Building Wealth for All through Dividend Housing
Quick Summary:
John and Peter talked with social innovator Margery Spinney on May 2, 2019 about how the dividend housing system she invented provides permanent housing affordability and allows residents to add value and receive an economic return on their housing choice. In the process, they build community by working together toward common goals.
In their conversation Margie showed a couple of slides from her presentation on how dividend housing works. In response to requests from several participants, she agreed to have us post them.
See the slides here.
Full Transcript:
For ten years following the 2010 publication of their book The Abundant Community: Awakening the Power of Families and Neighborhoods, John and Peter hosted conversations with neighborhood activists on their community-building work. All their ideas are still at work and continue to be influential for anyone engaged in creating the future in the present. The transcript here has been edited for length and clarity.
Building Wealth for All through Dividend Housing:
Conversation with Margery Spinney
May 2, 2019
Peter Block: Let me say a couple things about why this conversation is important and why Margie is such a radical, practical person.There’s a huge conversation in any community about housing; there’s a huge conversation about what to do about poverty. There’s a huge conversation about the impact and effectiveness of social services, and the bottom line in my mind is we have had those conversations for 20, 30, 40 years. And you know from all the dominant measures of well-being it seems like we’re doing well, yet we’ve got a huge number of people that struggle. We have high addiction rates. If you look at the people that the tide was supposed to raise, it didn’t.
And so, you ask yourself whether there is anything unique or anything new or anything worth focusing on that will confront the housing situation? Margie, probably 15 years ago, decided that she was going to find a way to do wealth creation for low-income people.
Wealth creation for low-income people: that’s quite a sentence because most of us think low-income people need to be fixed. They’re the target of billions of dollars in social services in Cincinnati right now. And we think they need job training; we think they need free coins for transportation. We think they need special kinds of coaching and counseling services. All of those are useful but they’re like triage. My thought is that most social services are like getting a new ambulance that doesn’t stop the war.
Margie’s found a way to stop the war. She’s invited low-income people into housing that she controls and acts as landlord for and then engages them as partners in the well-being of that structure. By engaging them they stay longer, they take care of the place, they take care of each other, and at the end of five years they’ve saved enough for the owner of the building that they now have access to five thousand dollars of wealth that they can use any way they want. It’s not a funder saying you can use the money but it’s gotta be for education, it’s gotta be for health care.
They now are creating wealth for low-income people simply by the way they together inhabit the building in which they live. And, to me, if you’re looking for social innovations, this ranks near the top. I do not understand why every housing situation in this city isn’t doing what Margie calls rental partnerships. I’m just so happy to have you as a neighbor, Margie. And I’m so happy that this thing has been invented in Cincinnati, and if I’ve exaggerated at all you don’t have to correct me.
But what I’d like to start with is first to welcome you and thank you. Tell me a little bit about the origin story. What’s your creation story of how you came up with this? Talk to us about how this got created and what the trail has looked like.
Margie Spinney: In about 1996, I took over management of a community loan fund in Cincinnati that had a lot of investment from socially conscious individuals who had put money into the fund. Churches were involved, religious orders, but the funding wasn’t done by the banks; it was done by people who cared and they were funding non-profit housing development. And so, I knew they really cared more about the people that were living in the housing than the housing development itself.
In analyzing what was happening to the people that I would go out and talk to, I learned that they weren’t really that much better off, that they were still unable to buy a home and to build any equity. They were fearful that they might have to move if prices in the neighborhood started going up.
They didn’t have a great sense of community because there are a lot of issues in affordable housing and nothing to really bring people together. So I was concerned about the wealth and inequality and the fact that low-income people are renters; they don’t have any way to build equity in a way that helps them get anywhere, to get to a better place in their life.
Even when their income goes up, because they’re already living hand-to-mouth, often times they just have to buy something else that they need and it doesn’t help them build wealth because they don’t have that discretionary income.
So, my idea was to create an alternative to the American dream of home ownership that would give people living in rental housing a way to contribute something of value to how that housing operates. This would generate money that would come back to them. I did that in partnership with the Franciscan Friars in Cincinnati, which was our first development, and with another non-profit. Then we developed a third project between 2000 and 2012. We had an independent evaluation that was highly successful: it showed that residents had built $140,000 in financial savings over time. Plus, people who were buying houses during the 2008 crash lost a lot of their equity, yet our residents were able to continue to build wealth and to build a very strong community among one another.
