ill be widespread foreclosures. The proposed
General Housing A ct o f 1945 (S . 1592) would meet such a situation
by providing for specific extensions o f the loan up to a total o f 3 years.
W ith the privilege o f unlimited prepayment o f mortgage indebted­
ness, and the above-mentioned schedule o f permissible mortgage debt
(permitted by F H A in its Letter to Mortgagees o f September 6,1944)
it would be possible fo r cooperative housing associations to build up a



reserve or cushion between the actual debt and the debt permitted. This
could be done in several ways. The stock subscription required o f each
member might be 5 to 10 percent greater than that actually required
under the financing. The mortgage would be taken in the maximum
amount, perhaps as much as 90 to 95 percent o f the value. However, the
additional paid-in shares would be used to prepay the mortgage and to
develop this emergency cushion immediately. This prepaid reserve
should be further increased by scheduling the amortization payments
over a period 5 to 10 years shorter than that permitted by the m ort­
gagee. A sizable saving in total interest cost is possible through the
more rapid amortization.23
The Federal Housing Administration is also w illing to have the fo l­
low ing provision incorporated in FH A-insured m ortgages:
In the event o f a prepayment o f principal, no default shall be construed to
exist by reason o f the nonpayment o f the principal portion o f any monthly pay­
ment thereafter due so long as the actual unpaid principal balance o f the debt
is not more than such balance would have been without taking into account such
prepayment or nonpayment.

I f it is within the financial ability o f the members, their 'payments to
principal should be made on a uniform m onthly basis, amounting to
4 to 5 percent per year. Although this has the slight disadvantage o f
increasing the payments during the first 40 percent or so o f the loan
over the “ uniform interest plus amortization payment” popularized by
F H A , the uniform-amortization schedule greatly reduces the total
interest payments made in repaying the loan. Under the level-annuity
plan, the payments on principal do not keep pace with depreciation in
the early years o f the mortgage, while the total monthly charges in the
later years o f the loan may exceed the rental value o f the dwelling.
Beduction o f period o f amortization is especially important in a
group containing some middle-aged members. It is essential that amor­
tization be completed by any fam ily before the retirement o f its prin­
cipal earner, as continuance o f amortization payments w ill ordinarily
be a serious burden fo r families dependent on retirement income.24
Under the system o f uniform monthly payments on principal, the
actual costs drop each month as interest is paid on a dwindling amount
o f debt. In the last years o f the loan, the interest payments become very
light, keeping the carrying costs o f the dwelling well within its pros­
pective rental value.
It is also appropriate to incorporate in the m ortgage a provision fo r
the release o f particular dwellings from the blanket mortgage as the
debts against these properties are paid off. Such prepayment and
release would be subject to approval by the mortgagor and to appraisal
by the F H A o f the property involved, at the time o f release. The
methods fo r handling these prepayments, or complete payments o f
the mortgage debt, are dealt with in more detail on page 35.
23 One cooperative housing expert doubts the feasibility o f the prepayment device, believing
that prepayment provisions will not readily be accepted by the usual financing agencies. How­
ever, in view of the patent advantages to members and mortgagees alike, as a safeguard against
times o f hardship, the adoption o f the prepayment plan is advisable if at all possible.
24 This difficulty would be overcome to some degree if the association makes provision allowing
such fam ilies to exchange their dwelling for another more suited to their dwindling size and
fam ily income. Nevertheless, a very long amortization period is a real risk.



Initial Financing

The cash fo r the equity financing (i.e., the ownership interest above
the mortgage debt) is raised through the purchase o f shares by the
members o f the association. A subscription agreement25 is signed by
each tenant-member, binding him to the purchase o f a stated amount
o f the shares or debentures o f the corporation. The amount o f these
shares or debentures is established in a manner to furnish the equity
required by the corporation fo r the dwelling or apartment the indi­
vidual is to lease.26 I t is not recommended that a subscription to shares
be executed in the amount o f the total value o f the property. T o do so
has the effect not only o f increasing the member’s liability to the value
o f his equity plus mortgage, but also o f making the member respon­
sible on his lease fo r the payments necessary to service the mortgage.
The limitation o f personal liability through incorporation is destroyed
to the extent that the member is required to sign a subscription agree­
ment in excess o f the equity required. Even in mortgage financing, the
trend o f progress is away from the increased liability o f the homeowner
as represented by deficiency judgments. Only i f all o f the cost is to be
raised through share subscriptions and none through a mortgage (or
other borrowing) should subscriptions equal the total value o f the
In the case o f buying land, raw or improved, it is desirable that the
members’ subscriptions be in an amount great enough to pay for the
land and the improvements necessary to make the land useful fo r hous­
ing. A variety o f difficulties may be encountered in developing mort­
gaged land and then releasing sites for building purposes. The land
must be free o f mortgage encumbrances when the first-mortgage build­
ing loan goes into effect; it is suggested that this initial and minimum
subscription required o f each member be adequate to bring the land
to this developed stage. I f this subscription amounts to more than the
minimum required under the mortgage-financing plan, it is suggested
that the maximum mortgage loan be taken, but that this excess equity
be used to prepay the mortgage as elsewhere suggested.
In case a cooperative acquires a much larger tract o f land than is
needed for the original housing development, the burden o f financing
can be eased by liftin g the mortgage only on the parcel o f land to be
used at once. The remainder can then be paid fo r more gradually. Such
an arrangement, if adopted, should be specifically provided for in the
sales contract; otherwise the cooperative may later find it difficult to
obtain the consent o f the seller o f the land.
In the case o f an association buying a completed building, it is nec­
essary that the equity paid in through the purchase o f shares be at least
equal to cost above the mortgage. It is far better if it is in excess o f
the equity required, and if a portion o f the shares is used to prepay the
m ortgage; this procedure starts the association with a reserve fund
which can be used to buy in the shares o f outgoing members. The funds
are obtained by simply withholding amortization payments on the
loan. This is made possible by the prepayment credit obtained by pre-*2
25 For sample agreement see Appendix B (p . 4 8 ).
28 “ Desirability” factors (location, view, extra-line plot, etc.) m ay be reflected in the total by
im posing additional flat amounts for each factor involved.



paying the mortgage. This also enables the association, i f necessary, to
lend an incoming member a portion o f the funds necessary to buy the
shares o f an outgoing member.
Assume, for example, that the members plan to build $5,000 homes,
this being the total value o f land and buildings. Under a 90-percent
loan, the first-mortgage loan would amount to $4,500, and the minimum
paid-in equity $500. In most cases, the land, plus cost o f roads, sewers,
utilities, etc., w ill exceed $500. It w ill probably run nearer to $750 to
$1,000 per improved dwelling site. An association should therefore set
its minimum share subscriptions at the $1,000 mark, if this w ill actu­
ally cover the cost o f the land and improvements. A fter the buildings
are erected, the dwellings and land w ill be eligible for a $4,500 loan. It
is suggested that the loan be sought in this upper amount, but that this
overlapping $500 o f equity actually not required under the $4,500 loan
be used to prepay the mortgage (taking care, o f course, to see that the
maximum indebtedness permittee! at any time under the original m ort­
gage be retained).
The use o f second-mortgage financing to raise any portion o f the cost
is not advised. Second-mortgage financing is very expensive because o f
the mortgagee’s risk.

Bonds are essentially a part interest in a primary or secured indebt­
edness o f the corporation. They may be utilized to raise a portion o f
the funds for financing a project, but this type o f financing should not
be necessary under the high-percentage single-mortgage loan. Bonds
might be sold to raise the funds for development o f land for the por­
tion o f the site not originally taken by the members. However, bonds
bear interest, which adds materially to the cost o f improvements fi­
nanced in this way. Compelling contractors or material firms to take
bonds for a portion o f their contract is likely to result in a higher cost
than could have been obtained if payment had been in cash.

Preferred stock represents an ownership interest entitled to its inter­
est return and repayment prior to any settlement to common stockhold­
ers. Interest paid on both preferred and common stock is taxable. Sale
o f preferred stock has been used to finance cooperative corporations,
the stock generally being issued to a limited number o f members,
friends, or associations w illing to invest a portion o f their capital in
the development. However, cooperative organizations whose members
expect to deduct, from their taxable income, the pro-rata interest and
tax payments made by the association on their behalf should not utilize
preferred stock. (See section on taxation, p. 37.)

A debenture is a bond or note, form ing one o f an issue. As a debt
which the corporation is pledged to pay, it takes its place along with
the other claims on the corporation ana has preference over common
stock. The interest payments on a debenture do not constitute a taxable
distribution o f the corporation, for such costs are regarded as a busi­
ness expense, just as if the money were borrowed from a bank and
interest paid on the debt.




Because o f the reluctance or inability o f some mortgage-lending
sources to make construction loans, it is sometimes necessary to arrange
separate financing for the construction o f the building. Generally it is
advisable to utilize the services o f a financing agency which can make
the construction loan, but if this is not possible it may be necessary to
resort to personal loans obtained by the members. The cost in such
cases is usually high. Any agency empowered to make FHA-insured
loans and most savings and loan associations w ill also make a building
loan. In the event that construction loans may not be available, the
members might raise a revolving fund by the purchase o f additional
stock or depositing funds with their association to build the various
dwellings. Then, as each building was placed under the first-mortgage
financing, the association’s revolving fund would be repaid.
The M em ber In R elation T o the O rganization


Ownership o f Shares N ot o f Dwelling

The member o f a cooperative housing association does not own his
house or apartment; he owns shares in the cooperative association. The
ownership o f these shares entitles him to a renewable or permanent
lease o f the dwelling which he occupies. This gives him most o f the ad­
vantages o f home ownership, the sense o f security and o f permanency,
and also an interest in im proving and keeping up the property, just as
though he were a private owner. H e is the private owner o f the stock
o f the housing association.
The legal ownership o f the property, however, should at all times be
vested with the association as a whole. The member does not have indi­
vidual title to the property he occupies. The property is never divided
up among the tenant-members. They all own it together. Experience
shows that this is the only way to heep cooperative housing cooperative.
W hen members can obtain individual title to their dwelling unit, they
often sell or rent it fo r personal profit. This introduces speculation, one
o f the evils which cooperation seeks to remove. I f cooperators obtain
homes on a cooperative, nonprofit basis and then dispose o f them for
rofit outside o f their group, the cooperative principle is destroyed.
[ot only do cooperators desire the advantage o f securing a home co­
operatively, but they want to keep that advantage by permanent own­
ership and administration o f their homes in a cooperative manner.
I f financing or other com pelling reasons make necessary the giving
o f individual titles to the members,27 safeguards such as the follow ing
should be im posed: A recorded option whereby the association reserves
the right to buy the property at any time at a stipulated price, minus
depreciation computed according to a stipulated form ula; a recorded
agreement (embodied in the option) that no sale to any other person
or organization may be made until a specified time after the association
has been notified o f intention to sell; an agreement that premises shall
not be rented to nonmembers except with the permission o f the board


27 Such a procedure does have certain advantages, among which m ight be cited (1 ) easier
financing, (2 ) avoidance o f foreclosure risk to members able to continue payments or having
high equities during a tim e o f general distress when many members m ight be delinquent in their
accounts with the association, and ( 3 ), as a consequence o f ( 2 ), less difficulty in obtaining




o f directors o f the housing association and under terms specified by it,
and in no case for longer than 6 months or 1 year; and provision in
charter and bylaws that in the event o f dissolution o f the association,
all property shall be sold through it, with any surplus o f funds realized
in excess o f actual investment, minus depreciation, to be distributed in
some form entailing no profits to individual members (such as by do­
nation to housing authority or State board, or to a fund for prom oting
the cooperative movement).
M em ber’s Lease

A s already stated, the member receives a certificate for the amount o f
his paid-in stock and a lease which entitles him to the continuing
occupancy o f one o f the dwelling units. This lease in form is like an
ordinary lease. In it the tenant-member agrees to pay a stated “ rental”
per month to meet expenses for the period o f the lease. The lease may
be for lifelong occupancy or 99 years, or it may be a 2- to 3-year re­
newable lease which can be extended for similar periods. The latter
method has been in successful use over a long period o f time in Am al­
gamated Dwellings and Amalgamated Housing Corporation in New
Y ork City. It has the advantage o f making more feasible the expulsion
o f members who have become obnoxious to the rest o f the community,
which is very difficult to do under a lifetim e or 99-year lease. The re­
newable lease also limits the member’s rent liability to a short period,
instead o f the longer period provided in the lifelong or 99-year lease.
In any case, the lease should permit its being transferred to the mem­
ber’s heirs or fam ily upon his death, provided the heirs continue to
occupy the house, and provided the usual conditions and obligations
o f a tenant-member are fulfilled.28
Rental Charges or M onthly Maintenance Payments

Besides the amount invested by the member in shares o f the associ­
ation, he must pay a monthly “ rental” or maintenance charge to cover
the fixed charges and operating expenses o f the property. The monthly
charge is usually determined by the association’s board o f directors293
and is incorporated in the lease each member signs.
F ixed charges.— The fixed charges include interest on share capital,
if any is to be paid; interest on any bonds, preferred stock, or deben­
tures issued by the association; interest on mortgage indebtedness;
amortization payment at least as large as the depreciation on the prop­
erty (otherwise the shares lose their va lu e); taxes; mortgage insurance
(if F H A -insured); and fire and liability insurance.
L ife and disability insurance are not included under the insurance
item above, but the provision o f group disability and group life insur­
ance is not an extremely heavy charge, and is worth investigating. The
Credit Union National Association80writes a type o f life and disability
insurance fo r borrowing members o f credit unions which might be
available to members o f cooperative housing associations. The value
88 For model lease, see Appendix C (p . 4 9 ).
28 But if the association is incorporated nnder the State housing1law , these charges must con­
form to the provisions o f that act. Thus, in Arkansas, California, Delaware and Kansas, the
rentals are set by the State Housing Board; in Illinois, New Jersey, New York, Ohio, South
Carolina, and Texas the State Housing Board sets maximums which must not be exceeded.
30 The address o f the association is Raiffeisen House, Madison 1, W is.



o f this type o f insurance is that the benefits payable on death or dis­
ability o f the member enable his fam ily either to pay off the mortgage
charge on the dwelling, greatly reducing the subsequent cost, or pre­
pares it better to meet the monthly charges on the dwelling. This
insures continuity o f the association.
A reserve or contingency fund is set aside fo r special purposes, such
as purchase o f members’ shares, fo r emergencies, or fo r the develop­
ment or expansion o f the enterprise. Under a suitably drawn plan, a
large part o f this fund could be used fo r mortgage-prepayment pur­
Operating expenses.—These may vary according to the type o f devel­
opment planned. The operating expenses include wages o f janitors,
helpers, office and administration expense; cost o f fu el; cost o f elec­
tricity and pow er; cost o f water; repairs, renovating, painting, etc.;
elevator expense; cost o f garden; insect-extermination expense; fees,
legal and accounting; miscellaneous operating expenses; and cost o f
equipment and supplies.
In single-fam ily dwellings on a spread-out plot, it may be less costly
to have individually fired heating equipment. In such case, it would
seem advisable to let the individual directly assume responsibility fo r
his fuel bill, gaining such economies as may be possible through co­
operative purchasing. It would seem wise also to furnish electricity and
power on a metered basis, with the cooperative buying at a wholesale
rate, and furnishing the electricity to the members at such saving as
it can effect. I f the use o f water is likely to be excessive by some mem­
bers, it too could be metered. A n individual fam ily is likely to be less
wasteful o f metered services than i f they are furnished as part o f the
One o f the definite advantages o f cooperative ownership is that by
providing fo r proper maintenance o f the dwellings, the long-term
value o f the residences and the neighborhood can be maintained at a
high level. This policy o f maintenance justifies the amortization o f the
mortgage over a longer period o f time than when no provision is made
for keeping property in good shape. It further increases the security o f
the members’ investment. It is nighly desirable that a cooperative
association make provision fo r all necessary exterior painting, roof
repairs, pointing o f masonry, maintenance or replacement o f worn-out
utters, etc., in order to keep its property in neat and sound condition.
onsecpiently, a charge should be levied to insure that funds fo r this
essential maintenance are available.
The interior decoration o f the dwellings could either be met directly
by the tenants, or provided fo r in the monthly charges. In many devel­
opments, it might be feasible to allow the budgeted sum to the indi­
vidual cooperator upon satisfactory completion o f the redecorating, or
the exterior painting. The necessary supplies might be bought by the
association and furnished to the members.
Public halls and stairways, elevators, walks, public or community
space, plumbing and heating equipment, ranges, and refrigerators, and
the structure o f the building w ill have to be kept in sound repair and
good condition by the association. The approximate cost figure used
fo r all heating, administrative, and maintenance costs is $4.50 per room
per month for dwelling in a m ultifam ily or elevator apartment build­
ing requiring janitor service. This figure may be reduced considerably




when developments are so planned as to put the responsibility for
much o f this maintenance directly upon the members, as it is when
property is held in single ownership. In such cases, members might be
given cash credit for work o f this kind. Equipment (ladders, paint
brushes, putty knives, etc.) and supplies could be furnished by the
association. Upon completion o f the job, the members would be cred­
ited with the standard labor charge. I f such a practice is adopted, the
association should take out liability insurance, to cover possible acci­
dents to members doing such work.
General price policy.—T o allow for safety and fo r contingencies, the
cooperative association should set its budget a little above the estimated
costs. It is uncertain and hazardous to budget in advance the exact
cost o f running an enterprise. Cooperatives which attempt to oper­
ate on a cost basis in their charges are on very risky ground. One o f
the basic Bochdale practices, which has proved itself in practice, is
sale at market prices. Through the annual rent refund any overcharge
is automatically returned, thereby reducing the member’s charges to
the net cost. A t the end o f each year, when all operating expenses,
heat, light, taxes, interest, debt service, etc., are known and paid, and
the proper reserves provided for, the accounting can be made o f the
earnings available fo r the rent refund. It is not wise to base any general
readjustment o f charges, at least if the adjustment is downward, on
less than several years’ operating experience. In case income is insuffi­
cient to cover all expenses, an assessment based on the monthly charges
w ill have to be voted by the members.
Voting Power

