Opinion: More problems than solutions in co-op ordinance


I recently read through the latest draft of the co-op ordinance. Unfortunately, it is still a mash-up of ideas that sound good but have significant flaws. And it is still disorganized — general requirements are mixed with specifics, concepts show up in multiple places, and some terms, including “limited equity cooperative,” “certification,” and “privilege,” are undefined. One of the biggest problem areas is the “permanently affordable Group Equity Cooperative” (GEC). I’ll focus there, but it is not the only problem by any means.
The ordinance allows up to 12 people to live in a co-op in low-density zones, and up to 15 in higher-density zones. But if the Planning Board so recommends, the city manager can increase the upper limit for a “permanently affordable” co-op like a GEC. The Planning Board must consider impacts, crowding, parking, and the co-op’s “mission,” but there are no actual rules for the board to follow to calculate their recommended number. So no one can challenge the recommendation, not even the City Council.
For GECs, the building’s majority ownership must be held by a 501(c)3 tax-exempt nonprofit — an entity that claims housing as a purpose and has convinced the IRS to give it 501(c)3 status. Equity ownership or rents must be affordable to “households earning no more than 60 percent of area median income.” A “household” can be just one person. So, apparently, any such 501(c)3 could buy a house, rent it out to as many of its income-qualified followers as it could get the Planning Board’s support for, and once the city manager accepts the number, it’s final. Sure, there are pro forma organizational and behavioral requirements for the co-op “members,” but ongoing enforcement of rules about their internal activities is almost impossible in practice.
It gets worse in the Property Rights section. The ordinance states, “Any licensed limited equity cooperative [like a GEC] or private equity cooperative is considered a use of land for the purposes of Chapter 9-6, ‘Uses of Land,’ B.R.C. 1981. If the city changes its land use regulations, such cooperatives shall have the privilege to continue as non-conforming uses…” This is a rezoning, pure and simple, done at the choice of the owner of the property, without any consideration of the location or effects on the surrounding properties. So even if the next City Council decides that co-ops are a really bad idea, the neighbors are stuck with a co-op at that location. Worse yet, this permanency will create an incentive for the 501(c)3 to modify the building to add more space for renters, or possibly scrape it and build a large, single-purpose co-op structure. That’s how bad things could get.
You might think that we could rely on the good senses of the nonprofit owners. But remember that Boulder Housing Partners (BHP), although chartered to supply affordable housing, supported the Chamber of Commerce’s recommendation (passed by the majority of City Council) to limit jobs-housing linkage fees to $12 a square foot, even though the actual cost of providing affordable housing to those new workers that would need it is well over $100 a square foot. And other tax-exempt entities could have much more bizarre motivations — the IRS doesn’t check their sanity or community mindedness, only what they do with their money.
This law — that allows a mere change in the occupancy of a property to change its zoning — is far more radical than “normal” spot zoning, which is illegal under many circumstances. In “normal” spot zoning, the city has to have a compelling reason to rezone that particular parcel, and must consider location, compatibility, etc., or else it’s considered a scam — a benefit to the property owner at the expense of the neighbors. But in this case of GECs, no consideration whatsoever is given to location or surrounding impacts. If a 501(c)3 entity purchases the house next to you (possibly using city money) and makes it their next co-op project, well then, you are out of luck. Permanently. And you have no recourse.
Not only that, but the GEC may not even pay property taxes. For example, the Masala Co-op, at 744 Marine, is owned by the Boulder Housing Coalition (BHP has a 0.01 percent interest) and pays $0 in property taxes. Ten of its residents (“households”) are restricted to incomes up to $70,835. Any others have no income restrictions whatsoever. I cannot see how this qualifies under the state law that only grants property tax exemptions to the portion of property dedicated to “low income” people, but I’ll leave that to the county assessor.


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