I left there in 2012 and went on to start Rental Partnerships. There were a few things that needed to be addressed that we couldn’t address with community fund housing because of the way it was financed. One of them is permanent ownership of affordable housing. That is critical. People have to feel that they can stay where they’re living indefinitely and they’re not going to fear that the rent is going to go up or the building is going to be sold because the neighborhood is getting more valuable.
The key parts for me are the permanent affordability, the fact that residents really contribute and are able to add value and actually receive an economic return and that they build community by working together towards common goals.
Peter: Let me just stop for a second. I think what’s so powerful is you’ve made a direct relationship within a building between building community, social capital, and economic well-being and asset development. That bridge is unique and amazing.
Margie: I look at the economic system as a community. It’s a big community, and some people are in and some people are out of that community. So, the owners, the in-people, are the people who own everything, and I think that is really underlying a lot of the economic issues we have now: the growing wealth and inequality and the inability for people to control a lot of their own lives.
Peter: It’s hard to sell the idea that resident behavior, community, going into a meeting once a week, taking care of a piece of it was essential to your success up until 2012.
Margie: I’m going to share a slide with you because this is very simple way of explaining it.
In this slide what we’re asking ourselves is, what can residents can do, what contributions can residents really make to operating housing that generates financial wealth? I argued that because they make this contribution, they deserve the wealth that is created.
In my experience managing rental housing for quite a long time the primary thing that residents can do is to reduce unit turnover. That’s because every time you turn over an apartment you have to repaint it, fix it up again, and you have to have property managers spend time getting new residents, going out and marketing. If we have a community where people are committed to stay together and to participate in budgeting for that housing, and to make sure that we stay within the budget and that people are so happy being there that they don’t want to leave, it’s amazing how much money you save.
So, the way we actually budget for the housing is that we put aside a reserve every month that would normally go into vacancy and turnover or otherwise goes in the owner’s pocket. In our case we put it in a reserve fund and then we have a certain measurements so that each resident is able to build a share of credits in that fund that we build.
Peter: That’s great. I was re-reading the study done by an independent group in Ohio and one thing they found was that without your rental housing the cost of painting rental units would be seven times higher. The other is the emotional crisis of having to move. If you look at why low-income people’s children don’t do well in school, one of the big reasons is because they go into a different school every four months.
Margie: That’s really true. And in trying to build a community where people know each other and care about each other, it’s hard to do that when you’re afraid that you’re going to have to leave at the end of the year.
We have continued to do this after I left and started running Rental Partnerships. We leased a duplex and have been working with those residents and we’re now looking for funds to do more of this housing outside of government programs. And I think that’s possible. I think for it to be scalable we have to go to another way of financing housing.
Our model for housing is what we now call dividend housing.
Peter: It’s not rental partnerships anymore?
Margie: Well, our organization is Rental Partnership but the housing itself is called dividend housing. People receive dividends in a lot of different ways, but one of the reasons we wanted to call it something like that is because now you only have two choices: You are either a home owner or a renter.
What we want people to say is “I want to choose dividend housing.” We wanted something that could become known as its own thing and that has a certain meaning to it that is agreed upon.
Margie: In dividend housing I am not the landlord. It’s supposed to remain permanently affordable so we have a non-profit organization that owns it, and it owns it in a kind of a trust similar to a land trust. but it owns the building entirely. So, the residents are essentially subleasing from a non-profit which they are also a part of.
This allows the housing to stay permanently affordable. Nobody has to buy anything to get in. Nobody has to come up with a down payment, and they don’t have to sell their unit when they leave. You get in it very much like you do renting. You have a lease, but it also has a legal contract in the lease that guarantees the rights to renter credits or financial credits.
Normally if you own your own house, you can do anything you want in terms of how you take care of it and what you have to do in terms of how you treat your neighbors. In renting you don’t really have any control; the landlord makes those decisions. In dividend housing every resident is a part of the resident association and they have a vote. We make decisions by consensus on a set of policies that everybody agrees to operate by.
Peter: If you have a problem resident, can they be asked to leave for good cause?