Each member o f the genuinely cooperative housing association has
one vote and no more regardless o f the number o f shares owned. This is
in contrast with profit business; in the latter each share o f stock carries
with it one vote, so that if a person owns 100 shares o f stock he has 100
votes, and i f he owns a m ajority o f the shares he casts a m ajority o f
the votes and controls the organization. Democratic control, which is
a basic principle o f cooperatives, is usually provided fo r in the cooper­
ative laws, but may not be required or even permitted if the association
incorporates under other statutes. However, as pointed out elsewhere,
it may be possible to include in the articles o f incorporation provisions
for democratic control even though the statute does not require them.
Withdrawals o f M em bers

I f a member o f a cooperative housing association wishes or is forced
by circumstances to withdraw from the association, he may do so, but
his shares must be offered to the association first and at the par value
which he paid fo r them. The shares are bought back by the association
at par value, less any amount owing the association fo r rent or for dam­
ages to the property. I f the member has allowed his savings return
or the interest on share capital to remain in the association’s treasury,
this amount is also due him. When the member has paid amortization
on the loan at a rate significantly greater than the rate o f depreci­
ation, some arrangement should be worked out to return such increased
equity interest. The incoming member, under such an arrangement,



should match the share investment and the increased equity o f the
withdrawing member.
The association should purchase the shares o f a member within as
short a period as possible, providing the finances o f the society are not
jeopardized. The place o f a retiring member should be taken when­
ever possible by the next prospective member on the waiting list for
that particular type o f housing unit.
Usually the bylaws provide for the repurchase o f the member’s
shares in such cases, and a reserve fund is set aside for this purpose. The
payment o f the incoming member may be used to repay the withdraw­
ing member. In some associations the reserve fund is held in a separate
corporation which is authorized to purchase the shares o f withdraw­
ing members and sell them to the incoming member. The reserve fund,
under such an arrangement, can be built up by having members assign
a portion o f their rent refunds fo r this use. The mortgage-prepayment
cushion, described elsewhere in this pamphlet, can serve as the source
o f funds fo r buying in the shares o f the outgoing member, by the
device o f withholding interest and amortization payments on the
mortgage and letting the debt increase. Shares o f outgoing members
should not be redeemed when this process jeopardizes the financial
stability o f the association. In such case, a program fo r making
regular partial payments in settling the account might prove feasible,
the shares o f the withdrawing members being sold to incoming mem­
bers and a partial loan being granted to the new members to complete
their initial purchase.
In the event that none o f the prospective replacement members can
make the investment required, some arrangement should be developed
whereby the incoming member may borrow a portion o f the funds
necessary to pay fo r his shares, under some agreement whereby the
shares themselves become security fo r the loan. This loan should
be repaid with interest and amortization by the member, on a monthly
basis; this has, o f course, the effect o f adding to the member’s main­
tenance charges.
I f it becomes absolutely necessary for the association to rent an
apartment or dwelling to a nonmember because there is no member
applicant for it, the rental set should be high enough to pay interest
on the association’s equity in the rented dwelling, especially i f the
common shares carry no interest and the maintenance charge does
not include interest on the shares.
I f at the expiration o f a year, or such other period as is provided
fo r the repurchase o f the shares by the association, the board o f
directors has not bought back the shares or transferred them to a new
member, the member him self shall have the right o f sale. This right
o f sale should be lim ited to a new tenant-member, acceptable to the
association, who signifies his intention o f occupying the property.
A ll transfers o f shares should be made on the books o f the cooperative
Much o f the economic pressure which tends to cause withdrawals
from cooperative housing ventures in depression times could be elimi­
nated by the establishment o f a tenant’s deposit account. The opera­
tion o f such an account is described in further detail on page 35.



Adm inistration and Management
Administration o f the Association

The affairs o f the association are administered by a board o f
directors, elected by the membership in general meeting. The di­
rectors serve without pay, and decide and act upon all general and
fiscal policies. In most cases, the directors in turn elect from their
own number the officers—generally president, vice president, secre­
tary, and treasurer. In genuine cooperative associations, the nominees
fo r the board must be members o f the association. In the case o f
limited-dividend and mutual housing associations, which may other­
wise operate as a cooperative enterprise, the board members m ight
not all be drawn from the membership.
Management o f the Property

The directors employ a bonded manager, whose duties are to collect
the rents, keep the accounts, handle deposits, authorize disbursements,
keep the property in good order, and make recommendations to the
board on policy. H e may also manage some or all o f any other co­
operative enterprises connected with the enterprise. The success o f
a cooperative housing association is largely dependent upon the ability
and efficiency o f the manager, and upon his understanding o f co­
operative aims and principles. Beyond this, a good manager needs a
knowledge o f business principles and law and the ability to work
amicably with people. One o f his duties is minimizing or eliminating
friction which can be injurious to the well-being o f the association.
I f the management is not satisfactory to the membership, the elec­
tion o f more capable directors or the appointment o f a more capable
manager is one possible solution. The membership m ight even decide
to turn the administration o f its property over to a central coopera­
tive housing authority, such as the administrative bureau o f a co­
operative housing federation, to a cooperative league, to a State or
municipal housing authority, or to a properly bonded real-estatemanagement company. However, such relinquishment o f control
implies some degree o f failure by the association to manage its own
affairs properly. The ideal solution might be to have available, per­
haps through a central cooperative housing federation, league, or
wholesale, expert advisory and supervisory personnel which could
assist the manager or board in working out solutions to troublesome

A wide variety o f member-sponsored activities is possible when the
members are awake to ways and means o f meeting their common
needs collectively. Some boards o f directors (especially i f not all o f
the directors are elected from the membership) may authorize a
house committee to handle many o f the decisions that confront the
association, such as approving new members, handling problems o f
group discipline, form ulating recommended rent-refund policies, etc.
A separate committee on cooperative services, or a separate co­
operative corporation might handle the distribution o f electricity



or other utility services, the distribution o f milk, the operation o f
stores, central kitchen, restaurant or dining room, bakery, laundry,
children’s nursery, library, recreation o f various kinds, barber shop,
beauty shop, shoe-repair, gasoline station, automobile storage or re­
pair, and other services needed by members. A first-aid hospital or
dispensary might be justified in some developments. Joint arrange­
ment might be made for the part-time service o f maids, cleaners, seam­
stresses, and children’s nurses or teachers, if the members desired.
The financial administration o f some or all o f these activities may
be assigned to the manager o f the cooperative housing association.
A n education committee is highly desirable. In all live cooperative
associations an education committee o f the members performs the
function o f keeping up interest in the whole cooperative movement—
what it is doing and aims to do—by holding meetings, forums, and
classes, by giving plays and pageants, and by carrying on activities
to keep members interested in the larger possibilities and achieve­
ments o f cooperation. Some larger societies employ a full-tim e edu­
cational director. A news sheet may be published, with the educa­
tional director serving as editor.
Beyond these more or less official committees or organizations, there
should be a bond o f sympathy and brotherhood which prompts the
members to grapple collectively with problems o f common concern.
In some cases, this group thoughtfulness might apply to helping those
known to be in need, whether members or not.
Another group activity which is carried on in many cooperative
associations is a credit union. The financial and educational value
o f these small cooperative banks, operated within the membership
o f the association, should not be overlooked. The reserves they repre­
sent, and the aid they can render in an em ergency may, in times o f
economic depression, make the difference between success or failure
o f a hard-pressed association. Credit unions may be o f great assist­
ance in helping new members to purchase their housing shares, or
enabling members to meet emergency expenses which might otherwise
have prevented the payment o f rental or maintenance charges. The
business training obtained by the officers o f a credit union is also an
excellent preliminary to greater participation in housing matters.

The basic function o f cooperative housing is that o f supplying
dwelling accommodations collectively, for the members, on a non­
profit or service basis. Subletting or subleasing, as a regular policy,
should not be permitted. Ordinarily a member who does not desire
to reside in his dwelling unit should turn his apartment or residence
back to the association for leasing to a new member on the waiting
list. In such case the outgoing member’s shares are transferred on
the association’s books, and the new member makes the investment
necessary to repay the withdrawing member.
I f a tenant-member finds it necessary to sublet his dwelling, there
should be certain regulations relating to this matter. The period
o f subleasing should be only for a short period o f time—perhaps a



few months to a year.31 The proposed tenant should be acceptable
to the board o f directors, or to the committee that handles member­
ship. The rental charged should not include a profit to be collected
by the lessor, but might reflect interest on the investment and the
rental value o f the furnishings, minus the rent refund for the rental
period. In fixing the rental charges the association should conform
to any regulations by price-control agencies (if incorporated under
limited-dividend housing laws) or by the housing authority or super­
visor charged with regulation o f the housing enterprise.32 In genuine
cooperative housing associations neither the maintenance charge
(“ rental” ) nor the investment required is subject to the wartime rentcontrol regulations, because o f the nature o f the cooperative ownership.
Several methods o f obviating subleasing or vacancies in times o f
lessened demand are possible: (1) Arrangements could be made fo r
incoming members to borrow, from either commercial sources or the
association’s reserves, a portion o f their share-capital requirements
so that their shares could be paid for in full at once, the debt (w ith
interest) being paid up over a period o f years. The member could
pledge the shares so purchased as collateral for his loan.33 (2) Vacant
quarters could be rent ed by the association at a rate which would pay
the interest return to the association on its equity in the apartment.
W ith this source o f revenue, the association might justify borrowing
from outside sources if necessary, since the renting nonmember would
be paying the necessary interest costs. (3) The best policy o f all
would be to maintain the prices for the association’s properties suffi­
ciently low, for the facilities offered, to insure that the dwellings would
remain “ good buys” regardless o f hard times. In such a situation,
a long waiting list could probably be maintained, keeping a ready
source o f new members.
Widespread subleasing or rental to nonmembers by the association
is destructive o f the underlying principles o f consumers’ cooperative
housing, and is not recommended. Any profits realized by an asso­
ciation (beyond the interest return on its equity) in renting to non­
members, should be devoted to the benefit o f the whole association or,
if possible, to enabling the nonmembers to purchase their shares.

In a large project in which space has been provided for a community
shopping and service center, the association w ill properly act as
landlord, renting the facilities at rates high enough to cover costs
plus a reasonable margin. Such practice is justified, in that the com­
mercial value is the result o f the housing development itself, and
should inure to the association. The properties should preferably
be let to cooperative associations formed to carry on the needed serv­
ices; as soon as these associations are in financial position to do so,
they should be allowed to become members o f the housing association
and owners o f shares entitling them to leasehold o f the premises they
occupy, on the same terms as other members.
31 The association m ight eliminate much of the demand for subleasing if members who left the
city for a year or S) at a time were retained on the membership rolls; they would then have
priority over new applicants for any vacancies.

32See footnote 29, p. 28.

33 This system was employed by Amalgamated Dwellings, In c., to enable new members to come
irto this development, which was built at the onset of the depression of the thirties.




Interest may or may not be paid on share capital, as has been men­
tioned previously. I f it is possible to apportion the member's subscription to the shares to the cost o f this dwelling, a s h y a per-room
basis or a percentage o f the total cost, it is desirable to have the com­
mon shares noninterestbearing. Interest, if paid, is largely o f illusory
benefit: In order to pay interest on shares, additional funds must be
collected from the member in his maintenance charge, only to pay
them back to him. A lso, the interest payment on shares constitutes
a taxable distribution o f earnings, since it is paid out in proportion
to the stock ownership. The member must therefore be charged for
both taxes and interest, in order that he be paid the interest. A person,
in estimating the total cost o f his own housing, may calculate the
interest his share investment might otherwise earn, but the individual
who owns a house individually does not actually charge himself in­
terest on his investment and then pay it to himself.
I f, nevertheless, the members decide that interest be paid, it should
not exceed the current market rate, nor should it vary with either the
value o f the property or the earnings o f the association.34
I f it is necessary or desirable that some members or friends con­
tribute capital beyond their pro-rata portion, subscribed in shares,
such oversubscription should preferably be handled as a loan. It
might be deposited with the association, lent to the association on
an interest-bearing note, or paid on a subscription or a debenture
bond. This method o f obtaining auxiliary financing does not involve
needless taxation o f the association, nor does it disqualify the asso­
ciation under certain other regulations o f the Internal Revenue Code
relating to cooperative housing.

In an association which has been able to secure a mortgage loan
which gives fu ll credit in time as well as debt for prepayments on
the amortization o f the mortgage loan, it would be feasible to estab­
lish a members5 deposit account. Essentially and simply, this would
be a type o f savings account in which the members could deposit
their refunds, or other savings for the chief purpose o f prepaying
the mortgage. Such a deposit account should probably make a small
interest payment comparable to that o f a savings bank fo r the balance
maintained in the account. The funds would be used prim arily to
reduce the higher-interest-rate mortgage loan, thereby effecting a sav­
ings in interest to the association.
It would be desirable to have this account available fo r other de­
posits besides the refunds which members might leave with the asso­
ciation. The conditions for repayment or withdrawal o f these funds
m ight be somewhat restricted in order to insure their use fo r helping
to meet the member’s maintenance or “ rent55obligations. Conceivably,
i f all members o f an association simultaneously sought to use their
deposits to make their rent payments, restrictions might have to be
imposed permitting withdrawal o f an amount equivalent to one-third
or one-half o f the monthly rent.
M The State housing laws lim it the rate o f interest on share capital to 6 percent, except in
Illinois where 6Yi percent is allowed and in Delaware where 8 percent is allowed.

684618 ° — 46- ------- 6



The chief purpose o f the deposit account is the establishment o f
a financial reserve upon which the member could draw to supplement
the funds he might have in order to make his monthly payments. The
association would have to withhold amortization payments, and per­
haps let the interest accrue on its mortgage, utilizing its mortgagerepayment reserve to offset the member’s withdrawals. W ith the
eposit account entirely depleted, the association’s mortgage would
have grown to the amount provided in the original schedule o f mort­
gage payments.


Properly utilized, such a deposit account could have the effect of
encouraging members’ savings in inflationary periods, lowering their
housing costs in times of economic depression or unemployment, and
greatly increasing the financial security of the association.

