Mutual Ownership Defense Housing Division - Mutual Home Ownership Concept

Mutual Home Ownership Concept

One of the United States government's plans for middle-class housing was the Mutual Ownership Defense Housing Division of the Federal Works Agency (also sometimes referred to as the "Camden Plan" in honor of the city closest to the first project at Audubon, New Jersey). From the conception of the Division; through the development of its eight projects;, and to its demise at the hands of inept management, wartime limitations and shortages, and attacks from powerful enemies was only a short few years. By the conclusion of the Second World War, the Mutual Ownership Defense Housing Division was all but forgotten. The Division's eight projects were presented by critics as unworkable and highly unattractive projects in the economic and political environment of the post-war period. But almost seventy years later, all but one (Dallas Park) of these projects is reported as continuing to operate as highly successful mutual housing corporations. The passage by the United States Congress of the Housing Act of 1937 can be thought of as a reaction to criticisms of earlier New Deal low-income housing programs operated through the office of the Federal Emergency Administrator of Public Works. Many officials were concerned about the over-centralization and disregard for local involvement and control in these early experimental programs.

The Mutual Ownership Defense Housing Program, as designed by Westbrook and his team, called for government construction of houses or apartments to be occupied—and eventually owned—by middle-income defense workers. A key to the plan was the commitment made by the federal government to sell the projects, at the conclusion of the emergency period, to a non-profit Mutual Housing Corporation made up of the projects' residents. This cooperative, non-profit corporation would be initially supported and advised by the government and later turned over completely to the members. This corporation would be responsible for amortizing the government backed mortgage over a 45 year period through monthly payments that included a 3% interest charge on the unpaid balance. Each of the project's residents would be a member of the corporation, and receive a contract from the corporation entitling him/her to perpetual use of his/her unit and one share of stock in the corporation. The monthly payment made by each member to the corporation would include individual amortization payments based on a 30 year rate, as well as set costs for maintenance, taxes, insurance, major repairs, etc. Each share was interchangeable among residents, thus allowing families to easily exchange different size units as family sizes and needs changed over the years.

As an added bonus, each member would build ownership equity within the corporation,

"since, during the amortization period, the tenant is paying off his share of the mortgage in 30 years, rather than the 45 years allowed the corporation, he is in effect enabling the corporation to make prepayments on the principal owed to the Government. In this way he builds up an equity, or cash value, equal to the original value of the house, less depreciation and less the amount of principal still unpaid. Should he wish to withdraw from the project the equity is returnable to him in cash. Moreover, if for hardship reasons such as unemployment or illness he is unable to meet his monthly payments, the equity can be drawn upon to tide him over."

This equity could also be available to the Corporation as an emergency fund.

In a mutual home ownership corporation, rents are kept low by creating an economy of scale. There are also savings for mass-construction, improved land use, centralized facilities, operating economies, and maintaining a non-profit status. Costs can also be contained—although controversially—by the federal government providing all necessary public works (i.e. sewers, streets, curbs, sidewalks) through the Works Progress Administration (WPA). According to Colonel Lawrence Westbrook, membership in the community should be based on a process in which individuals of predominantly similar income groups from a cross-section of area occupations, and from different age groups, are selected. These demographics made the community less vulnerable to economic crisis, while the differing family sizes and space needs allowed for flexibility in housing requirements. Plans called for the final selling price of the Mutual Housing project to be set through negotiations between two separate appraisers—one representing the federal government and the other representing the Corporation—and title would be transferred at the 20% amortization point.