Margie: Yes, which actually is an advantage of dividend housing over, let’s say, a condo. Because we have a set of policies that everybody’s agreed to, it’s adopted by the resident associations and when somebody is in violation of those policies we have a process that they go through. It’s a three-step process including talking to whoever might have been hurt by their behavior. We try to work it out but if we can’t then they can be evicted.
Peter: Usually when you’re renting if there are problems in your building or next door, you go to the police to come with you to tell those people to stop doing bad things.
Margie: Right. You don’t really have any control and if the landlord doesn’t come when you complain that somebody’s in the building that shouldn’t be there, there’s really not much you can do about it.
Peter: Many of the landlords live in another city.
Margie: We have had these situations. We sit with the residents and say, “It’s up to you guys to decide how we are going to address that problem.” And they all sit down in a meeting and figure it out and also decide who will take turns making sure that the doors are locked in the evening.
Peter: That’s great. Dave Crest asks, “Is it fair to say that dividend housing is a form of community land trust but adapted to multi-family housing?”
Margie: Yes. I think that’s pretty fair.
John McKnight: Well, I was interested in some of the social aspects of what’s going on. You have a residents’ association and there’s some indication that maybe people have to go or are obligated or make a commitment to go.
I’m just wondering if you can describe the nature of the decision making that the residents are engaged in? How seriously do they take their role of being co-managers in this?
Margie: One thing we do is advertise dividend housing as a choice and we market it that way. We do an orientation before people move in: They attend meetings, they get a good understanding of what this involves so they’re not moving in as renters and then being told this is what you have to do.
They’ve chosen to live here, and they have said this is what we want to do. They understand that we’ve been through all the legal agreements and that kind of thing so they’re coming in knowing what they’re doing.
One of the first things they do while we’re developing a property is develop the community, and we do that largely by working on house rules and the operating policies and so, for example, they will determine whether pets are going to be allowed and what you do if somebody violates the curfew and so on.
If we have a disagreement, we often break into smaller groups and people will come up with their own solution. Each group will come up with a solution for their group and then they’ll share with the others. We often come up with very creative ideas about how we’re going to solve that. We don’t air grievances there. It’s a matter of creating policies. The residents’ and communities’ job is to create the policy.
John: Another thing I was wondering about is that you’ve also developed a loan fund. And that loan fund recognizes that, even though you’ve given a wonderful economic opportunity in dividend housing, people still live largely on the margin. And they are one check away from bankruptcy.
What usually happens is that people get pay-day loans at very high interest to borrow very little money. But you now have an alternative in your loan fund that really impresses me. Could you tell us about it?
Margie: I started out operating a community loan fund so we could use that fund to help residents when they came into a tight situation. For many this happens a few times a year. What this meant was essentially forbearance on their rent.
They can use the money they would pay for rent to apply to whatever their emergency is. Then we work out a way they can pay that back, whether it’s over a couple of years or a little bit a month or when they get their check or when they get back to work, however they want to do it. That’s been very effective.
Once people have been there five years, they have their own access to their credits to use and that is one of the primary ways that they use them.
I wanted to add to what Peter had said. The credits are scheduled to build up to $10,000 in 10 years. How much money the family earns in that time really depends on how strict they are about fulfilling each of the monthly obligations. If they miss a month they keep building, but they won’t have quite as much when they’re done. And they can renew that, so they can continue to build the equity credits after the 10 years in which their first contract expired. They can stay there and renew their contract and build for another 10 years and another 10 years. They can live there their whole lives and essentially keep building financial equity for as long as they live there.
So, they can build equivalent to what they would have if they’d been able to buy a house.
Peter: This is a common land and building trust. The land or building is going to appreciate over time. Is there any way the dividend housing model can capture and make use of some of that appreciation?
Margie: No.
Peter: So, it’s really like a nature conservancy. Is there any return at all for the investors?
Margie: Yes. I want to stick to that because that’s the next kind of community we need to build. You had said, why isn’t every owner doing this? And why isn’t this being done since it could be anywhere? It isn’t being done because our financial system is geared to buying and selling property.
And we really don’t have a financial system that supports permanent affordability. The idea is you get appreciation, then you sell it, and you get some money out of it –– that’s what the system is built to do. Here we are trying to build a system that essentially removes the housing from the market so it stays permanently affordable. It doesn’t lose quality; we want to keep the quality high but we want to use it as a means for the residents to build wealth so we’re not going to sell it.