In a cooperative housing association the members do not profit
financially By any increase in the value o f the property or o f the capi­
tal stock; there are no stock dividends and no extra bonuses, as is
customary in ordinary stock corporations. A n increase in the market
valuation o f the property as a whole does not result in stock revalua­
tion. I t may increase taxes. W hen the market value o f the property
declines, the members are equally not affected, except as they may
enjoy lower taxes. This is true because the cooperators are members
o f an association which collectively owns homes fo r residence pur­
poses and not fo r sale or speculation.
The antispeculative controls previously suggested are techniques
fo r eliminating profit-taking at the expense o f consumers o f housing.
I t is also important to find ways to meet the deflationary challenge
which an association must expect to face during its lifetim e. I t is
almost axiomatic to say that families w ill not want to move out o f
a cooperative development any sooner than financial considerations
compel them to do so. The soundest way to prevent such withdrawals
is fo r the association to build up as large a reserve as possible, pref­
erably in the form o f mortgage prepayments, upon which a fam ily
may draw fo r a fairly long period, to supplement the rent payments
it can make. The advantage o f the mortgage-prepayment method
is that such prepayments reduce the interest cost on the mortgage.
Such funds, i f invested in other ways, might not be available to meet
mortgage payments in the event o f another economic debacle, and
certainly are not likely to bring any more interest than is being paid
on the mortgage.
A lengthy period o f partial unemployment m ight exhaust such
reserves, especially if the association’s reserves were small to begin
with. The members whose rent-receivable accounts may be growing
have actually secured that debt up to the amount o f their investment
in shares, yet unless the mortgagee is unusually sympathetic, or imlasg
there is in effect a moratorium on foreclosures, an association as a
whole is no more able to convert its equity to rent than the individual
fam ily owning a mortgaged house. Money m ight be borrowed on
these rent-receivable accounts to help make mortgage payments.



Tax Status o f Cooperative Housing Associations
One unique feature o f cooperative housing is its nature as a non­
profit, nonspeculative, corporate type o f group home ownership. As
long as the net earnings o f a cooperative housing association are
disbursed as a rent refund, rather than as interest or dividend to
stockholders, the effect o f this distribution is to reduce both the taxa­
ble income and reserves held by the association and the cost o f housing
fo r the members. (This would be true in any corporation, whether
cooperative or otherwise; however, the usual corporation is in busi­
ness to pay its earnings not to its customers but, rather, to its stock­
holders.) Earnings not refunded, but held as reserves or paid out
as a dividend to stockholders, are subject to taxation.
Many cooperative statutes require that a percentage o f the earnings
be set aside until the reserve equals a certain proportion (usually 30
to 50 percent) o f the value o f the stock outstanding.35 The funds paid
into this reserve are probably taxable since they would eventually
accrue to shareholders o f the association in proportion to ownership.86
A reserve satisfactory to the cooperative laws could probably be estab­
lished from the outset by requiring that the members’ paid-in sub­
scriptions exceed the minimum equity required for financing, and
then utilizing this additional capital to build up a prepayment reserve
or cushion in the mortgage-amortization schedule.
Some associations have built up a reserve from which to buy in
their shares, by returning virtually all o f their earnings to their
members as a patronage refund on rent. The members, either at the
annual meeting or by action o f their board, have previously agreed
to assign or donate a portion o f this refund to a special housing fund.
This rand might be held by a separate corporation, preferably the
one charged with buying in and selling the shares o f the housing asso­
ciation to incoming members. In this case, the reserve is built up
by donations or loans o f the members to the fund, not by a taxable
withholding o f reserves.
Individual taxpayerSj owning property in single ownership, are
permitted to deduct their real-estate tax and interest payments from
their income subject to taxation. A s the internal revenue laws make
a similar provision fo r the cooperative ownership o f real estate, the
member may deduct his pro-rata portion o f the taxes and interest
payments made on his behalf by his association. However, i f a hous­
ing association has more than one kind o f stock outstanding, or i f
any o f its earning are paid out as profits, or if more than 20 percent
o f the stock is owned b y nonresident members, the members o f the
association w ill be disqualified from this income-tax deduction. (See
Internal Revenue Code, Regulation 111.)

Use o f Surplus Savings
I f the laws of incorporation permit, there are many uses to which
the surplus savings, which accrue from collecting from the tenantmembers more than the net costs, may be put. Thus—
88The housing laws, on the other hand, set a maximum (generally 15 percent), which m ay
not be exceeded.
“ However, “ equity reserves” earmarked for individual members have been held to be nontaxable to the association.



(1) They may be used for more rapid amortization o f the mortgage.
(2) They may be returned to the members directly in cash, as
savings returns, in proportion to their monthly rental or maintenance
(3) They may be returned to the member as a rent refund, but
in two portions, part in cash to the member and part as payment to
be assigned to a reserve or housing fund.
(4) They may be returned to the members as a rent refund under
a plan whereby part or all o f the refund would be deposited to the
member’s account with the association, for withdrawal by the member
upon need (as to pay his monthly charges). A small interest pay­
ment, comparable to that on a savings account, would be justified
on this sort o f deposit, especially if these funds were utilized to pre­
pay the interest-bearing mortgage indebtedness under the prepayment
provisions discussed previously.
(5) A portion o f these surplus savings might be spent fo r further
improvement o f the property, beautification o f the premises, develop­
ing additional recreational facilities, meeting and game rooms, thea­
ter, summer camp, etc., to build up a library, or to purchase additional
equipment not otherwise provided. It is strongly recommended that,
before distribution o f the surplus savings, a portion be set aside for
social or community purposes.
(6 ) A portion o f these funds might become the working capital
fo r other self-supporting cooperative services, such as distribution
o f food and dairy products, furnishing a barber shop, a shoe-repair
shop, a medical clinic, or a nursery school and kindergarten, or other
services needed by the community.37 In case these services were to be
undertaken by a separate service cooperative, these savings could
be refunded to members to use for purchasing their shares in the
service cooperative.
(7) The savings return may be authorized for payment under a
plan which defers the actual payment fo r a period o f years. This in
effect is a type o f loan from the member, which increases the working
capital in the association. This method o f maintaining a revolving
fund o f capital in addition to share capital has become very popular
among agricultural cooperatives in recent years. It has been sub­
jected to criticism from organizations opposed to cooperative enter­
prise, but the Federal courts have ruled that deferment o f patronage
refunds does not make a cooperative liable to the payment o f Federal
income tax on the amounts so deferred.
(8 ) These surplus sayings might be partially utilized fo r educa­
tional work in expanding the usefulness or scope o f cooperative
housing. Lack o f even minimal financial support for this type o f
work, usually provided by most Rochdale cooperatives, has been a
m ajor deterrent in the development o f a widespread program o f
cooperative housing.
(9 ) These surplus savings might become the working capital fo r
other cooperative wholesaling or manufacturing organizations which
would furnish necessary building materials, supplies, or appliances
for cooperative housing associations.
37 In a large association it would be desirable at the start, to provide space fo r community
stores and services. One o f the first measures after the dwellings were occupied could then
be the form ation of one or more cooperative associations to operate such enterprises.



Before making a decision on the uses to which the surplus savings
shall be put, the association should study the provisions o f the law
under which it is incorporated, to insure the legality o f its decision.38

Dissolution of Association
I f the requisite proportion o f the members vote in general or special
meeting to dissolve,39 dissolution should become effective.40 The dis­
solution and sale o f the property for the personal gain o f the members
should be discouraged,- fo r it permits those who chance to be the final
members to reap the benefits o f the joint efforts o f all who preceded
them, thus violating the nonprofit feature o f the enterprise. P ro­
vision may be made in the bylaws, at the beginning, that shares shall
remain at par, and that any increase in the value o f the property
shall be used as a fund fo r the further development o f the coopera­
tive movement or o f cooperative housing. Thus, if for some reason
it seems necessary to disband the association, the property is sold
as a unit. In the case o f detached residential buildings, the dwellings
might be sold to individual owners by the association. No member
should receive for his shares more than he has invested. I f no interest
has been paid on the shares, payment o f such interest conceivably
might be permitted. I f the association is operating under a housing
law which restricts returns to the owner o f the stock, the limited divi­
dend established in the law would apply in this settlement.
In the event that the equity interest sells fo r more than the capital
invested (plus, perhaps, the uncollected interest), it would be highly
desirable that the association use this “ profit” for some valid com­
munity purpose, such as the establishment o f a park or library, or
assign it to a fund for the financing or guidance o f other cooperative
I f, at the time o f dissolution, the value o f the property has de­
creased, the members receive such percentage o f their shares as has
been realized by the sale o f the property. This loss may be attributable
to putting the association’s property on the market at a time o f low
real-estate values; obviously, dissolution should not be undertaken at
such times if any alternative plan is possible. This potential loss
upon dissolution may also be traceable to charging off depreciation
at an insufficient rate, resulting in a reduction o f the share capital
because maintenance charges were not set high enough to include a
proper depreciation. The loss in value o f the shares, in this instance,
would already have been offset by the gain the members obtained
through too-cheap rent.
38 A ny o f the above uses would he legal under practically all o f the consumers’ cooperative laws.
Some of the limited-dividend housing laws, however, sharply lim it the purposes fo r which surplus
earnings may be used. Thus, if receipts exceed operating and other expenses, the balance must
be applied to a reduction o f rent in Illinois and Kansas; also in New York, Ohio, South Caro­
lina and Texas, unless the amount is too sm all. In Massachusetts the surplus earnings may
be used for the renovation o f the property or to provide other facilities, in the discretion o f the
^ °S SpJ.Qportion varies in the various State cooperative laws but (when specified) is generally
a majority or two-thirds o f the entire membership.
40 Associations formed under State housing laws are often required to obtain the approval o f
the State housing board before they may dissolve. This is the case in Arkansas, Florida, Illinois,
TTitnaag New Jersey, New York, Ohio Pennsylvania, South Carolina, and Texas.
41 Un^er the housing laws o f Florida, Kansas, New York, Ohio, South Carolina, and Texas,
any excess above par value of shares must be paid over to the State unless the State housing
board approves some other means o f disposal.



Central Cooperative H ousing Organizations
Supervisory Agency and Cooperative Housing Fund

In order to make adequate information and technical guidance avail­
able to groups desiring to undertake a cooperative housing venture,
it would be highly desirable that a consultative, advisory, or super­
visory service be established. Such assistance should be available
through critical early years when the association must make im por­
tant decisions, in order to bring the experience and knowledge o f
other cooperative groups to bear on the problems o f each association.42
In addition to this service, the creation o f a housing fund to assist
in the development o f cooperative housing associations would like­
wise be desirable. This fund should be available fo r (1 ) loans to
individual cooperators who have not sufficient funds to subscribe to
the fu ll amount in the beginning fo r their purchase o f shares, and
(2 ) loans to cooperative housing associations to finance their original
development or to meet their temporary financial needs. Such a fund
could be raised by subscription fo r bonds or shares. Possible sub­
scribers fo r such bonds would include cooperative associations; founda­
tions and philanthropic organizations; insurance companies, banks,
and other business institutions; individuals; and municipal, State, and
Federal Governments. This fund would be administered by a board
o f directors elected by the shareholders, or it might be administered
by a cooperative housing federation when such exists.
Federated Activities o f Cooperative H om ing Associations

Cooperation between associations is useful in the same way that
cooperation between individuals is useful. Two or more housing
associations may unite fo r their mutual advantage, form ing what is
comparable to the cooperative wholesale or league among the store
associations. The members o f this federation would be associations,
not individuals, with votes in proportion to the membership o f each
constituent organization.
The federation would be financed by the subscription o f shares by
the member associations.
It would engage in large-scale educational, service, or commercial
enterprises, which are more effectively performed thus than by a single
association. Possible activities might include a central architects’
bureau, facilities for building and contracting, and manufacturing
or wholesale dealing in roofing materials, lumber, sash, frames, doors,
paint, plumbing supplies, and other housing needs. Some o f these
supplies are already available through cooperative wholesales.43 The
utilization o f relatively standardized items by various cooperative
housing associations would permit efficient large-scale buying, and
in some cases, manufacturing, in order to help keep the costs down,
and still maintain quality and specification standards. Cooperative
43 The Eastern Cooperative League, 44 W est 143rd Street, New York C ity, is experimenting
with such a service as a means of helping prospective cooperative housing associations. As
other league offices often have a staff member who is well informed on housing m atters, housing
associations would be well advised to get in touch with the league or wholesale nearest them.
(See list of such bodies in Appendix E , p. 59.)
43 Or the project m ight operate as an affiliate or subsidiary o f National Cooperatives, In c., at



societies contemplating a building program should keep in touch with
the nearest wholesale about building materials and appliances.
Certain surplus funds o f the member associations might be invested
in a federation to be used for the financing o f other cooperatives, and
for loan funds to help individuals become tenant-members. In the
case o f loans from the funds to individual cooperators, the applicant
for a loan should have funds o f his own amounting to at least 40
percent o f the amount he requires to subscribe for his home. He
should try to amortize his loan at the rate o f 20 percent a year, so that
within 5 years the fund would be restored to its original amount.
The federation might also take over the administration o f indi­
vidual cooperative housing associations, if the members o f such hous­
ing associations voted for the transfer o f the administration to such
federation, or might become part owner o f the properties o f the
member associations in order to prevent the dissolution o f associa­
tions, in the event o f a great increase in the value o f the real estate
and its possible sale by the members for their own profit.
Another possibility for organized effort in the housing field is the
formation o f service associations created to provide maintenance
service for housing projects within a given region.



A ppendix A .— M odel Bylaws fo r a C ooperative H ousing
A rticle 1.— Name and Location of Association
Section 1. The name o f this association is__________________________________

Its principal office is located in_______________________________________________ 1
A rticle 2.—Purpose
Section 1. The purpose o f this association is to provide its members with

housing on the cooperative plan and to engage in such related activities as the
members may determine.
A rticle 3.—Membership
Section 1. Membership qualifications.—The association shall consist o f the

present membership and all other persons who hereinafter may be admitted to
Any person approved by the association may become a member o f this asso­
ciation by agreeing to comply with the provisions o f these bylaws, purchasing
_________shares o f its capital stock, applying for a dwelling,1
2 and agreeing to
subscribe for additional shares proportioned to the cost of the dwelling he is to
Sec. 2. Bights and duties of members.— Every member must agree to obey the
rules of the association as set forth in these bylaws, or elsewhere, and the
decisions of the general membership meeting or of the board of directors. He
must also do his utmost to promote the aims and purposes of the association,
the success of its operations, and the welfare of its members.
The books o f account, stock book, and transfer ledger of the association shall
be available for inspection daily at reasonable hours by any member o f the
association who has been a member for at least 6 months prior to his demand.
Sec. 3. Withdrawal or expulsion from membership.—A member wishing to
terminate his membership shall make written application to the board of
directors, which shall have the right to establish the terms according to which
the repurchase of his stock and other equity, if any, may take place, subject to
the provisions of article 5, section 3.
At any time the board of directors may prefer charges against a member if
the board is of the opinion that such member has violated any of the provisions
of these bylaws, or that he has been guilty o f conduct detrimental to the asso­
ciation. Subject to the provisions of article 5, section 3, his lease may be can­
celed by notice, upon tender of the par value of his stock and other equity, if any,
minus his proportionate share of any deficit, as determined under article 5,
section 3, and his membership shall be terminated.
A rticle 4.— Fiscal Year
Section 1. Fiscal year.— The business period o f this association shall begin

w ith ______________________ o f each year and end o n _______________________
A rticle 5.— Capital
Capital stock.—The capital stock in this association shall be
_________________ dollars, divided in t o ______________ shares at a par value of
_____________ dollars each.3
Sec. 2. Member's shareholdings.—The number o f shares to be held by an indi­
vidual member shall be based upon the equity required by the association in
relation to the cost of the dwelling he is to occupy.
Sec. 3. Transfer or repurchase of shares.— It shall be the policy, when requested,
to redeem the capital stock owned by the members whenever this can be done
without jeopardy to the association. A member wishing to withdraw shall
be required to give 60 days’ notice o f such intention. The association may
Section 1.

