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Maybe it's time to start a co-op and take on the challenge? - Jakub Krzysztofik

02 of January '25
w skrócie
  1. The reasons for high real estate prices are due to an imbalance between demand and supply, where developer margins average 30%.
  2. Housing cooperatives are groups of people who build houses together, allowing to reduce the cost of investment by about 33% compared to the market price.
  3. Co-op construction allows people to get an apartment with a garden, parking space and a cell, while reducing costs and increasing the sense of community.
  4. Local governments can support housing co-op initiatives by helping to purchase plots of land, simplifying regulations and providing infrastructure.
  5. The housing co-op model enables the creation of attractive and easily marketable housing that is affordable to both families and seniors looking for comfortable housing.
  6. For more interesting information, visit the home page of the A&B portal

What is the situation in the housing market? What can be done to reduce the imbalance between demand and supply? What path could young people take to meet their housing needs without excessive credit risk? This is the author's vision of the direction in which housing cooperatives should develop with the support of local governments.

To begin with, I put forward a thesis: I believe that it is possible to build one's own apartment without the risk of excessive debt for life, without losing personal freedom, which I believe a mortgage entails. I'll say more: I'll suggest how this can be done regardless of age and wealth status, although of course it's not simple or easy. I will point out to local governments several areas where they can support the idea and creatively develop it. I have a feeling that all the actors on this stage: architects, investors, critics, are missing a few pieces of this puzzle.


First, it's worth answering some simple questions:

How is housing different from other goods, and why is it so important?


It is our refuge, asylum and basic need; when we return home, we expect security and stability. It's where we build the foundation for our most important decisions, it's where we make room for loved ones. Often in life we want to change things, improve things, and this is a dynamic pursuit, but at the same time we want balance and security, and the place where we live, sleep and rest is a basic element of our stability. Often, credit is a way to realize exorbitant aspirations, but it has additional burdens that are invisible at the outset: depression caused by fear of losing one's job, self-recrimination for excessive compromises, abandonment of one's ideals, helplessness.

In the beginning, it is worth considering how to get your own apartment, where you feel comfortable and are not afraid that after losing your job, someone will throw you out of it. Such an apartment should also be a good investment, which does not fall in value, is transferable and can be converted into a larger dwelling as our capabilities and needs develop.

gminne spółki powinny realizować politykę mieszkaniową oraz dbać o estetykę i urbanistyczny ład inwestycji

Municipal companies should implement the housing policy and take care of the aesthetics and urban order of the investment - TBS Łódź Kaliska

proj.: 3D Architects with a vision


why are apartments so expensive?
and what can we do about it?


We are familiar with discussions about housing prices and mortgages, "greed" of developers, luxury apartments, debatable investment solutions. Many people are puzzled as to why real estate is so expensive in Poland. This particularly affects young people, who are suddenly faced with the dilemma of whether to take a loan for thirty years. Added to this is the pressure of others who have already made up their minds, are living in their own M, paying installments and even rejoicing, because apartments have become more expensive since then. The situation in many cases is saved by the help and support of parents or the aging effect of inheriting property from grandparents. But what about those who work hard and cannot count on any inheritance?

I put forward the thesis that a minimum of half a million apartments are needed in Poland for the market to be balanced, that is, for price growth to be slightly higher than wage growth. However, the imbalance in the residential real estate market lies in the fact that high demand for apartments results in their high price. Housing construction is mostly carried out by private entities, and their activities are regulated by the rules of the free market. It is no secret that the developer's margin is a minimum of 30 percent. What can we do about it? I will spare readers from citing politicians' attempts to solve housing problems. In this text there will be: no postulated legislative changes, no new taxes, no maligning of developers, local and central governments, no criticism of young people or the older generation that has managed to get by.

gminne spółki powinny realizować politykę mieszkaniową oraz dbać o estetykę i urbanistyczny ład inwestycji

Municipal companies should implement housing policy and take care of aesthetics and urban order of investments - TBS Łódź Kaliska

proj.: 3D Architects with a vision



My conclusion is simple: if the profit on the sale of apartments is about 30 percent, after all, it is an opportunity to reduce the price of an apartment by just that much. How? Simply become a micro-developer and do it yourself. I know, everyone knows this and that's why they build houses on cheap land themselves. Only is this the remedy for the situation?