What we need to do is find a way to finance that housing, and that’s what we’ve been working on for the last three years. In essence, our goal is to create another community loan fund where the community of people who have wealth and can give us 10 thousand dollars for ten years, or more, will invest in dividend housing and we will pay them a return of two to three percent out of the rent.
Because they’re investing, we don’t ever have to sell the housing to give the principal back. The goal we have is like a mutual fund where someone else comes in and invests and takes them out. So, we have a continual source of flow of funds coming in and developing housing that’s affordable and that builds wealth for low-income people.
Peter: That’s amazing. And two to three percent is as much or more than I can get by putting it in a bank.
Margie: We got our first 20 thousand investment in this fund about a week ago and we are working on financing four units.
We have a plan to continue to grow this and to work with affiliates to grow it in other areas, but I think where we are right now is we have to prove, we have to demonstrate again, that this model works and that residents or investors really are willing to invest in it.
John: You’ve had a lot of experience with investors; where do you look for them? What are the characteristics of people who will invest in this kind of thing?
Margie: I have met people who have said when I explained what we’re trying to do, “Good, you’ve given us a way we can do something about what’s going on in the world.” Because they hear an awful lot and they feel bad that people are hurting. They know that we have this wealth divide that is growing, a separation of community, and there are increasing demands for social services that we can’t meet. They want to do something about that. So, this is a way they can do something. I think it’s through the faith community primarily that such feeling is there, not any particular community, but I think that there’s a feeling of spirituality that we’re all connected and that we can’t just take care of ourselves and not worry about anybody else.
What we’re showing here is that you can make it work for everybody.
To summarize what I wanted to say today: We’re building communities not just of residents and building wealth not just for residents but also for people who invest in this fund. We’re building connection between them and people they never see and might want to see and want to know but they don’t have a way to do it. And they are really making a difference in the lives of those people. The impact of investing 10 thousand for 10 years in this is much greater than the financial return; it exponentially grows. If people across this country were doing this, we would have millions and of millions of dollars of wealth being developed at the lower end of the economic system.
Peter: Also, what strikes me is that people are very generous, and they give a lot of money without any expectation of return. For the Greater Cincinnati Foundation, I don’t know how many millions of dollars are sitting there with no expectation of return and no ability to recycle their money.
So, this is an amazing value proposition and instead of giving money away they get a tax deduction. I don’t know if they get any tax benefits from you, but I’m just saying what an alternative: I can park my money for 10 years and get it back in case my mind changes or people change generationally, and I get out of the system where property is the major generation of wealth which means I stop displacing people all the time.
In the current system the private developer is pressured to create affordable housing and they do it, but then people get moved out because there’s no stability in low-income modern-day housing. If the city can get 34 million dollars for a soccer stadium, why can’t they send a check to Margie?
Margie: The other thing we do that the affordable housing developers don’t do is we give the development decisions back to the community because we’re doing small projects. We’re doing a duplex or a fourplex or a few units at a time.
A church can come together and say, we’re going to invest in this four-family unit and we’re going to partner with those residents in lots of different ways. You can’t do that if your primary goal is to develop conventional affordable housing because the way it’s financed incentivizes doing 70 to 100 units at a time. It isn’t the same kind of community. It’s hard to build community that way.
Peter: When you put 80 units in one place you create a mass of material that changes the nature of that community. It denies all history of that community. It has amnesia about what might have grown and has been built there.
It’s just so different from the traditional way of wealth creation: to buy and sell property. This is why African Americans’ wealth in 15 years is going to go to zero because they are excluded from buying property. And what you’re doing here is letting communal housing generate wealth in another way. To me it’s a form of reparation.
If the question is how to we pay back people who have been red-lined out of the post war wealth accumulation by design, there is the Community Reinvestment Act that was designed to repair this. Dividend housing could be framed as a form of reparation.
Margie: It can be framed that way although it isn’t out of the sense of guilt; it’s out of building a healthy community where everyone is included.
Peter: I know but the reparation doesn’t have to be about guilt; it’s about money due. It’s about a future we can create together.