1 Either “ Inc.” or “ Incorporated” should appear in the name of the association as an indica­
tion that the liability of the members is limited. If the association is not incorporated it functions
as a company in which each member is liable for the entire obligations of the organization.
2 This provision insures that the members and tenant-owners shall be an identical group.
3 Cooperative shares never go above par value. This provision is inserted here m ainly to
comply with the technicalities of legal procedure.
Some States set the value of the individual shares o f stock for societiesi which incorporate
under the general cooperative law, and the State law under which incorporation takes place
should be consulted before the value of the share is fixed.



redeem shares at an earlier date if the board of directors decides that they may
be withdrawn without injury to the association. Every effort shall be made
to accommodate members leaving the community or in distress.
Transfers o f shares shall be subject to the approval of the board o f directors.
The issue and transfer of all shares must be registered on the books o f the asso­
ciation. No shares shall be transferred until all claims o f the association
against the owner of such shares shall have been paid.45 The board of directors
may purchase any share or shares from the reserve fund of the association.
The association shall have an absolute lien on the shares, loans, or deposits
o f any member for any debt due the association by him, and any sum credited
to such member may be applied on or toward the payment o f such debt.
The association shall have the first option on any shares of stock offered for
sale. Shareholders desiring to withdraw from membership or to dispose o f
surplus shares must first offer their shares to the association, through its board
o f directors.
The amount to be paid for such stock shall be determined by the board o f
directors, by the following computation: The par value of his paid-up stock,
minus the proportionate share o f the deficit (if any) based on total stock out­
standing. This computation shall be made as o f the end of the fiscal year, the
date of which is nearest to the date of acceptance of the member’s withdrawal.
The deficit figure used in this computation shall be that figure found in the
annual report of the fiscal year used, after the board of directors has taken action
in accordance with section 5 o f this article.6
I f the association, through its board o f directors, is unable or refuses to
redeem such shares, the shareholder shall then have the right to dispose o f
them to any person eligible to membership in the association.
Transfers of the shares o f this association shall not be binding until made upon
the books of the association with the approval o f the board of directors, and
no transfers shall be completed until the old certificate or certificates have been
endorsed and surrendered and a new certificate issued in the name of the
The board of directors, also, shall at all times have the authority to repur­
chase the shares of stock and to cancel the membership of any shareholder
(1) who has died, (2) who has failed to meet his payments on stock subscrip­
tions within the specified period or time, or (3) who has, for any other reason,
been judged unfit for membership. Provided, however, that such member shall
have the opportunity to appear in his own defense before the next regular or
special meeting o f the association and that the board o f directors is sustained
in its action by a majority vote o f the members present.
The board of directors shall not repurchase the shares o f any withdrawing
member nor of any other member when in its judgment such a reduction o f
the association’s capital would in any way endanger the financial condition o f
the association.®
Sec. 4. Loan capital.—The association may accept loans from its members or
from nonmembers when in the judgment of the board this is to the best interest
o f the association, provided, however, that the total amount of such loan capital
shall at no time e x ce e d ______ percent o f the total paid-in share capital, and
provided, further, that any loans to be used for capital improvements or for
financing new activities must first be authorized by vote o f the membership.
Notes or other evidences o f indebtedness shall be given by the association for
such loans, but no such note shall be for a period o f less than 90 days.7

4Many an association having no rule such as this, has felt itself obliged to redeem the capital
stock of a withdrawing member. Not only should there be such a provision in the bylaws, but
it should be scrupulously followed.
5The redemption price of shares is often regulated by the laws of the State. Some States
compel redemption at par value, regardless of the fact of a deficit or surplus on the books of
the association, others at book value.
6 It would seem that this provision is so obviously sensible that it is not needed in the bylaws.
However, many a board of directors has acted directly contrary to its own best judgment in the
face of persistent demands on the part of some strong-willed shareholders. A clause such as
this in the bylaws will help to stiffen the backbone o f a board of directors, and a resolution by
the board expressing its judgment and the reasons therefor would probably meet the situation.
7 Wherever agreeable to the depositor, these notes should be made for longer periods of tim e
— 6 months or 1 year, or 2 years or more; they could be redeemable “ 90 days after demand.’*
Notes or bonds running 20 years or more are advisable where the money is used for building.
Bonds are safer than short-term notes, because they insure a longer loan, and they have a
definite maturity date. Most cooperative associations will not undertake to issue bonds, but
they should try to give these notes something o f the same stability. O f course, as long as this
form o f capital is needed, members should be urged to renew their notes well in advance of the
date o f expiration.



Sec. 5. Returns on share and loan capital.—Any return on share capital shall
not e x ce e d ______ percent per annum® and shall be paid only from earnings.
Such return shall not be cumulative.
Loan capital shall receive interest at a rate fixed by the board o f directors,
but shall not e x c e e d ______ percent per annum; such interest may be cumu­
Sec. 6 Death.— Upon the death of any shareholder leaving heirs or assigns,
the association shall, upon request, redeem at par value within 1 year such
shares as are held in his name, if permitted by law or if possible without
jeopardizing the financial position of the association.
A rticle 6.—Disposal of Net Savings
S ection 1. The board of directors shall at the end o f each fiscal period provide
fo r the distribution o f the net savings remaining after expenses have been met,
according to the following method:
(a) General surplus reserve.—From the net savings shall be allocated to the
general reserve account a sum not less than 10 percent o f such savings until the
reserve is equal to the amount o f paid-in capital; and thereafter not less than 5
*101 The general surplus reserve shall consist o f money especially allotted
to it from net savings or earnings o f the business, initiation fees, fines, contri­
butions from individuals, and any other funds appropriated to it by action o f
the board of directors or the general membership meetings. This reserve shall
be used to absorb operating deficits of unsuccessful years, losses caused by fire,
theft, or other reasons; for the extension of the association as a consumers’
cooperative; or for other developments directly associated with the cooperative
movement, upon vote by a general meeting of the membership.11
The general surplus reserve shall be the indivisible property o f the association
as a whole.12
(b) Educational fund.—From the net savings a sum not less than 5 percent
thereof shall be allocated to an educational fund. In addition, this fund shall
receive the amounts o f patronage refunds standing to the credit o f nonmembers
who have failed to become members within the period specified in paragraph (c )
o f this section.
This fund shall be placed at the disposal of the educational committee o f the
association, to be used for purposes o f education among the members and the
(c) Patronage refunds.— Subject to determination by the membership meeting,
the sum remaining after paying the return on share capital and after providing
for the reserve and educational fund, as provided in section 1 (a) and (b)
above, shall be used collectively for social purposes or be divided among the
members who are not in arrears, in proportion to the amount o f their monthly
payments during the fiscal period;
Provided that these savings returns or patronage refunds may be paid imme­
diately in cash, or in certificates of indebtedness, or may be placed in a revolving
fund upon the books o f the association to the credit o f the patron members, to be
paid at some future date at the discretion o f the board o f directors; and


8 In no case should the maximum rate here specified exceed the current rate. However, see
discussion relative to returns on share capital (p . 3 5 ).
8 Loan capital is entitled to its interest before share capital. In fact, the interest on it should
be charged to operating expenses, whereas the return on share capital must come out of net
surplus savings; it cannot lawfully be paid from the general reserves.
10 Before the amount to be placed in the reserve is determined, the State law under which the
association is incorporated should be consulted, as some o f the laws have a definite provision
on this point.
11 Under this section it is possible for the association to make an appropriation to the central,
national, or district cooperative educational body. Generally, however, such appropriations
should be made out o f current surplus savings or earnings. Funds should not be appropriated
from the reserve as donations to organizations or causes outside the consumers' cooperative
movement; such action establishes a precedent from which it is difficult to disentangle the
association in the future; furthermore, it may cause disagreement and division in the member­
ship. Donations to pure philanthropies by unanimous vote of the membership should be the
only exceptions to this rule.
12 The indivisibility o f the reserve fund is im portant. Its meaning should be made clear to
the membership, for this is one particular in which the cooperative business differs radically
from profit business. Many associations have made the mistake o f crediting each shareholder
with "h is share" o f the general surplus reserve and actually turning this over to him in the
form o f cash when he withdraws. In other associations, the membership m eeting has voted
to divide the reserve. Either practice is objectionable, for it allows such persons to profit from
the funds built up! from patronage o f previous members and is in violation o f that Rochdale
principle which requires that cooperative shares shall never exceed the par value. Monetary
benefits to members o f cooperatives should be the result o f patronage, not o f the investment.
18 Some associations regard educational work as part of the regular operating expenses and
do not, therefore, make a definite appropriation at the end o f the fiscal period.



Provided, further, that in case o f a patron who is not the owner o f shares
sufficient to qualify for membership in the association, patronage refunds shall
be credited to the payment o f such stock.
I f a nonmember fails to become a member w ith in ________ , the amount to
his credit shall be transferred to the educational fund.
No patronage refunds shall be declared or paid for any period in which there
was an operating deficit, nor as long as the association has a general deficit.
Article 7.— Subleasing of Dwellings
Section 1. A member may sublet his dwelling at the regular rate plus a
nominal charge for furnishings. Subletting shall be permitted for a period
to be decided upon by the directors.14 Members subletting shall be responsible
to the association for payment o f rent. Persons renting must meet with the
approval o f the directors.
Article 8.—Meetings of Members
Section 1. Regular meetings o f the members shall be held quarterly. The
first regular meeting o f the year shall be the annual meeting at which time
the general business o f the association shall be transacted, directors elected,
® Notice o f regular meetings shall be posted prominently in the association’s
place o f business and shall also be sent to the address of every member as
registered on the books o f the association at the time the notices are sent.
Notices shall be sent at least 6 days before the date set for the meeting.
S ec. 2. A special meeting o f the members may be called by the president when­
ever he shall deem it necessary or as directed by resolution o f the board o f
directors or upon a petition signed by 10 percent o f the members.16 Such meeting
shall be called by a notice published 10 days before the meeting.17 Such notice
shall specify the time and place and object o f such meeting and no business
other than that specified shall be transacted thereat.18
Sec. 3. Twenty percent of the members, or 50 members, whichever is less,
present in person shall constitute a quorum for the transaction o f business.
Sec. 4. At all meetings o f the members and the board o f directors the order
o f business and parliamentary practices shall be governed by Roberts’ Rules o f
Order, Revised.19
14 This practice is to be allowed only in cases o f necessity, and there should be a definite time
lim it to the period for which subletting is to be permitted.
1# “ Third Thursday o f January” is the way one association designates the date o f meetings.
The cooperative laws o f some States (N ew York is one) demand that the exact day be desig­
nated in this way. Others permit the directors to use their discretion in each instance. I f the
State law does not require this, it may be left out and in its place may appear the words “ on
such date as may be determined by the board of directors.” The date should, however, be at
least 1 month, preferably 6 weeks, after the end of the fiscal period.
M The right to initiate a call for a special meeting should be recognized in every cooperative
association. A very small association should probably require the signature of 20 percent o f
the members, whereas a very large association m ight require only 5 percent or even less.
** 10 days* instead of 6 days* notice is suggested here because o f the extraordinary nature o f
the occasion. The members usually are not expecting a call to such a special meeting, as they
are at the time of a regular m eeting, and they should, therefore, have more time to prepare for it.
“ This last paragraph is a legal requirement in many States, and it should be required in
every cooperative association. A special meeting generally has some special purpose, and thia
purpose must be clearly stated in advance. And then, once the meeting is in session, no person
present should be permitted to surprise the meeting with some other business, the nature o f
which the members may not be prepared to discuss. In fact there m ight be many members
absent from the special m eeting whose interests would be vitally affected by the “ surprise”
business and who would not be absent if they knew it was to be discussed. Special meetings must
be sharply restricted to the specific purpose for which they are called.
The order of business at regular membership meetings may well include the follow ing:
1. Reading o f minutes of last regular or special meeting.
2. Unfinished business left from previous meetings.
3. Report of president.
4. Report of secretary.
5. Report of treasurer.
6. Report of manager.
7. Report o f audit committee.
8. Report o f education committee.
9. Report of membership committee. (It is very easy for a meeting to confine itself exclu­
sively to business m atters. Therefore, it is essential that a place be definitely allotted on
the agenda for discussion of education and membership. It is important to have a sound
educational policy as well as a sound financial policy. Expansion and development o f the
membership are as essential as expansion and development o f the business.)
10. Report of other committees.
11. Election to fill vacancies on board o f directors or committees, for the unfinished term ,
and of new directors and committee members.
12. Action on distribution of net savings. (The board o f directors should always present
its recommendations on the distribution o f the net savings, giving the reason therefor.
The meeting is then ready for a worth-while discussion o f the whole m atter and may accept
the recommendations, m odify them, or reject them .)
Continued on p . 46,



S e c . 5. Rights and limitations of the membership meeting.— The membership
meeting has both the right and the responsibility to elect directors or members
of committees and to remove them from office if and when they are derelict in
their duties; to hear and pass upon the reports of officers and the manager o f
the association and of any committees which are responsible to i t ; to determine
the method of dividing the net surplus or earnings; to make the final decision
regarding any drastic changes in the financial p olicy; to act as final arbiter in
any disputes or disagreements which may arise between the board of directors
and any committees or individual members; to determine what amendments
shall be made in the bylaws; and to exercise its final authority in all other
matters vitally affecting the association as a cooperative fraternal body and as
a business organization.30
S e c . 6. Participants in membership meetings.— Every member who has met his
full obligations as regards share capital, as specified in article 5, section 2, and
who has not in other respects been judged by a membership meeting to be
delinquent or acting contrary to the interests of the association, shall be qualified
to vote and to participate in the meetings o f the association.1
S e c . 7. Voting rights.— Election o f directors and members of committees shall
be by ballot unless unanimous consent is given to a vote by show o f hands. Action
on all other matters shall be by ballot, by an “ aye” or “ no” vote or by a rising vote,
as the majority o f members present may decide. Each member shall have one
vote on all voting occasions, and never more than one vote,22 and there shall be
no voting by proxy.23
At the discretion o f the board o f directors, or upon the presentation o f a peti­
tion signed by 10 percent o f the membership, the secretary shall, along with the
notice of meetings, include a copy of any specific proposal to be acted upon by the
meeting. A member unable to be present at any meeting shall have the right to
cast his vote on such specific measures by mail, Provided, that his vote shall
be signed by him and shall be received by the secretary in time to be counted at
the meeting.
A r t ic l e 9 .—

Management, and Duties of Officers

Directors and officers.— The responsibility for the management shall
be vested in a board of directors consisting of 7 (or 9) members. The directors
shall serve for terms of 2 years, half o f the board being elected at each annual
meeting. They shall be eligible to serve until the election o f their successors.24
The board shall elect its officers—a president, a vice president, a secretary,
and a treasurer—from its membership, and shall be authorized to appoint an
executive committee. The office of the secretary and treasurer may be combined.
S e c t io n 1 .

19 Continued.
13. Action on other recommendations o f board. (Other matters to he presented may cover
a wide range o f subjects, such as proposed amendments to the bylaws, construction of new
buildings, the undertaking of some new cooperative activity, expulsion of a member, author­
izing the sending of a delegate to a national or district convention^ etc.)
14. Other new business.
20 A t first glance this section may seem unim portant; it is not. Many associations have been
seriously crippled because the membership meeting did not have its duties clearly defined; there­
fore, it neglected some o f its most important duties (such as selecting the proper people for the
board of directors or not holding them strictly to account after they were elected), or, on the
other hand, handicapped the board’s effectiveness by interfering with its work.
21 Even if the board of directors has already decided that any member should be expelled, the
offending member should not be disqualified from participating in the meeting unless the meeting
has approved the action o f the board. The board should not be placed in such power as to make
it possible for it to determine who may or may not vote at a m eeting. This power should rest
with the membership only.
„ .
22 The 1-vote rule should be enforced under all circumstances, unless the State law contains
specific provision to the contrary. It is one of the fundamental principles of consumers*
. . .
23 Proxy voting should not be permitted m cooperative associations because it may be used to
defeat democratic control, and it should not be adopted as a compromise under any circumstances,
unless the requirements of the State law make this unavoidable (as in Illinois and North Carolina,
providing for written proxies, but in the latter State proxy voting is allowed only in case o f
sickness or unavoidable absence, and no member may be permitted to vote more than 1 p ro xy).
I f the State law requires vote by mail under certain circumstances, a provision to that effect
should be inserted. (In California, District of Columbia, Illinois. Michigan Minnesota, M issouri,
Montana New York (stock ), New York (nonstock), North Carolina, North Dakota, South
Dakota, W ashington, and W isconsin, an absent member may be permitted to vote by mail if
notified in w riting of the question to be voted on and if a copy of the motion is attached to the
vote; all the States except New York (nonstock) and District of Columbia require that the vote
be signed and Minnesota requires that it be certified by the voting member.)
24 Some* societies do not allow more than 2 consecutive terms, requiring that candidates retire
for 1 term before they become eligible for further service. The board o f directors and all other
committees should always be an odd number.