A house or an apartment?


I don't know. I am against building single-family houses, whether luxury villas, mansions, or small row houses near the city. I don't count on convincing people who dream of having their own house with a garden in a beautiful place. I'm counting on offering an idea for people who are looking for other solutions. Let's deal with the myth of the single-family home. We all complain about urban sprawl, and we rarely see the element from which this urban chaos is built. And it is precisely the single-family house with a garden. Who among us has not dreamed of it? The space, the dream interiors, the barbecue with friends. And the access? Suburban location forces two or three cars in the family, of course, leased, because it "pays off", well, because how to get to the center, take the children to tutoring, events... There is no alternative to this, we must have cars like our friends and customers.

schemat budynku małej kooperatywy

diagram of the building of a small cooperative

pic: © 3D Architects with a vision



Is this really the life we want? Maybe it would be worth it to have less credit, live closer to the center and have one car instead of three. Maybe the kids would be closer to school and could get to many places themselves. Or maybe you need to take the streetcar, bus or bike? I know, many times I hear: "after all, apartments are so expensive, and a house costs almost as much". Really? And the cost of commuting, our priceless time, stress, worries about the exchange rate or the interest rate on the loan?

I suggest you verify your own needs. A single-family home causes urban sprawl and is a credit trap for many Poles, who will be stuck in traffic jams and pay severely to realize their "dream." It is appropriate to support and promote multifamily construction in urban centers, but I propose something else - a substitute for a house with a garden in a good location and at an inexpensive price.


To rent or to buy?


Most Poles are convinced that it is better to take a loan and own an apartment. This, however, is slowly changing in favor of supporters of long-term renting, following the example of Western countries. Recently, there are opinions that it is better to rent an apartment, have no obligations, work, and spend the money earned on travel and pleasure. This is an individual decision for each of us, but it is worth considering what will happen when the job market changes. Housing prices are unlikely to fall. However, for those who would like to seek their own path to ownership, I recommend my proposal.

schemat budynku małej kooperatywy

diagram of the building of a small cooperative

pic: © 3D Architects with a vision


let's develop housing cooperatives


Almost all legislative attempts by successive government teams have left us increasingly perplexed, but in the thicket of absurdities an interesting proposal has emerged: a law on support of housing cooperatives. The word "support" is very important, because cooperatives exist, form and operate on their own. They are informal groups of several families that want to build a housing unit together.

What are the disadvantages of the current situation of most households in Poland? The popular model for obtaining one's own apartment or house is that many people in the initial period either rent an apartment or live for a long time in their own apartment, which is often too cramped because it was bought on credit. Those who decide to own their own home build it on credit and rather on a plot of land outside the city. Children complain about long commutes, lack of direct contact with peers, and more difficult access to urban entertainment and culture. When there could be a period of expected stability, the children move out to the city and the house empties. All that's left are high bills to pay and long commutes to work. Is this really what we want?

kooperatywy mogą być najlepszym sposobem dojścia do własnego mieszkania w rozsądnej cenie

Co-ops may be the best way to get to your own reasonably priced apartment

proj.: 3D Architects with a vision


Let's do it differently. The goal: get your first apartment of your own cheaper, faster and closer to downtown, before you're 30.


Step 1: Establish a cooperative - the deal. First, you need to find an interested group: young, working people who are determined to own their own apartment. Ideally, it should be four families, for optimization of investment. You need to conclude a contract, which involves dividing the costs into equal parts, and each shareholder receives an apartment of the same size and very similar parameters: an area of up to 70 square meters, four rooms, a toilet, a bathroom, a cell and a parking space. In addition, a garden.


Step 2: Purchase a plot of land. Preferably small, a minimum of 600 square meters and dimensions close to a square 25 by 25 meters. Minimum utilities: sewerage and water supply. Conditions for a good location: access to public transportation, stores and public services, so that the use of a car is optional. There is a chance that the participants of the cooperative will be able to choose the most favorable offer for them, despite the high price of the plots, because they divide the cost into four parts.