John: Margie, let me ask you about another thing. There’s an evaluation on our site that people ought to read about how things were in the beginning of your activity. The thing that interested me especially was the question they asked each of the residents: What is the single most important thing for you about being here in this place? And the top answer for a third of the people was that the sense of community was the most important thing. Not, for instance, that they were building equity. But the first thing they say is, this is building the sense of community that we have.
And I wonder if you could comment. It seems that everybody is trying to enhance, build, support community, and here even though you’re coming at it from a financial aspect, residents say the most important thing is the social relations and the community that we feel is here. How does that happen?
Margie: I think that community is built around common interest, so you build a community around your school and your kids’ playmates and you build community around your church or you playing tennis or fishing.
In this case we’re building community around the idea that we want to live in a place that is safe, and attractive, and where people respect each other and are neighborly and friendly. That is the commonality, and the intent is people want to live there forever. What I saw happen ––it’s been really beautiful over the time we’ve been doing this –– is that people start out just trusting everybody else because that’s the world they live in.
And then over time, if somebody’s cranky all the time because that’s their personality, because they stay there awhile, people get to thinking that’s just so-and-so and how she is but her heart is still a good a person.
We’ve had so many incidents like that. My partner, Carol Smith, and I go to work every day feeling great because we see this happening: people just caring for one another and the place. If they wanted to grow flowers, they could get out there and water flowers and dig in the dirt and they could choose to do that and other people would want to do it with them because they like to do that.
Carol tells this story: Every year we do a spring cleanup when we replant flowers and make the garden look nice outside. And also, clean up the community room in the kitchen. The first year everyone wanted to help clean the community room because that’s what they knew how to do. They didn’t feel comfortable digging in dirt but then, every year, more and more people wanted to come out and enjoy the fresh air and planting their flowers. And so eventually Carol had nobody working with her in the kitchen and they were all outside with me.
Peter: Do people have their own apartments and there’s a community room kitchen?
Margie: Yes.
Peter: Sounds a little like pocket housing.
Margie: There’s a lot of nuance to this and part of it is the community design: It should be a sense of place.
Peter: A sense of common place.
Margie: One time we had to decide what do with the interior of the building and how it connects to the street. We had a landscape designer come out and talk to the residents about what they wanted. They said they wanted to be able to barbecue and also to sit out on the sidewalk.
So, he helped us design the space and we got a grant: we built picnic tables and the residents planted trees. We ended up with a park.
Peter: What’s so powerful about this is you’re really shifting from a property-based economy to a relationship-based economy. The whole modernism that began with enclosure in England had common land taken for private ownership because it’s more profitable to have sheep than people. To me this is kind of going back in the direction of the common land, the common good, disproving the tragedy of the commons.
Caller: I had a quick question about permanent affordability, whether that means the same thing as rent not going up and if rent does go up, how is that calculated?
Margie: Rent goes up because it needs to, so if costs go up the rent goes up. The residents participate in a creating the budget, so they know why it goes up. It just doesn’t arbitrarily go up, but costs do go up over time.
The financing for this property is at two or three percent and that makes the difference. If we finance a hundred thousand dollar building at two percent, we’re paying two thousand dollars a year towards having that building. If the normal investor might want 10%, you’re paying 10 thousand a year. We’re saving that eight thousand dollars a year that would be going into the financing. That’s why we need this fund: It allows us to keeps rents about four or five percent below market rate without having to go to government program to do it.
Becky Robinson: David said that having worked in community empowerment areas within metropolitan public housing communities in Canada for over two decades and having lived in Philadelphia for the last decade, he’s still finding that the realities between these two nations are so different.
I applaud Ms. Spinney’s accomplishments, he says. It must have been a long and depressing journey to get this done to this level. But he’s curious, how can we talk about ownership, financial security, of anything in the US when that can be taken away with one health emergency. Is there a plan to coordinate this effort with other empowerment sectors?
Margie: The thing that jumps out at me is the question about stability and that you lose your home because you have a health emergency, or you’ll lose your home because you’ve gotten older. Keeping the housing permanently affordable helps. Building a nest egg through renting partnerships or dividend housing and staying there for a long time can make the difference. One example is a resident who was legally blind and used her equity that she built after five years to do the co-pay she needed in order to get an operation and help get her sight back.