The board is authorized to fill the position o f a director who resigns before
his term expires, such appointee to serve until the next regular election only.
Sec. 2. Duties of board.—The board shall administer all business carried
on by or on account o f the association. The directors shall in all their actions
be under control and direction o f any regular or special meeting o f the members.
The board shall hold a regular meeting each month. Special board meetings
may be called by the president and shall be called by him on request of any three
At meetings o f the board a majority shall constitute a quorum.
The directors shall act for the association and be responsible to it for the
performance of the following duties:
1. To watch closely the financial condition of the association and the operating
results of its business, and to take action required to keep these in a healthy
2. To appoint the following officials and to assign their duties and determine
their salaries:
(a )
A manager or general manager to assume administrative control o f the
(b) An auditor or auditing agency, as soon as the affairs of the association
require and the finances permit the employment o f a paid auditor. The board
should consult the auditing committee in making this appointment, but the paid
auditor shall be appointed by and be directly responsible to the board.
Nothing in this provision shall be interpreted to prevent the board from making
other appointments if and when the welfare o f the society makes this necessary,
but the filling o f these two positions shall at all times be the direct responsibility
o f the board.
3. To require the manager and all officers and employees charged with responsi­
bility for the custody o f any o f its funds or property to give adequate bonds.
4. To provide adequate insurance o f the property o f the association and ade­
quate insurance against liabilities.
5. To determine and supervise the more important policies o f the organization,
insuring the conduct o f its affairs in accordance with the bylaws, with fairness
to members and employees; to provide the best possible conditions of labor
consistent with other requirements o f these bylaws while demanding equivalent
results in efficiency and faithfulness.
6. To decide upon the major steps in business activity and expansion, including
the investment o f reserve funds; borrowing money, subject to article 5, section 4 ;
making important financial commitments and entering into new fields o f busi­
ness enterprise.
7. To maintain at all times an active program o f cooperative publicity and
education; and to maintain relations with other cooperative societies, federations,
leagues, and wholesales aimed to promote the best interests o f the association
and of the cooperative movement.
Sec. 3. The board shall make a comprehensive report at the annual meeting o f
the association and shall submit a budget or an approximate estimate of the
income and proposed expenses for the coming year. A copy o f the proposed
budget shall be sent to every member together with a notice o f the annual
Sec. 4. Duties of president and vice president.—The president shall act as
chairman at all meetings o f the association and o f the board o f directors, but
should he be absent the vice president shall take the chair; should he also be
absent the officers and directors present shall elect one from among themselves
to act as chairman on that occasion. The president, or chairman acting in his
absence, shall sign all contracts.
Sec. 5. Duties of secretary.—The secretary shall attend all meetings o f the
association and of the board o f directors, and shall record the names of all the
directors present and the minutes o f their proceedings; he shall also countersign
all contracts sanctioned and entered into by the board; he shall likewise
receive all proposals for admission into the association. He shall attend to all
correspondence, keep the accounts, documents, and papers o f this association in
such a manner and for such purposes as the directors may appoint. He shall
prepare the regular statement o f the association’s affairs. The secretary shall
on all occasions in the execution o f his duties act under the superintendence,
control, and direction o f the board o f directors.
Sec. 6. Duties of treasurer.—The treasurer shall be required to attend all the
regular meetings o f the association and o f the directors. He shall be responsible
for such sums of money as may from time to time be paid into his hands by the



secretary or by any other person on account of the association and for the
investment o f the same under the authority o f the directors. He shall be responsi­
ble for having adequate financial reports presented to the board at regular
periods or as the board may direct.
Sec. 7. Election and duties of auditing committee.—An auditing committee o f
3 members shall be elected by the members o f the association. They shall each
serve f o r ______ and shall at all times have access to the books, vouchers, and
accounts o f the association; shall examine and audit the same and every balance
sheet of the receipts and expenditures and effects o f the association at least
every 3 months; and shall report to the membership meeting, with recommenda­
tions. The auditors shall be responsible for the daily and perpetual accounting
system kept by the manager and shall check same periodically.
A bticle 10.—Merger with Another Association
S ection 1. Upon affirmative vote by the members of the association, the board

of directors may arrange for the consolidation of this association with another
recognized cooperative in the same or nearby territory, i f it appears that this
action would prevent duplication o f activities, promote efficiency, or otherwise
be in the interest o f the cooperative movement.
A bticle 11.—Amendments
Section 1. These association bylaws may be amended, repealed, or other­

wise changed by a two-thirds vote of the members at any regular or special
membership meeting, due notice o f which has been given in advance. Provided,
That no change shall be made in article 5, section 1 ( c ) and article 7, section 7,
unless such change is approved by a vote o f two-thirds o f the entire membership
present or voting by mail, and provided, f urther, that no amendment o f the bylaws
shall be valid if it violates a statute or the articles o f incorporation.
A bticle 12.—Dissolution of Association
Section 1. Dissolution.— At any regular or special meeting, due notice o f which

has been given in advance, this association may be dissolved by a two-thirds vote
o f the entire membership, present or voting by mail.26
Sec. 2. Disposal of reserves.—Upon such dissolution duly authorized, any
reserves o f the association in excess o f the outstanding financial obligations shall
be turned over to such recognized cooperative organization as the membership
may determine; or to some Government or other public agency, to be used for
some social purpose; or be distributed among those patrons who have been
members or subscribers at: any time during the past 6 years, on the basis o f their
patronage during that period, as the membership may determine.27

Appendix B.— Sample Share Subscription Agreement
Subscription Agreement28
The undersigned, having read and approved the plan o f purchase and
organization o f _________________________ Cooperative Housing Association, for
one dollar ($1) in lawful money o f the United States to him in hand paid, and
for other valuable consideration received, and in consideration of the mutual
agreement herein contained, each for himself agrees to and with the members
of t h e ________ ________________ Cooperative Housing Association and with the
______________________ Cooperative Housing Association, Inc., to purchase______
shares of capital stock at $5 per share of this cooperative corporation, and to
pay for same at the full value thereof in cash, amounting t o _______________
_____________ dollars ($__________), said payment to be made by cash, money
orders, or check, delivered as follow s:
First payment: to the order of t h e ___________________________Cooperative
Housing A ssociation,________________________ dollars ($________ ), o f the sub­
scription upon subscribing to this agreement.
Second payment: To the order of th e ___________________________Cooperative
Housing A ssociation,________________________ dollars ($________ ), o f the said
subscription on or b e fo r e ________________________ 19____ .
26 But some State housing laws also require permission of the State Housing Board (see p. 3 9 ).
27 The purpose o f this provision is to prevent the dissolution of the association solely for the
purpose o f dividing the reserves am ong those who happen to be members at die tim e, and thus
bar them from profiting from the results of the activities of previous stockholders.
28 Should be modified to conform to circumstances of individual cases.



Third payment: To the order o f t h e ___________________________Cooperative
Housing A ssociation,________________________ dollars ($________ ), o f the said
subscription on or b e fo r e ________________________ 19____.
Fourth payment: To the order o f th e __________________________ Cooperative
Housing A ssociation,________________________ dollars ($________ ), o f the said
subscription on or b e fo r e ________________________ 19____.
It is further understood and agreed by and between the undersigned, the
members o f t h e ________________________ Cooperative Housing Association, and
t h e ___________________________Cooperative Housing Association, Inc., that the
undersigned is to pay the additional sum o f __________________________ dollars
($_______ ), payable simultaneously with the first, second, or third payments
as aforesaid, said additional sum to cover fees, carrying charges, management
and organization charges, and minor repairs incident to acquiring title to
prem ises________________________ Cooperative Housing Association, for which
said additional payment it is understood and agreed no capital stock is to be
issued to the undersigned.
_______________________ payment: To the order o f t h e ______________________
Cooperative Housing A ssocia tion _______________________ dollars ($________ )
o f the said subscription on or b e fo r e __________________________ _ 19___ , to be
paid i n ___________________________monthly installments, the payment to be
applied to the retirement o f t h e _____________________________ mortgages on
T h e ________________________ payment is a charge included in the rental as
set forth in the lease executed between the undersigned and the association.
In consideration o f said first, second, third, and fourth payments made as
aforementioned by this member, the said subscriber shall receive a certificate
from said corporation o f ___________________________shares o f its capital stock
o f the par value o f $5 each, and shall receive a lease for the term o f 99 years20
on premises N o .________________________ at the annual monthly charges set
forth in said lease.
In consideration o f s a i d ________________________ payment made as afore­
mentioned by this member, the said subscriber shall receive a second certificate
from said corporation o f ________________________ shares o f its capital stock
o f the par value of $5 each.
But if said subscriber shall default in any o f the payments called for in this
subscription, and such default shall continue fo r 10 days after notice to pay
sent by registered mail by t h e ________________________ Cooperative Housing
Association to said member at address as given below, then, forthwith at the
option o f t h e ________________________ Cooperative Housing Association, said
member shall lose any and all rights to said certificate and to said stock, and
to receive the same, and shall forfeit any and all right to a lease on or to
continue occupancy o f the p re m ise s__________________________ Cooperative
Housing Association, and the deposit shall, at the option o f th e _________________
Cooperative Housing Association, be returned, less the subscriber’s proportionate
share o f the expenses incurred in the negotiation for the purchase o f the
property, in search, insurance and passing title; in the maintenance of such
property after it is purchased, and any other expense reasonable in these
premises. T h e ________________________ Cooperative Housing Association may,
at its option, waive the foregoing obligation o f the subscriber in the event that
he shall secure an assignee o f said subscription satisfactory to the association,
who will assume each and every obligation herein contained.
N a m e _____________________________________[l.s.]
Home a d d ress_____________________________________
D a ted ___________________________
In the presence o f __________________________

Appendix C.— Model Lease for a Cooperative Housing
This lease made t h e _________day o f _________________________ 19__ , between
t h e ________________________ Cooperative Housing Association, Inc., a domestic
corporation hereinafter called the “ cooperative” , a n d ________________________
residing a t ________________________ , hereinafter called the “ tenant.” 2
29 Or “ a lease renewable at the end o f each [2 or 3] year period.”



Whereas, the cooperative has been incorporated for the purpose o f owning
and operating dwelling properties in t h e _____________________________ _ city
o f ________________________ and State o f _________________________ _ known as
N o s._______________________ Street,________________________ _ hereinafter called
the properties, upon a cooperative basis, with the intent that the stockholders
o f the cooperative shall have the right to lease and occupy dwellings therein
under the terms and conditions hereinafter set forth, as long as they, respectively,
are stockholders; and
Whereas, the tenant is the owner and holder o f _________shares o f common
capital stock o f the cooperative o f the face value o f $_________, and is entitled
by reason thereof to a lease o f the dwelling hereinafter described, subject to
the bylaws of the cooperative;
Now, therefore, in consideration o f the premises and the covenants, conditions,
and agreements herein contained, the cooperative hereby lets to the tenant
and the tenant hereby hires from the cooperative the dwelling, now known
a s ________________________ _ hereinafter called “ the dwelling” , consisting o f
______ rooms a n d _______ baths to be occupied strictly as a private dwelling
by the tenant and the family of the tenant, except as hereinafter provided,
for the term o f ____ years a n d _____ months,1 beginning on t h e __________day
o f _________________ 19__ , and ending on th e ______ day o f ____________________
The parties hereto mutually covenant and agree as follow s:
1. The tenant shall pay a monthly rent of $_________in advance on the first
day o f each month of the said term, subject to increase and decrease as here­
inafter provided. Such monthly rent may from time to time be increased to
such amount as the board o f directors o f the cooperative, by the unanimous
vote o f all the directors, may determine, provided the rents o f all the other
cooperative tenants are increased proportionately according to the basic per­
centages of the present rentals o f all the dwellings as the same appear on the
rent schedule hereto attached. I f said board of directors shall not be unani­
mously in favor o f an increase in the monthly rent, an increase may nevertheless
be approved by vote o f two-thirds of the stockholders o f record o f the coopera­
tive, expressed either in writing or at a meeting duly called for the purpose
o f considering the same, in which event such increase, pro rated as above
prescribed, shall become fully operative from such time as may be determined
by such vote.
Such monthly rent may from time to time be reduced if in the judgment of
a majority o f the board o f directors o f the cooperative such reduction is justified,
provided the rents o f all the other cooperative tenants are also reduced propor­
tionately as above prescribed.
2. In consideration and on condition that the tenant will pay and perform
the rents, conditions, covenants, and agreements in this lease contained, the
cooperative covenants that the tenant may, at all times during the said term,
peaceably have and enjoy the dwelling.
3. T ie cooperative shall maintain and manage the properties on a high level,
with a suitable manager or janitor, supply proper and sufficient amounts of
cold and hot water and furnish steam or other heat to warm the premises during
the heating season.1
* The cooperative reserves the right to stop the above sup­
plies and services at such times as may be necessary by reason o f shortage o f
labor, accidents, or alterations or repairs deemed desirable by the cooperative.
The cooperative shall not be held responsible for interrupted supplies or services
caused by any reason whatsoever, nor shall there be any diminution or abatement
o f rent on account of such interruption.
4. The cooperative shall keep in good repair the foundations, sidewalks, roofs,
gutters, cellars, chimneys, cornices, boilers, pumps, tanks, heating system, and
all plumbing intended for general service,8 it being agreed that the tenant shall
give the cooperative prompt notice of any accident or defect requiring such
repairs to be made, and shall at all reasonable times allow the agents o f the
cooperative to enter and inspect the dwelling in order to ascertain what such
repairs are needed and to make such repairs and upon reasonable notice to
remove such portions o f the walls, floors, and ceilings o f the dwelling as may
be required for the purpose of making such repairs, which portions, so removed,
the cooperative shall, as soon as such repairs can reasonably be finished, replace
in as good condition as before such removal, all such repairs to be at the
1 May be either a lifelong (99-year) lease or one renewable every 2 or 3 years (see p . 2 8 ).
2 Should be modified to conform to individual situation of association.
3 IS an apartment house, the words, “ fire escapes, entrances, main halls and stairways** should
also be added.



expense of the cooperative unless the same shall have been rendered necessary
by the act, negligence, or carelessness of the tenant, or of any member o f the
family, guests, or employees of the tenant, in which case the expense is to be borne
by the tenant.
5. The tenant shall during the term o f this lease keep the interior o f the
dwelling and all fixtures and plumbing and other appurtenances belonging
thereto in good order and repair, and make all decorations therein, and the
cooperative shall not be held answerable for any repairs or decorations in and
to the dwelling, except as hereinbefore specifically provided, and in case o f the
refusal or neglect o f the tenant during 10 days after notice in writing from
the cooperative to make such repairs, or to restore the dwelling to good con­
dition, such repairs or restoration may be made by the cooperative, and any
expense incurred thereby by the cooperative shall be immediately due and
payable from the tenant to the cooperative, and shall be deemed to be additional
rent for the dwelling. The tenant shall not without the written consent o f the
cooperative make any alterations, additions, or improvements. Any alterations,
additions, or improvements which may be made by the tenant in, to, or upon
the premises shall be the property o f the cooperative and shall remain upon and
be surrendered with the premises at the termination o f this lease, without
disturbance, molestation, or injury; provided that movable furniture and fix­
tures put in at the expense o f the tenant may be removed by said tenant but
that any injury caused by moving said furniture and fixtures in or out shall
be repaired by the tenant.
6. The tenant shall promptly comply with and execute all laws, ordinances,
rules, orders, and regulations o f the Federal, State, county, and city govern­
ments, and o f the board o f fire underwriters, and of all other authorities, and
of their departments and bureaus, applicable to the dwelling, or concerning
any matter in, upon, or connected with the dwelling, except such as require
structural changes or repairs. I f the tenant shall fail promptly to comply with
and execute any o f the foregoing requirements the cooperative may, upon 5 days’
written notice to the tenant, enter in and upon the dwelling and comply with and
execute the same for the account o f the tenant and any expense thus incurred
by the cooperative shall be immediately due and payable from the tenant to
the cooperative, and shall be deemed to be additional rent for the dwelling.
The tenant shall not do anything or suffer anything to be done in or about the
dwelling which will increase the rate o f fire insurance upon the property, or
which may be deemed extra or specially hazardous by the usage o f fire insurance
7. The tenant shall notify the cooperative in writing o f any leakage o f the
roof coming to his notice, and shall hold the cooperative guiltless therefrom
unless the cooperative shall fail, within a reasonable time after such written
notice is delivered to it, to repair the roof. The tenant shall hold the cooperative
free from liability for any damage to person or property in the dwelling or
in the apartment house, caused by gas, steam, electricity, rain, snow, water
from the tanks, pipes, plumbing work, vault light or any other sources or by
sewerage, falling plaster or any other cause whatsoever; the tenant shall hold
his property in the dwelling or anywhere else in the properties at his own risk,
and shall hold the cooperative free from any liability for any damage thereto
from any cause arising.
8. In case of damage by fire or the elements, the tenant shall give immediate
notice thereof in writing to the cooperative. The cooperative shall repair same
with all reasonable dispatch at its own cost and expense. I f the damage shall
be so extensive as to render the dwelling wholly untenantable, the rent shall
cease from the time the cooperative is notified o f such damage until the dwelling
is restored to tenantable condition, and thereafter shall begin to run and to
be payable as before. In case the properties generally (though the individual
dwelling may not be affected) be substantially destroyed by fire or the elements,
or be so injured or destroyed that the cooperative shall within a reasonable
time decide to rebuild or reconstruct the properties, the rent shall be appor­
tioned pro rata and paid up to the time of such destruction or injury, and upon
such payment being duly made by the tenant, this lease and the term herein
granted shall cease and come to an end.
No claim for compensation shall be made by the tenant by reason o f incon­
venience, damage, or annoyance arising from the necessity of repairing any
portion of the dwelling or apartment house, however the necessity may occur.
9. If the property or the plot of land on which it stands, or any part thereof,
be condemned or taken for public use or quasi-public use, the cooperative shall