Step 3: Design. I propose a specific form of development: single-family, semi-detached houses with separate two units in each. We do not divide the plot in half, but, in accordance with the building law, we separate separate units: on the first floor and on the first floor. We get for each family a unit with a share in the plot. All apartments have an associated garden; those on the first floor directly, and those on the first floor through an external staircase (see Figures 1 and 2). Each half has its own staircase. Parking spaces right below the house.


Step 4: Construction. We don't need a general contractor, so all we need is a good construction manager and a supervisor who helps contract construction teams and account for the work under the supervision of all participants in this small cooperative. The level of complexity of such construction is low, the house has no basement, is relatively simple, with a total area of about 300 square meters. In fact, it is an undertaking comparable to the construction of an average single-family house with a garage.


let's talk about money


Plot: the cost of buying a plot of land in the location we want is 1000-1200 zlotys per square meter (I checked in six of Poland's largest cities), so it's about 600,000-720,000 zlotys. The good news: the share of one co-op participant is about 150,000-180,000. That's how much you need to have to get started, as I don't recommend buying a plot on credit. Of course, in smaller cities prices may be lower.


Construction: the cost of building a house in developer condition without a general contractor, using the economic system, but with the participation of qualified teams is about 3,800-4,000 zlotys per square meter (data according to an online calculator). The cost of building the entire house is about 1,140,000-1,200,000 gross, and the share of one co-op participant is 285,000-300,000.


The total investment costs are 1,740,000-1,920,000, with the share of one participant being 435,000-480,000. These conservative estimates show that it is possible to get your own 70-square-meter apartment with a parking space, a cell and a garden for less than half a million. I have assumed that the participant's own funds are about 35 percent (purchase of the plot), and 65 percent could be obtained from a mortgage. The cost of producing such a unit per square meter is 5,800-6,000.

rzuty budynku małej kooperatywy

plans of the building of a small cooperative

pic: © 3D Architects with a vision


Sound good? I guess so, because the market price of such an apartment in a good location is an average of PLN 10,000 in the six largest cities. You have to add the cost of the project, a provision for unforeseen costs, connections, but you can still see that you can get your own high-quality dwelling for 2/3 of the market price. A brief analysis confirms that already with four apartments and an appropriately adapted design containing elements not available in apartments in blocks of apartments (garden, parking right in front of the house, intimate form) you can achieve the effect of "development" of the developer's margin and get a product desired by market demand with many additional advantages and few disadvantages.


advantages of small co-ops:


1. to "develop" the developer's margin and obtain an apartment about 33 percent cheaper.

2. Activation of the dormant entrepreneurship of Poles, who can finally take matters into their own hands, directed at meeting pressing housing needs.

3. A proposal for young Poles struggling with the price barrier for new housing and fearing long-term mortgages, the risk of job loss or interest rate changes.

4. The available investment model of a semi-detached house with four units has many amenities: parking space under the house, garden, cell on the cage, intimate scale.

5. to create a small four-family neighborhood community with strong social ties, which built the house itself and takes care of its maintenance.

6. The project is aimed at micro-enterprises in the construction industry, which are often family businesses and as such can enter the cooperative themselves, using their knowledge and technical facilities.

7. housing produced in this way is marketable and easily marketable, in the event of a change in life plans it can be sold at a profit.

8. This model of housing can also be aimed at people 50+, who, despite having financial resources, have not managed to build houses, and children have already become independent. It can also be a proposal for seniors living in too large apartments or houses, but who want to live in a comfortable, economical apartment with a garden and in a nice neighborhood.


Disadvantages:

1. creating a cooperative requires bringing together four families or individuals who trust each other and who share similar needs, requirements and commitment to the venture.

2. There is a risk that one of the parties to the agreement will withdraw, in which case the others must find a replacement, and the resigning partner must recover his contribution from the successor.

3. The relatively large contribution to the purchase of the plot of land despite spreading the cost among the four partners.

4. The risk of distorting the idea of the project by building on the far outskirts of the city or by developers who are only focused on profit taking over such projects.

gminne spółki powinny realizować politykę mieszkaniową oraz dbać o estetykę i urbanistyczny ład inwestycji

Municipal companies should implement the housing policy and take care of the aesthetics and urban order of the investment - TBS Łódź Wysoka

proj.: 3D Architects with a vision


How can the local government help in accordance with the law on supporting cooperatives?