John: You’re focusing on the aspects of life that produce more health, more well-being than anything else: community and income. So, you’re at the heart of the matter; all the other things are really secondary. You are an answer to health problems, and education problems, and I think that it is good that you are focused where you are because what you’re getting is multiple effects. You’re getting lots of outcomes for a minimum of inputs.
Margie: I think you’re right about, and I have seen the studies that show that the stress of living in their living environment the way they are is one of the biggest contributions to health problems.
John: I want to add one other thing: the stability question, the fact that you’re giving people an incentive to stay in a place. Most of the people I’ve been associated with over the years are neighborhood organizers, and the greatest deterrent to an effective neighborhood organization is the mobility of the people in the neighborhood, the high turnover. Giving continuity to residents is absolutely vital to creating the neighborhood relationships that then can become powerful and work on other kinds of goals and issues.
Margie: That’s really true. We organize our residents to go to the community council meetings, and they are the ones that could make decisions because they were there and they were staying there. They could go and protest, let’s say, a drug issue or an issue of somebody doing something unhealthy or bad in your community.
Peter: David says, “I wondered whether the American dream of private housing is no longer attainable” and even questions the phrasing: Was that the American dream?
I think that’s a consumerist dream: I have to own something as a measure of my well-being, as a measure of my accomplishment. I think we’re at a time now where they say the middle class has changed. The talk is about bringing jobs back.
And this is a real alternative for that; it puts in question all of our measures. That you measure economic wealth by housing starts. And you’re joining the chorus that says it is the measurements that are killing us.
Margie: The fact that more people that can afford to buy are choosing to rent is also putting pressure on the cost of housing in the city, in the urban areas where lower-income people are living. This creates a rise in rents and displacement and mobility.
We can call it gentrification, so it’s a double-edged sword in a way. It’s good that people want to move into the city and they want diverse neighborhoods, but they end up being un-diverse because the people who lived there have to move out.
Peter: And it’s a shift in mindset: from home ownership to housing security. I want to be secure where I’m living. I don’t need to own it.
Margie: And it doesn’t have to be dividend housing, it doesn’t have to be one class, it’s not necessarily low-income housing. Anybody who wants to be responsible to their community and be part of that should be able to do it.
Peter: And there are other movements, like co-housing movements, where people are coming together in small groups and buying something that helps them raise their children and share with one another. There’s a pocket neighborhood movement. So why do I keep calling it low-income housing?
Margie: Right.
Peter: Why don’t we just call it dividend housing? You’re giving me a name.
Margie: Exactly, thank you.
Peter: If this is another way to manage my wealth and provide housing security, a housing future, I can pass it on to my family, but I don’t have to go through the economic ups and downs, and we won’t ever have a housing bubble again.
Becky: One person was wondering that if you don’t have 10 thousand dollars to invest, are there are other ways you can help build these communities? So we’ll address that one first and then I have several more questions from our listeners.
Margie: We need to build the fund and people can help by reaching out to others: Go to a community they belong to and get other people involved; help us come out and talk to them. That way is something most you could do.
We’re saying 10 thousand because that’s kind of a nice even number. I’m not saying that the fund has to be 10 thousand.
Becky: There is a comment from Ellen about the importance of consistent housing to keep children in the same school that helps them make progress and learn and get better jobs in the future. And Sarah’s wondering what some of the responsibilities are that the residents commit to?
Margie: We ask them to participate in management, but they aren’t going in and fixing their furnace or climbing on the roof like they would if they were homeowners. Their responsibilities usually are to take care of a certain area of the property and keep it in good condition.
We map the property out and everybody usually has an indoor and an outdoor responsibility. They may take care of their hall and make sure it’s always clean and nice looking. They might put pictures up and keep the hallway attractive. They might make sure they’re sweeping the sidewalk out in front of their door and making sure there isn’t litter, and they’re pulling weeds and that kind of thing.
After we do a map everybody decides what they want to do. If they want to clean the lint out of the washers and dryers in laundry room, that can be their job. Usually, we look for people to put in about 15 minutes a day or an hour and a half a week. The goal is to make our property look better than anything else on the street.
John: In the evaluation, a quarter of the residents said that the most important thing about this place is that the living conditions are so good. This is not a communal judgment; it’s a judgment of the results of this sort of co-management and the agreements.
Margie: Right. And that only happens because they do it together.
image: Tonp1