be entitled to and shall receive any award that may be made to or for the
account o f the tenant for the value o f the unexpired term of this lease. The
tenant hereby expressly assigns to the cooperative any award that may be so
made to or for account of the tenant for any damages to the term hereby demised.
In no event, however, shall there be any abatement or apportionment o f the
rent because o f such condemnation or taking. The tenant hereby further agrees
that for the purpose of obtaining such award or awards, and for all other pur­
poses, all the alterations, additions, and improvements now on or which may
hereafter be made in and to the premises herein demised are the sole and
absolute property o f the cooperative.
10. The tenant shall, at the option o f the cooperative, purchase from the
cooperative, or from any person or corporation designated by the cooperative,
such electric current as may be required by the tenant for use in the dwelling
upon condition that the rates charged therefor by the person or corporation
furnishing said electric current shall not, at any time, exceed the rate fixed
for the district by the Public Service Commission for a like amount of current
measured in the same manner as current would be measured by the Public
Service Commission. The tenant agrees to pay for such electric current upon
presentation by the cooperative o f a bill for such current, and upon the failure
o f the tenant to pay for such current, the amount so due shall be added to the
installment of rent next becoming due hereunder, and such amount shall become
a part of the said rent and shall be collectible in like manner.
11. The basic percentages o f the present rentals o f all the dwellings in the
property may be changed to be effective in any year following the year in
which a new building shall have been completed or an existing building con­
verted to nonresidential purposes on any lot adjoining the property or across
the street therefrom, but only subject to the following provisions: A petition
for such change signed by at least three tenants shall be filed with the presi­
dent and with the secretary o f the cooperative at least 3 months before the
proposed effective date o f the change. A meeting o f the stockholders of the
cooperative shall at once be called for a general discussion o f the proposed
change. The board o f directors shall then in their discretion either reject the
proposed change or propose a new schedule o f basic percentages. In either
event their determination or failure to act shall be reported, at least 2 months
before the proposed effect ive date of the change, to a meeting o f the stockholders.
The stockholders may then take such action as they see fit, provided, however,
that any change in the basic percentages to be effective must receive the
affirmative vote o f at least 65 percent o f the stockholders o f record o f the
cooperative, at a stockholders’ meeting duly called for that purpose.
Such action of the stockholders shall be final unless within 20 days thereafter
there be filed with the president and secretary o f the cooperative a written
request signed by at least three stockholders, asking for arbitration. In that
case arbitrators shall be appointed as in paragraph 29 hereof provided. Their
determination shall be final.
Such final determination by the stockholders or by the arbitrators shall fix
the basic percentages of rentals o f all the dwellings for the period beginning
the following January 1 and continuing until such percentages shall again be
changed as provided in this section.
12. The cooperative reserves the right to make such rules and regulations as
in its judgment from time to time may be needed for the safety, care, and
cleanliness of the properties, and for the preservation o f good order and comfort
therein, and the tenant agrees faithfully and punctually to observe and comply
with such regulations and further agrees that all persons living in or visiting
in the dwelling will also punctually observe and comply therewith.
13. This lease is and at all times hereafter shall be subject and subordinate to
the lien of any mortgage or mortgages now affecting the premises o f which
the dwelling forms a part, or which may at any time hereafter be placed
thereon, and further the tenant agrees to execute, at the cooperative’s expense,
any instrument which the cooperative or any lender may deem necessary or
desirable to effect the subordination o f this lease to any such mortgage, and
the tenant hereby appoints the cooperative the tenant’s attorney in fact, irrev­
ocable, during the term hereof, to execute any such instrument on behalf o f
the tenant.
14. For default by the tenant in the payment o f any sum payable hereunder,
the cooperative shall have the same remedies as for default in the payment of
rent. The various rights., powers, remedies, options, and elections to the coopera­
tive reserved, expressed, or contained in this lease are cumulative and no one



of them shall be deemed exclusive o f the others, or o f such other rights, powers,
remedies, options, or elections as are now or may hereafter be conferred upon
the cooperative by law. For any breach or threatened breach of this lease, the
cooperative shall be entitled to restrain the tenant by injunction.
15. No surrender o f this lease or the term hereby demised, whether by parole
or act, shall be valid or binding upon either party, unless such surrender shall
be in writing duly signed by both the parties hereto.
16. All notices may be delivered to either party personally or by registered
mail, addressed to the cooperative or to the tenant respectively at the property.
IT. The failure o f the cooperative in any one or more instances to insist upon
the strict performance of any o f the covenants of this lease, or to exercise any
option herein conferred, shall not be construed as a waiver or relinquishment
for the future o f any such covenants, conditions, or option, but the same shall
continue and remain in full force and effect.
18. The tenant shall not, without first obtaining the written consent o f the
cooperative in each and every case, under penalty of forfeiture and damages:
(a) Either assign, mortgage, or otherwise encumber this lease, in whole or
in part, or any interest therein;
(b) Or sublet the dwelling or any part thereof;
(c) Or occupy or permit the dwelling or any part thereof to be occupied except
for dwelling purposes;
(d ) Or permit anyone other than the tenant or a member of his family to
occupy the dwelling or any part thereof.
Upon the tenant’s default with respect to any o f the foregoing, the coopera­
tive shall have the option to give the tenant 15 days’ written notice o f the
cooperative’s election to end the term o f this lease and, upon the expiration
o f such 15-day period, the term o f this lease shall terminate and come to an
end and all right o f occupation hereunder on the part o f the tenant shall cease,
with the same force and effect as though the term originally reserved herein
had terminated, and the tenant shall quit and surrender the premises to the
The cooperative hereby consents to the tenant’s subletting the dwelling upon
the following conditions solely:
A. The tenant may sublet the dwelling for a term o f not more than 1 year,
subject to the prior approval in writing o f the proposed subtenant by the coop­
erative, which approval shall not be unreasonably withheld, provided further,
that the rent shall not exceed a sum equivalent to the rent payable by the
tenant to the cooperative, plus 25 percent of such rent (to compensate for cost
o f repairs) plus, if the dwelling is sublet substantially furnished with the
furniture of the tenant, an additional 25 percent o f such rent, plus an amount
equal to 6 percent per annum on the amount o f stock o f the cooperative stated
on page (1) hereof as being owned and held by the tenant. Such sublease shall
not be renewed except with the express prior approval in writing o f the co­
operative, which approval shall not be unreasonably withheld.
B. Application for leave to sublet under subdivision A o f this paragraph shall
be made on a form to be provided by the cooperative and shall contain the
name, address, and occupation o f the proposed subtenant. It shall also con­
tain a statement that the tenant has not received nor been promised any consid­
eration or thing o f value, directly or indirectly, from the proposed subtenant
or any other person for the making o f the proposed sublease or as subrental
therefor except what is mentioned in said application. Such application shall
also contain such further information pertinent thereto as the cooperative may
C. Any sublease made hereunder shall be in a form to be provided by the
cooperative and shall contain a suitable provision that such sublease shall
terminate in case at any time the cooperative shall determine that because o f
objectionable conduct on the part o f such subtenant or o f persons dwelling in or
visiting the apartment the tenancy o f such subtenant is undesirable, and upon
5 days’ written notice o f such determination.
D. It is understood by the tenant that it is one o f the cooperative principles
and purposes which the cooperative was incorporated to accomplish that no
tenant shall derive a profit directly or indirectly from the making o f a sublease
and the tenant agrees that he will not at any time take any profit. A breach
o f this covenant shall entitle the cooperative to terminate this lease as provided
in paragraph 19 hereof.
19. The granting o f this lease and the term herein demised are conditioned
that at the cooperative’s option, upon the happening o f any o f the events men­



tioned in subdivisions A to G, both inclusive, o f this paragraph, the cooperative
may give the tenant at least 15 days* written notice of the cooperative’s election
to end the term o f this lease, and upon the date specified in such notice the
term o f this lease shall terminate and come to an end, and all right o f occupation
hereunder on the part of the tenant shall cease, with the same force and effect
as though that were the date originally set in this lease for the termination
thereof, and the tenant shall quit and surrender the dwelling to the cooperative,
unless before the expiration o f such period the condition which was the basis
for such notice shall have ceased to exist. In the event of such termination
the cooperative shall have the right to reenter the dwelling, either by force
or otherwise, and dispossess and remove therefrom the tenant or other occupant
thereof and their effects. The tenant shall, however, remain liable to the
cooperative for any expense that the cooperative may be put to in reentering
or reletting the dwelling and for any deficiency between the equivalent o f the
rent hereunder and the sum or sums received by the cooperative on a reletting
o f said premises for a period o f 3 years after such termination. The tenant
shall pay to the cooperative, on account o f such deficiency, on the first day o f
each and every month during such period the then current monthly rental fo r
the dwelling less any sums then actually received by the cooperative on account
o f such reletting, if any. Separate actions may be maintained from time to
time to recover such respective amounts, without waiving the right to maintain
further actions to recover such respective amounts subsequently accruing. The
tenant hereby expressly waives all right to redeem the premises under sections
1437 and 1438 o f the Civil Practice Act,4 or otherwise, after a warrant to
dispossess shall have been issued, or to a second and further tri^l after an
action in ejectment.
The conditions herein referred to are the follow ing:
A. In case at any time during the term o f this lease the tenant shall cease
to be the owner o f the shares o f stock issued to him and standing in his name
on the books o f the cooperative, to which stock this lease is appurtenant, or
this lease shall pass by operation o f law, or otherwise, or be assigned to anyone
who is not then the owner o f the said stock, except that, if upon the death o f
the tenant, this lease, together with the tenant’s stock, pass by will or intestate
distribution to any person or persons not exceeding three in number (or if to
more than three in number such lease and stock pass by assignment among
themselves to colegatees or codistributees not exceeding three in number) such
legatees or distributees may, by assuming the terms o f this lease in writing
within 15 months after the tenant’s death, become the tenant hereunder, without,
however, releasing the estate o f the deceased tenant from any liability under
this lease, provided, however, that such estate shall not be liable for any liability
accruing after 3 years from such date o f death. In any event, this condition
shall be suspended for a period of 15 months from such date o f death;
B. In case the tenant becomes or is adjudicated insolvent or a bankrupt, or
makes a general assignment for the benefit o f creditors, or takes the benefit o f
any insolvency or bankruptcy act, or in case a receiver, trustee, or assignee is
appointed for the tenant’s property, or in case an execution or attachment issues
against the tenant’s property whereby the dwelling or any o f the tenant’s rights
under this lease or said share o f stock shall be levied upon, advertised for sale,
or sold by operation o f law or otherwise, or in case said share o f stock is sold
pursuant to the terms of an agreement whereby said stock shall have been pledged
as collateral security;
C. In case o f any assignment o f this lease, or o f any subletting hereunder,
without the consent hereinbefore required, except as herein expressly allowed;
or in case o f any misrepresentation in any application for leave to sublet;
D. In case at any time the cooperative shall determine, upon the affirmative
vote of at least 75 percent o f the stockholders o f record, at a stockholders’
meeting duly called for that purpose, that the tenant has violated any o f the
provisions o f its bylaws or has been guilty of conduct detrimental to the coopera­
tive, or that because o f objectionable conduct on the part o f the tenant or o f
persons dwelling in or visiting the dwelling, the tenancy o f the tenant is un­
desirable ;
E. In case the tenant shall default, for a period o f 90 days, in the payment
o f the rent or o f any other proper charges against him, or in the payment,
either before or after the commencement of the term hereof, of any install­
* Relates to New Y ork; in any other State the appropriate citation o f the State law should
be made.



ment of his subscription to the stock o f the cooperative appurtenant to this
F. In case the tenant, either before or after the commencement o f the term
hereof shall be in default in the performance o f any other covenant, condition,
or agreement hereof, for 30 days after written notice o f such default shall
have been given to the tenant by the cooperative;
G. In case this lease is made to a janitor or superintendent, upon the discharge
o f such janitor or superintendent by the board o f directors, with or without
cause, or upon the termination o f his employment in any other manner.
20. In case at any time the cooperative shall determine, upon the affirmative
vote o f at least 75 percent o f the stockholders o f record, at a stockholders’
meeting duly called for that purpose, to sell the properties, the cooperative may
terminate this lease by written notice o f such intention on its part, which
notice shall be given at least 60 days before the date at which such termination
is specified to take effect in such notice, and upon the date specified in such
notice o f termination the term o f this lease shall terminate and come to an
end and all right of occupation hereunder on the part o f the tenant shall cease
with the same force and effect as though that were the date originally set in this
lease for the termination thereof, and the tenant shall quit and surrender the
dwelling to the cooperative on such date.
21. Should this lease be terminated as provided in sections 18, 19, and 20 o f
this lease, then the tenant shall deliver this lease and a duly executed and
acknowledged surrender thereof to the cooperative, and deposit with and sur­
render to the cooperative, duly endorsed, the tenant’s shares o f stock appur­
tenant to this lease, receiving a receipt therefor. In that event said stock shall
be taken up and paid for by the cooperative at the face value thereof, less any
arrears of rent and any other proper counterclaim, at any time or times after
such deposit when the cooperative may in its discretion decide that its financial
position is such that it is wise to do so.
Should the tenant fail to make the deposit provided for in the above para­
graph, then the cooperative shall have the option at any time upon 10 days’
written notice to the tenant to cancel said stock and the same shall thereafter
be void and o f no effect. The cooperative, however, shall remain liable to the
tenant for a sum equivalent to the face value o f said stock, less any arrears o f
rent and any other counterclaim, which sum shall be payable only at the time
it would have been payable had the tenant made the deposit above provided for,
and in no event before 3 years after such termination o f this lease.
22. At any time the tenant may make to the cooperative a written offer to
surrender the lease and to resell all the tenant’s stock appurtenant thereto.
Such offer shall be filed by the cooperative and a list o f the name o f the tenant
and o f all other tenants who have made like offers shall be compiled by it in
the order of receipt o f such offers, which list shall be known as the tenant’s
priority list. All repurchases o f such appurtenant stock by the cooperative
shall be made from such list in the order o f priority o f the names appearing
The cooperative shall set aside out o f its surplus the sum o f $________ _ to
to known as its revolving fund for the repurchase o f tenants’ stock, that part
o f its surplus which o n ________________________ , was invested in stock o f the
cooperative appurtenant to dwellings_________________________________________
having a par value o f $________ , being the part so to be set aside for the
purpose. The cooperative agrees that, as and when the stock appurtenant to
each such dwelling is sold, the moneys realized from such sale or sales shall
constitute the aforesaid revolving fund and, immediately upon receipt o f each
installment o f such moneys, shall be applied to the repurchase o f the stock o f
tenants whose names appear on the aforesaid tenants’ priority list, all such
repurchases to be made in the order in which such tenants’ names appear on
said list (the stock o f the tenant whose name appears first on the list to be
paid for in full, less any arrears o f rent and any other proper counterclaim,
before any payments whatever are made for the stock o f any other tenant on
said list). Each repurchase of such stock is to be accompanied by acceptance
by the cooperative o f the tenant’s offer to surrender back the lease appurtenant
to such stock, such acceptance to take effect and the tenant to be released from
all further liability on said lease when and only when such repurchase is
completed by payment in full as aforesaid for said stock.