Looking at the qualitative advantage of the advantages over the disadvantages of this project, I do not want to underestimate the significant disadvantages, raising its risks and pointing out the barriers. At this point , I can finally refer to the Law on Supporting Cooperatives, which came into effect on March 1, 2023, because it perfectly complements my postulates, indicating areas where the municipality can support cooperatives, offsetting the disadvantages and risks indicated above, and these are:


1. the possibility of selling real estate from the municipality's resources to cooperatives on preferential terms, that is, with deferred and installment payments. There is also the possibility of obtaining a discount when reaching 2/3 repayment of the value of the property.

(2) The condition for taking advantage of the preference, and in particular the discount on redemption, is the realization of the investment within five years, which mobilizes shareholders to quickly complete the construction.

3. the municipality providing the discount and support to the cooperative can receive non-refundable support from the budget for investment in the development of plots of land earmarked for further cooperatives, so the local government is also rewarded for its involvement in such a project. This is a great opportunity to popularize and develop the cooperative project and reduce the cost of development by shareholders.

4. The cooperative can count on the assistance of the municipality in the implementation of the investment, for example, in organizational, formal matters, especially in the piloting of the first projects, when both parties to the agreement gain experience in the implementation of the project.

5. A preferential loan can be obtained for the construction itself (currently it's a 2% loan project), and the support of the municipality and shareholders strengthens the position of the borrower vis-à-vis the bank and gives the chance for even better terms.

6. The law regulates the form of the legal contract of the cooperative, but allows for the possibility of concluding a contract in the form of a civil partnership. The statutory scope of the contract regulates, among other things, the rules of representation of the cooperative, the rules of financing and accounting for investments, changes in membership and the terms of termination of the contract.


The cited regulations significantly support the idea of housing cooperatives. Finally, the legislator not only recognized the developing grassroots initiatives, but also precisely defined the legislative tools intended for cooperatives as support. Unfortunately, there was not enough time to promote this project, greatly overshadowed by the 2% loan project. Nothing lost, as the law is in force and may even be strengthened by the announced bills of the new government supporting the development of housing in Poland.


summary


Municipal support of cooperatives can be a veritable building block for the creation and development of housing policy, but with very important added values: supporting entrepreneurship, fostering small and medium-sized enterprises, developing neighborhood social ties based on the idea of cooperatives. This is therefore a great opportunity for an integrated approach to the important and complex problem of housing. The municipality's participation and involvement in the development of model solutions of cooperatives will prevent distortion and deformation of the project, it also creates a huge opportunity for the implementation of ecological solutions thanks to the municipality's support of the best pro-environmental solutions and mediation of external financing. Their list is long and unlimited: heat pumps, green roofs, rainwater retention, the use of gray water, photovoltaics, solar panels, recuperation... In the piloting of such projects, and then their development, could involve companies from the construction industry to create products for small cooperatives.

gminne spółki powinny realizować politykę mieszkaniową oraz dbać o estetykę i urbanistyczny ład inwestycji

Municipal companies should implement housing policy and take care of aesthetics and urban order of investments - TBS Łódź Wysoka

proj.: 3D Architects with a vision


The idea of cooperatives supported by municipalities does not have to be limited to the proposed example of small houses for four families, they can be multi-family buildings, smaller or larger tenements, conversion and division of commercial premises, attics, vacant buildings that are in the housing stock of local governments, for which there is no idea of use. The possibilities are limited only by the energy of those interested in their own cheaper housing, the will and determination and competence of officials.


epilogue


While the text may seem idealistic, it stems from careful observation of existing attempts to apply similar ideas. As an architect, I have done similar commercial projects for my clients. Perhaps the time has come to form a cooperative with friends in the construction industry, employees of our companies, and take up the challenge? In my opinion, it is worth a try. I invite you to cooperate and exchange experiences. Write to jk.3darchitekci@gmail.com

Jakub KRZYSZTOFIK


illustrations © 3D Architects with vision

more: A&B 3/2024 - residential architecture,
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