The revolving fund as thus reinvested in stock o f the cooperative shall still
be deemed the revolving fund for the repurchase of tenant’s stock as aforesaid,
and, as and when such stock is resold to new cooperative tenants, the moneys
therefrom shall once again be applied to the repurchase o f stock o f tenants
whose names appear at such time on said priority list in the order o f their
priority; it being the intent o f the parties that tfiis fund shall be and remain
a permanent revolving fund and that as each investment o f it in stock o f the
cooperative is released it shall immediately become available fo r reinvestment
so that there shall be at all times $________ , either in cash or in stock of the
cooperative, available for the purpose; provided, however, that i f at any time
and to the extent that the total surplus o f the cooperative falls below $_________
said revolving fund shall likewise fall to the same extent below $________ .
At any time after the tenant shall have made written offer o f surrender of
this lease and o f resale of the stock appurtenant thereto the tenant shall allow
the cooperative’s agents to show the dwelling to persons wishing to hire the
23. Simultaneously with or prior to the execution hereof the tenant has
executed a subscription f o r _____________ shares o f stock of the face value of
____________________________ in the cooperative, the terms o f which are more
particularly described in said subscription agreement. I f the said stock is not
fully paid for at the time o f the execution o f this lease, then the tenant shall
pay all of the installments called for in said subscription agreement according
to the terms hereof.
24. It is expressly understood and agreed that this lease is appurtenant to
the shares of stock o f the cooperative purchased by the tenant and that the
sale or transfer o f said stock by the tenant shall terminate any and all o f the
tenant’s rights in and under this lease except as herein otherwise expressly
25. I f this lease is made to more than one tenant, then such persons shall
be deemed liable hereunder jointly and severally. One o f such persons may
assign his interest in the lease and in the stock appurtenant thereto to the
other co-owners o f this lease or to one o f them, but not otherwise, except as
hereinbefore otherwise provided. Under no circumstances shall this lease, or
the tenant’s stock appurtenant thereto, be held or owned by more than three
26. It is understood that one or more dwellings may be let fo r a doctor’s or
dentist’s office or to a cooperative operated on Rochdale principles, upon a co­
operative lease similar to this lease, except that the uses therein named may
be such uses as the cooperative may agree upon with such tenant. Such tenant
shall be a stockholder o f the cooperative, and shall in all other respects be upon
the same basis and hold upon the same terms as though it were an individual
tenant holding such dwelling or dwellings under a cooperative lease.
27. The tenant shall always, in good faith, endeavor to preserve and promote
the cooperative principles and purposes which the cooperative was incorporated
to accomplish.
For the purposes o f this lease a cooperative operated on Rochdale principles
shall be deemed to be a cooperative—
(1) That conducts its business primarily for the mutual help and benefit o f
its consumer stockholders or members without profit;
(2) That limits the annual dividends upon its stock, i f a stock company, to
6 percent or less;
(3) That either sells its goods or services substantially at cost, an d/or retains
and uses its net earnings (exclusive o f dividends) and its savings in whole or
in part for the needs* o f its business and/or in furtherance o f the general
economic movement known as the Rochdale cooperative movement, and/or
distributes such net earnings in whole or in part among its consumer stock­
holders or members upon the basis o f the amount o f business done by it with
each such consumer stockholder or member;
(4) That permits no profit to be taken by its stockholders or members, whether
by sale of its stock and/or, if a housing corporation, by assignment or subletting
of leaseholds, or otherwise;
(5) That limits the voting power o f its stockholders or members (regardless
o f the amount o f capital stock held by each) to one vote per individual, if such
stockholder or member is an individual, or in its discretion, if such stockholders
or members are corporations, ratably in proportion to the membership o f each
such corporation.



28. The tenant shall quit and surrender the dwelling at the termination of
this lease in as good order as it was at the beginning thereof, reasonable wear
and damage by the elements excepted. I f the dwelling be not surrendered at
the termination o f this lease, the tenant shall reimburse the cooperative for
all damages which the cooperative may suffer by reason thereof, and shall
indemnify the cooperative against any and all claims made by any succeeding
tenant against the cooperative as a result o f the tenant’s delay in delivering
possession o f the dwelling.
29. It is understood that, upon the death o f a tenant-member, his family or
heirs may continue to occupy the dwelling, his rights thereto being transferred
to them upon their fulfillment o f the usual conditions and obligations required
o f a tenant-member.
30. All disputes and differences arising out o f this lease shall be settled by
arbitration as follow s: Either party may, by written notice to the other, appoint
an arbitrator. Thereupon, within 10 days after the giving o f such notice the
other shall by written notice to the former appoint another arbitrator, and,
in default o f such second appointment, the arbitrator first appointed shall be
sole arbitrator. When any two arbitrators shall have been appointed as afore­
said, they shall if possible agree upon a third arbitrator and shall appoint him
by notice in writing, signed by both o f them in triplicate, one o f which tripli­
cate notices shall be given to each party hereto; but if 10 days shall elapse
after the appointment o f the second arbitrator, without notice o f the appoint­
ment o f a third arbitrator being given as aforesaid, then either party hereto
or both may apply to t h e __________________court, county o f __________________ ,
to appoint a third arbitrator. Upon the appointment o f the third arbitrator
(whichever way appointed as aforesaid) the three arbitrators shall meet and
shall give opportunity to each party hereto to present his case and witnesses,
if any, in the presence o f the other, and shall then make their award. The
award o f the majority o f the arbitrators shall be binding upon the parties
hereto, and judgment may be entered thereon in any court having jurisdiction.
Such award shall include the fixing o f the expense o f the arbitration and
assessment o f the same against either or both parties.
In witness whereof, the parties hereto have set their respective hands and
seals the day and year first above written.
In presence o f :


____________________________________[L .S .]

________________________________ C ooperative

o u s in g


s s o c ia t io n ,

I n c .,


o p ____________________________

County of___________________, ss:
On th is _________day o f ________________________ 19____, before me personally
c a m e _____________________________________ to me known and known to me to
be the individual described in and who executed the foregoing instrument and
he duly acknowledged to me that he executed the same.

o f __________________________


County of____________________ ss:
On t h is ________ day o f ________________________ 19____, before me personally
appeared____________________________________to me known, who, being by me
duly sworn, did depose and say: That he resides i n _________________________
______________ ; that he is t h e ____________________ o f _____________________Co­
operative Housing Association, Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal o f said corporation;
that the seal affixed thereto is such corporate seal; that it was so affixed by
order of the board o f directors o f said corporation and that he signed his name
thereto by like order.
N ote: I f desired, the association m ight incorporate many o f the provisions o f the lease, given
above, in a set of operating rules available for inspection by the members. This would shorten
and sim plify the lease, which could then specify that such rules as were adopted by board or
membership should be binding on the tenant.



A ppen dix D.— Citations o f Laws
Cooperative Laws
Alabama.— Code, 1940, title 10, section 168.
Arkansas.— Statutes, 1937, sections 2262 to 2278.
California.— Statutes, 1939, chapter 808, as amended by Acts o f 1941, chapters
1216 and 1277.
Colorado.—Michie’s Statutes, 1935, chapter 41, sections 210 to 214.
Connecticut.— General Statutes, revision o f 1930, title 35, chapter 193, sections
3508 to 3517.
District of Columbia.—Public Act No. 642 (76th Congress, 3d session), chapter
Florida.— Statutes, 1941, section 611.38, as amended by Acts o f 1941, page 136.
Idaho,—Code, 1932, title 29, chapter 10, sections 29-1001 to 29-1005, as amended
by Acts o f 1945, chapter 70.
Illinois.— Smith-Hurd’s Revised Statutes, 1943, chapter 32, sections 305 to 331.
Indiana.— (The cooperative law o f Indiana— Statutes, 1926, sections 5282 to
5288—was repealed in 1935.)
Iowa.—Code, 1939, chapter 390.1, sections 8512-01 to 8512-60.
Kansas.— General Statutes, 1935, sections 17-1501 to 17-1515, as amended by
Acts of 1939, chapter 157, section 1.
Kentucky.—Revised Statutes, 1944, sections 272.010 to 272.050 and 272.990.
Maine.—Acts o f 1943, chapter 253.
Massachusetts.— General Laws (Ter. E d.), 1932, chapter 157, sections 1 to 9.
Michigan.—Compiled Laws (Mason’s 1940 supplement), sections 10135-98 to
10135-117, as amended by Acts o f 1941, No. 237, and Acts o f 1943, No. 211.
Minnesota.— Statutes, 1941, sections 308.01 to 308.42, as amended by Acts o f 1943,
chapters 304,317, 318, and 438, and Acts of 1945, pp. 320 and 878.
Missouri.—Revised Statutes, 1939, sections 14406 to 14424.
Montana.—Revised Codes, 1935, sections 6375 to 6396.
Nebraska.—Revised Statutes, 1943, sections 21-1301 to 21-1306.
Nevada.— Compiled Laws, 1929, sections 1575 to 1595, as amended by Acts o f
1941, p. 329.
New Jersey.— Revised Statutes, 1937, sections 3 4 :17.1 to 3 4 :17.18.
New Mexico.— Statutes, 1941, sections 54-1401 to 54-1445.
New York.-^Cahill’s Consolidated Laws, 1930, as amended by supplement o f 19311935, chapter 10-a, articles 1 to 9, Acts of 1937, chapter 172, and Acts o f 1938,
chapter 458.
North Carolina.— General Statutes, 1943, sections 54-111 to 54-128.
North Dakota.—Revised Code, 1943, sections 10-1501 to 10-1525, as amended by
Acts of 1945, chapter 152.
Ohio.—Baldwin’s Revision Throckmorton’s Code, 1940, sections 10185 and 10186.
Oklahoma.— Statutes, 1941, title 18, sections 421 to 436.
Oregon.— Compiled Laws, 1940, as amended by Acts o f 1941, chapter 219, and
Acts o f 1943, chapter 52.
Pennsylvania.— Purdon’s Statutes, 1936, title 14, chapter 1, sections 1 to 28, and
chapter 4, sections 191 to 193.
South Carolina.— Code, 1942, chapter 158, article 1, sections 8137 to 8149.
South Dakota.— Code, 1939, chapter 11.11, as amended by Acts o f 1945, chapter 29.
Tennessee.— Code, 1932, section 4146 (10).
Vermont.—Public Laws, 1933, chapter 239, section 5791, as amended by Acts o f
1943, No. 142.
Virginia.— Code, 1942, chapter 148, sections 3855 and 3855a.
Washington.—Remington’s Revised Statutes, 1931, sections 3904 to 3923, as
amended by Acts o f 1943, chapter 99.
Wisconsin.— Statutes, 1943, sections 185.01 to 185.24.
Wyoming.— (The Wyoming cooperative law, Wyoming Compiled Statutes, 1920,
sections 5119-5134, was repealed in 1931.)

General Housing Laws
Arkansas.— Digest o f Statutes, 1937, sections 12243 to 12269.
California.— General Laws, 1943, Act No. 3481.
Delaware.—Revised Code, 1935, sections 5424 to 5452.
Florida.—Florida Statutes, 1941, sections 424.01 to 424.22.



Illinois.—Revised Statutes, 1943, chapter 32, sections 504 to 549.
Kansas.— General Statutes, 1935, chapter 17, article 23.
Massachusetts.—Acts o f 1933, chapter 364, as amended by Acts o f 1935, chapter
New Jersey.—Revised Statutes, 1937, title 55, chapter 15.
New York.—Acts o f 1939, chapter 808, as amended by Acts o f 1940, chapters 148,
393, and 444.
Ohio.—Baldwin’s Revision, Throckmorton’s Code, 1940, chapter 14A.
Pennsylvania.—Acts o f 1937, No. 181, page 704.
South Carolina.— Code, 1942, sections 5271-4 to 5271-30.
Texas.— Vernon’s Statutes, 1936, articles 1524b to 1524k and 1528a.

Appendix E.— Cooperative Leagues and Wholesale Associations
Associated Cooperatives
817 Lydia Street
Oakland 7
District o f Columbia:
Potomac Cooperative Federation
2621 Virginia Ave., NW.
Washington 7
Central States Cooperatives
1535 S. Peoria Street
Chicago 8
National Cooperatives
343 S. Dearborn Street
Chicago 4
Cooperative League o f the U.S.A.
343 S. Dearborn Street
Chicago 4
Indiana Farm Bureau
Cooperative Association
47 S. Pennsylvania Street
Indianapolis 9
New England Cooperative
53 Farnsworth Street
South Boston
Farm Bureau Service
221 N. Cedar Street
Lansing 4
Midland Cooperative Wholesale
739 Johnson St., NE.
Minneapolis 13
Minnesota Farm Bureau
Service Co.
101 E. Fairfield Street
St. Paul 1
Farmers Union Central Exchange
Box G
St. Paul 1
Consumers Cooperative
318 E. Tenth Street
Kansas City 13

Farmers Union State Exchange
39th & Leavenworth Streets
Omaha 5
New Jersey:
Cooperative Federation o f
New Jersey
843 Broad Street
New Y ork :
Cooperative League o f the U.S.A.
167 W. 12 Street
New York 11
Eastern Cooperative League
44 W. 143 Street
New York 30
Eastern Cooperative Wholesale
44 W. 143 Street
New York 30
Farm Bureau Cooperative
246 N. High Street
Columbus 16
Oregon Grange Wholesale
1135 SE. Salmon Street
Pennsylvania Farm Bureau
Cooperative Association
3607 Derry Street
Philadelphia Area Cooperative
1429 Spruce Street
Philadelphia 2
T exas:
Consumers Cooperatives Associated
1517 E. Third Street
Utah Cooperative Association
155 Pierpont Avenue
Salt Lake City
Vermont Cooperative Council


W isconsin:
Wisconsin Cooperative Farm
Supply Co.
744 Williamson Street

Grange Cooperative Wholesale
3104 Western Avenue
Seattle 1

Central Cooperative Wholesale
1901 Winter Street

Pacific Supply Cooperative
P. O. Box 1004
Walla Walla

Appendix F.— Where the Housing Dollar Goes
Tables 1 and 2, which follow, are taken from National Housing Bulletin No. 2 :
Housing Costs, Where the Housing Dollar Goes, published by the National Hous­
ing Agency. These tables show the cost o f various items that enter into house
construction as percentages o f the total of a dwelling, and the effect that a
20-percent reduction in costs would have upon the purchaser’s monthly payments
on a $5,000 dwelling.



1 — Distribution of Housing Costs, by Item
Percen t o f total cost o f house and land
represented by—


Cost o f m aterials at sito
M qormrv
C oncrete and m ortar------------------------------------Plaster, lath, and w allboard------------------------Insulation____________r
R oofin g----------------------------------------------------------Flooding
M illw ork
P a in t--------------------------------------------------------------F inish ha rd w are__
M isepna'nfirnis
Cost o f construction labor at site_____ _ _ _
C ontractor’ s and subcontractors’ overhead and

Cost o f
m anu­

Cost o f




2 .8 8
.8 8


.8 6

1 .0 2


Cost o f
p orta­
.1 0


p rofits
6 .1 0

.2 1

1 .0 0

.1 0


p rice
1 .0 0


Total cost o f house
V alue o f unim proved land (in clu din g p rofit
on land) _
Cost o f land im provem ents (in clu din g p rofit)
T otal capital cost.


1 0 0 .0 0



T able 2.— Monthly Cost to Purchaser and Effect on Monthly Cost o f 20-Percent
Reduction in Various Items of Cost
..Assumes total cost (house and lan d) o f $5,000, down paym ent (90-percent m o rtg a g e ) o f $500,
and $ 1 0 0 in closing fees and com m issions] 1
R eduction in m onthly cost
assum ing 2 0 -p ercen t
reduction in norm al cost

N orm al m onthly cost

Item o f cost
F irst
25 years

Interest (5 p e rc e n t)______ ____________
A m ortiza tion (25 y e a r s )______________
L oss o f interest on cash paym ents
( 3 p*»TV».AT»t) _
. . .
T axes (2l/ i p e rc e n t)__________________
H azard insurance ( 0 .2 p e rc e n t )______
M aintenance ($ 1 0 0 p er y e a r )_________
Capital cost-



N ext
15 years

A verage
fo r 40

F irst
25 years

A vera ge
N ext
fo r 4-3
15 years






m u z z




— 6.5


1 4.5





2 16.4

2 11.9







1 Savings per month over 31% years (term of loan) under 20-percent reduction.

R epresents sa vin g entailed b y reduction o f total cost o f house an d land fr o m $5,000 to $4,000.


A dm inistration and m a n a gem en t_____ ______________ _------------------------ ____ TT_________
A d visory service, value and uses o f, b y housing g r o u p s ____________________ 5 , 11, 12, 16, 32, 40
A lterations by m e m b e r ____________________________________________________________________ 3 , 51, 52
A m algam ated cooperative a p a rtm e n ts_______________ :____________________________________ 6 , 28, 34
A m o r t iz a tio n --------------------------------------------------------------------------------- 1 1 , 14, 15, 23, 24, 28, 31, 38, 61
A rbitration o f disputes between member and a ss o cia tio n ________________________________________ 57
A r c h it e c t -------------------------------------------------------------------------------------------------------------------------------------- 6 , 18
A rchitectural con sid era tion s______________________________________________________________ 6 , 16, 17
A ssistance (financial, e t c .), probable sources o f o u ts id e _________________________________ 13, 23, 40
A ttorney, steps in which services are a d v isa b le __________________________________________ 11, 20, 21

mortgage______________________________________ *____________ 23, 24
Bonds of association______________________________________________ 26, 28, 43
Building and loan associations as source of financing_________________________ ____ 23
Building design____ ___________________________________________________ 17
Building materials______________________________________________6 , 17, 40, 60


Bylaws, provisions o f ---------------------- -------------------------------------------------------------- 21, 22, 31, 42-48

Capital (see also Financing)------------------------------------

3, 4, 25, 26, 28, 35, 42-44, 48, 49
Deposit account, members’ ----- —---------------------------------------------------- 31f 35 f 35
Members’ share capital, returns on________ ____ _______________ 3 , 35 , 38 , 39 , 44
Redemption of members* shares----------------- 3, 8, 27, 29, 30, 31, 37, 42, 4 3 , 49 , 5 5 , 56
Revolving fund, uses o f_________________________________________ 27, 55, 56
Shares, transfer o f_______________________________________ 4, 22, 31, 42, 43
Carrying costs (see Maintenance, cost of, and Rental charges).

Charges________________________________ ____ ________ -----------

7, 10, 22, 28-30, 50, 52, 61

Commercial activities, housing association, in relation to ---------------------------------------------------- 17, 34
Committees for various purposes__________________________ --------------------------- 1 1 , 12, 32, 33, 46, 48
Community facilities, and w elfare________________________ ----------- 8 , 9, 12, 13, 16, 17, 34, 38, 39
Construction ______________ ______ _________________________ ---------------------------------------------6 , 7, 17-19
Construction lo a n s--------------------------------------------------------------- ----------------------------------------------------------- 27
Contract, building, factors to be considered i n ____________ --------------------------------- ------------------ 18, 19
Contractor, considerations relating t o _____________________ ------------------------------------------------ 6 , 18, 19
Cooperative activities in housing associations___________ ----- 8 , 9, 19, 20, 32, 33, 34, 38, 39, 56
Cooperative la w s ------------------------------------------------------------------ --------------- 5, 20, 21, 37, 39, 45, 46, 58
Cooperative League of U .S.A .__________ - ___________________ ----------------------------------------------------------- 5
Cooperative principles and practices in housing--------------- ------------------- 2-5, 27, 30, 34, 85, 53, 56
--------------------------------6, 7, 17-19, 26, 60
Development_____ ______________________________________ ---------------------------------------- 12, 13, 25, 26
Distribution of cost item s_____________________________ ----------------------------------------------------- 60, 61
Down payment---------------------------------------------------------------Economies possible________________________ : ; : : : : : : : ; ; : ; T ; T - 8 7 i 7 i i i ; T 4 T T 9 : 30
Fixed charges----------------------------------------------------------------- -----------------------------------------------------28, 61
________________________________ 14-16, 24
Interior decoration------------------------------------------------------- ----------------------------------------------- 29, 30, 51
Labor —------------------------------------------------ --------------------------------------------- 7, 29, 60
----------------------------------- 12-14, 25, 26, 60



-------------------------------------------------- 6, 15, 29
Profit, speculative---------------------------------------------------------- ______ 3, 4, 6, 8, 9, 18, 19, 27, 36, 39
6, 11, 12, 14, 19
Property valu es------------------------------------------------------------- _____________________
R epairs---------------------------------------------------------------------------- _____________________ 11, 29, 30, 50, 51
Shopping facilities------------------------------------------ --------------- ______________________________ 16, 17, 34
U tilitie s----------- '----------------- 7 ------------------------------------------- _______________ 6, 8, 12, 13, 17, 26, 52
Credit Union National Association--------------- ----------------------- ______________________________________ 28
Credit unions in cooperative housing associations-------------- _______________________
Crestwood, Wisconsin housing project-------------------------------“ Cushions” (see Reserves).


Death of member, provisions regarding----------------------------------------_________

28, 44, 54, 57

D e b e n tu res---------------------------------------- ---------------------- 7 ---------------------------------------------------------- 25, 26, 28
Debts o f members to association, procedure r e g a r d in g ------------------------- -------------------------------7, 43, 54
D efault by m ember, procedure in case o f -----------------------------------------------______________ 23, 49, 52-54
D eposit account, ten an ts*------------------------ ------- #----------------------------------------__________________ 31, 35, 36
D irectors o f housing association, election, duties, etc., o f ---------------------_______ 3, 32, 42, 45-47, 50
Disputes between m em ber and association, arbitration o f --------------------Dissolution o f association, procedure in case o f ------------------------------------- : : : : : : : : : : : : : x t 8,~397 48
Dividend on s t o c k ------------------------------------------------------------------------------------__________________________ 7
D ow n p a y m e n ts--------------------------- ---------— --------------------------------------------- __________________________ 15
D w ellings, size o f, in relation to size o f fa m i l y ---------------------------------------______________ 9, 10, 17, 24
D w ellings, types o f -------- ,------------------------------------------------------ --------------------______________________ 11, 17
D evelopm ent c o s t s ------------------------------------------------------------------------------------- _________ 12, 13, 25, 26
E ast R iver Cooperative A p a rtm e n ts---------------------- ---------------------------------------- ------------------- — — 13, 14
Eastern Cooperative L e a g u e -------------------------- --------------------------------------------------------------------------- 40, 59
Econom ies, possible, through cooperative m e th o d ------------------------------------- 3, 6 - 8 , 17-19, 24, 29, 30
Educational w o r k -----------------------------------------------------------------------------------------------------------------33, 38, 44



Employment, reasonable expectation of, necessary------------------------------------------------------------- --- 9 , 10
Existing buildings, purchase o f __________________________________________________________ 1 1 , 12, 25
Experts, use of, in housing------------------------------------------------------------------------------- 5, 11, 1 2 , 16, 32, 40
Expulsion of undesirable m em bers__________________________________________________ 28, 42, 46, 54
Federal Housing Administration ___________________________________________________________ 23, 24
Federal Public Housing Authority, procedures and regulations_____________ ________________ 14-16
Federations, housing------------------------------------------------------------------------------------------------------------40, 41, 44
Financing, considerations regarding (see also Capital, and R eserves)--------------- 13, 22-27, 40, 42
Fixed charges----------------------------------------------------------------------------------------------------------------------------- 28, 61
G overnm ent agencies and housing

7, 14-16, 23, 24

Housing law, national--------------- ------------------------------------------------------------------------------------ 8 , 15, 16, 23
Housing laws, provisions o f _____________________ 8 , 14, 15, 20, 23, 28, 34, 35, 37, 39, 48, 58, 59
Income, members’ , considerations regarding ____________________________________ 8 , 10, 15, 17, 20
Incorporation of association-------------------------- _________________________________________ 8 , 20. 21, 25
Information, cooperative sources o f --------------- _____________________________________________________59
Insolvency, members’ , procedure in case of - _____________________________________________________54
Insurance, Government, on housing loans __ _________________________________________ 7, 23, 24, 28
Insurance, use of, in cooperative housing — ______________ ________________ 7, 8 , 23, 28-30, 47, 51
Interest and interest rates------------------------------ ______________________ 3, 4, 14-16, 24, 35, 38, 39, 61
Interior decoration------------------------------------------ -------------------------------------------------------------------- 29, 30, 61
7, 60
L abor, cost o f .
Labor, members’, as contribution on co st--------------------------------------------------------------------------------- 7, 29
Land, considerations regarding purchase o f ---------------------------------------------------------------------12, 13, 60
Lease, members’, procedure regarding-------------------------------------------------------- 3, 4, 14, 22, 28, 49-57
Legal provisions______ ___ _____ ______ _________ . . . . . . 5, 8 , 14, 15, 20, 28, 34, 35, 37, 39, 42—46
Limited-dividend la w s------------------------------------------------------------------------------------------------------------5, 20, 39
Loan capital---------------------------------------------------------------------------------------------------------------------- --------43, 44
Loan, period of, extension of, under National Housing A c t --------------------------------------------------- 8 , 23
Liability of member----------------------------------------------------------------------------------------------------------------8 , 21, 25
Location of project (see Site).
Losses, probability o f --------------------------------------------------------------------------------------------------------------7, 9, 39
Maintenance costs, considerations regarding------------------------------------------------------------— 6 , 7, 29, 61
Manager of association, requirements, and duties o f ---------------------------------------------------------------------32
M anagem ent______________ - __________________________________________________________ 32—36, 47, 50
Materials, building---------------------------------------------------------------------------------------------------------- 6 , 17, 40, 60
Meetings, membership----------------------------------------------------------------------------------------------- ----------------45, 46
Members, considerations affecting:
Alterations by member to dwelling--------------------------------------------------------------------------------3 , 51, 52
Costs to members (see also Econom ies)------------------------------------------------- - 7, 10, 24, 26, 28, 29
Death, provisions regarding--------------------------------------------------------------------------------- 28, 44, 54, 57
Debts to association, procedure in case o f --------------------------------------------------------------------- 7 , 4 3 , 5 4
Default, procedure in case o f -------------------------------------------------------------------------- 23, 49, 52, 53, 54
Deposit account------------------------------------------------------------------------------------------------------------ 31, 35, 36
Expulsion of undesirable---------------------------------------------------------------------------------------- 28, 42, 46, 54
Income group to be served--------------------------------------------------------------------------------- 8 , 10, 15, 17, 20
Insolvency, procedure in case o f ----------------------------------------------------------------------------------------------- 54
L e a s e ___________________________________________________________________________ 3, 14, 28, 49-57
Liability of members------------------------------------------------------------------------------------------------------ 8 , 2 1 , 25
Loans by association---------------------------------------------------------------------------------------- 26, 31, 34, 40, 41
Meetings of mem bers---------------------------------------------------------------------------------------------------------- 45, 46
Ownership, evidence o f ---------------------------------------------------------------------------------------------- 1 , 3, 27, 50
Rights, duties, and responsibilities----------------------------------------------- 8 , 27, 28, 30, 31, 42, 50-57
Safeguards----------------------------------------------------------------------------------------------------------------- 5, 8 , 29, 36
Share capital, returns o n ----------------------------------------------------------------------------------- 3, 85, 38, 39, 44
Share subscriptions-------------------------------------------------------------------------------------------- 24-26, 42, 48, 49
Transfer of shares---------------------------------------------------------------------------------------------- 4, 22, 31, 42, 43
Withdrawals, procedures in case o f ------------------------------------------ 3, 8 , 27, 29-31, 42, 43, 54-56
Membership, qualification-----------------------------------------------------------------------------------------------------9, 10, 42
Merger with another association------------------------------------------------------------------------------------------------------ 48
Mortgages and mortgage considerations------------------------------------------------------------------------------1 1 , 22-25
Amortization--------------------------------------------------------------------------------- 14, 15, 23, 24, 28, 31, 38, 61
Blanket m ortgage------------------------------------------------------------------------------------------------------------------ 23, 24
Prepayment of m ortgage---------------------------------------------------------------------------- 23-26, 29, 31, 35-38
Release of individual dwellings fr o m ------------------------------------------------------------------------------8 , 9, 24
Second m ortgages---------------------------------------------------------------------------------------------------------- 22-24, 26
Term o f -----------------------------------------------------------------------------------------------------------------------------------14, 15
___ 5, 10, 14-16, 21
Mutual savings banks as scoirces of financing .
Neutrality, political, religious, etc., of association--------------------------------------------------------------- 4, 5, 10
New members_________________________________________________________________________ 26, 31, 33, 45
Nonmembers, considerations regarding------------------------------------------------------------------------------------- 43-45
Officers o f a s s o cia tio n _____________________________________________________________________ 32, 47, 48
Option to repurchase_______________________________________ *4, 8 , 22, *27, 29-31, 42, 43, 49, 55, 56
Order of business at membership meetings--------------------------------------------------------------------------------45, 46
Ownership, legal, of dw elling-------------------------------------------------------------------------------------------- 3, 4, 8 , 27
Ownership, member’s evidence o f ----------------------------------------------------------------------------------- 1, 3, 27, 50



-------------------------------- 38, 44, 45
---------------------- 5, 6 , 12, 16, 17
— -------------------------------------------17

Patronage refunds__________________________________
Planning considerations___________________________
Plans, building_____________________________________
Policies o f association:
M anagem ent___________________________________
Operation------------------------------------------------------------Rental of dwellings-------------------------------------------Subletting----------------------------------------------------------Vacancies------------------------------------------------------------Prefabrication of housing elements------------------------Preferred s to c k --------------------------------------------------------Prepayment of m ortgage----------------------------------------President, duties o f --------------------------------------------------Price on property, considerations regarding----------Profit, speculative, in cooperative housing-----------Project, possible types o f ------------------- --------------------Property values, considerations regarding------------Proxies (see V oting),

-------------------------- 32-36, 47, 50
--------------------------------------- 33-36
---------------------------------------------- 30
-------------------------------------- 31, 34
— 5, 8 , 27, 33, 34, 45, 53, 54
-----------------------------------------------------26, 28
----------------------------- 23-26, 29, 31, 35-38
----------------------------------------------------------- 47
---------------------------------------- 1 1 , 12, 14, 19
----------- 3, 4, 6 , 8 , 9, 18, 19, 27, 36, 39
----------------------------------------------- 11-16, 2 0
------------------------------------6 , 11, 12, 14, 19
9, 10, 42
______ 45

Qualifications, desirable for members----------------------Quorum____ — - ------------------------------------------------------------

Redemption of members' shares----------------------------------- 3, 8 , 27, 29, 30, 31, 37, 42, 43, 49, 55, 56
Registration of association's securities-------------------------------------------------------------------------------------------13
Release of individual dwellings from blanket mortgage as paid f o r -------------------------------------8 , 9, 24
Rental charges______________________________________________________________ 7, 10, 28-30, 50, 52, 61
Rental of cooperative dwellings------------------------------------------------------------------------------------------------- 31, 34
R ep airs___________________________________________________________________________ 11, 29, 30, 50, 51
Reserves_______________ 1 _______________________________________ 8 , 14, 23-25, 28, 31, 36, 37, 44, 48
Revolving fu n d ----------------------------------------------------------------------------------------------------------------------------38, 44
Safeguards for members and associations________________ ---------------------------------------------5, 8 , 29, 36
Savings and loan associations as source of financing------ _____ ______ _______
Savings, opportunities f o r ------------------------------------------------- i:::::::::::::"i;T-8ri7-i9T~24r”29i 30
Second m ortgages_________________________________________ ------------------------------------------------- 22-24, 26
Secretary, duties o f _______________________________________ -------------------------------------------------------------47
Self-help activities open to members_____________________ -------------------------------------------------------- 7, 29
Share capital (see also C a p ita l)__________________________ ________ 3, 25, 26, 28, 35, 42-44, 48, 49
3, 8 , 27, 29-31, 37, 42, 43, 49, 55, 56
Shares, members', repurchase o f --------------------------------------Share subscriptions of members---------------------------------------- ------------------------------------ 24-26, 42, 48, 49
Shopping facilities-------------------------------------------------------------- _______________________________ 16, 17, 34
Site, considerations regarding choice o f __________________ _________________________________ 6 , 11-16
Speculation in cooperative housing______________________ ________ 3, 4, 6 , 8 , 9, 18, 19, 27, 36, 39
State requirements on housing________________________5, 14, 20, 28, 34, 35, 37, 39, 43-46, 48, 58
Subletting of dwellings------------------------------------------------------- _____________ 5, 8 , 27, 33, 34, 45, 53, 54
Surplus savings------------------------------------------------------------------- ___________________ 3, 4, 9, 37-39, 41, 45
Taxes, considerations regarding_____________________________________ 11-14, 2 0 , 26, 28, 35-38, 61
Term of mortgage------------------------------------------------------------------------------------------------------------------------ 14, 15
Title, legal, to dwelling, procedure regarding___________________________________ ____________3, 4, 27
Treasurer, duties o f _____________________________________________________________________________ 47, 48
Unemployment, effects o f __________________________________________________________________ 9, 10, 36
Urban redevelopment___________________________________________________________________________13, 14
Utilities, considerations regarding_________________________________________ 6 , 8 , 12, 13, 17, 26, 52
Vacancies, procedure regarding________________________________________________________________ 5, 7
Vice president, duties o f -------------------------------------------------------------------------------------------------------------------47
V otin g________________________________________________________________________ 3, 4, 5, 30, 46, 48, 56
Withdrawals o f members, procedure---------------------------------------- 3,


27, 29, 31, 42, 43, 54, 55, 56

Zoning, requirements relating to — — --------------------------------------------------------------------------------------------- 17

& U .S . GOVERNMENT PRINTING OFFICE: 1 * 4 # ---684613