Reading # 2          Co-op History/Discussion Club          July 26, 2009           

How Amalgamated got through the Great Depression

[The following historical article describes some of how the Amalgamated 
cooperative survived the Great Depression. It was written by Abraham Kazan 
as part of his article "The Birth of Amalgamated Housing Corporation" 
which appeared in the "30 Years of Amalgamated Cooperative Housing 
1927-1957" journal. It is also reproduced in the 75th Anniversary Journal, 
The Story of A Co-op: The First 75 Years published by the Herman Liebman 
Memorial Fund, New York, 2002.]

The Acid Test - 1932-1936

With the number of applicants always increasing, it seemed to the 
Amalgamated Housing Corporation and, to some extent, Amalgamated 
Dwellings, Inc., that the progress and expansion of the organizations 
would continue indefinitely. Members always paid their carrying charges on 
time. For every member-cooperator who filed an application to withdraw, 
there were several to take his place. No reserves were being set aside for 
the purpose of repurchasing stock. No funds were available for other 
reserves.

In the early 1930's, while economic conditions were getting worse by the 
day, the management of the housing corporations was preoccupied with plans 
for new construction. The fact of the matter is that building 9 was 
completed only in the spring of 1932.

In the summer of 1932 the incomes of most of the cooperators began to 
drop. The number of people desiring to give up their apartments began to 
rise, and the number of those who wished to join was declining. Those who 
still had a desire to become members were skeptical about investing the 
large sum of money needed -- in some instances, it would be their lifetime 
savings. The shortage of money began to be felt.

Together with a good many others, management thought that the unemployment 
which affected the majority of the cooperators would not last very long. 
Many members began to fall behind in the payment of their carrying 
charges. Measures to enforce payment had to be taken. Later on, as 
conditions grew worse instead of better, the mortgagees were asked to 
delay the paying of the mortgage amortization with a promise to repay it 
when economic conditions improved. The mortgagees agreed to this 
arrangement.

The years 1932 to 1936 can be considered the darkest period in the history 
of real-estate business. Mortgage defaults were frequent. Properties were 
foreclosed and taken over by the lenders and then dumped on the market at 
any price. In a large number of cases, the owners, without waiting for 
legal action to be taken against them, voluntarily assigned the rents and 
the title to the mortgaged properties, unable to continue to operate them.

The good reputation that the two Amalgamated cooperative organizations 
succeeded in establishing for themselves during the few years of their 
existence materially helped them during the depression. The lending 
institutions knew that every effort was being made by the organizations to 
keep up their obligations. They had full confidence in the management.

Two other problems equally as difficult confronted the administration:

What was to be done about the member-cooperators who failed to maintain 
their carrying charges? What was to be done about the member-cooperators 
who had to move away and who expected to have their stock repurchased? If 
the corporation failed to exercise its right of repurchasing the members' 
stock and permitted the members to sell their equity to the public, the 
reputation of the cooperative would suffer an irreparable blow.

As the situation was getting worse and almost hopeless, something drastic 
had to be done if the cooperative was to be saved. To begin with, each 
cooperator was advised that he must make every effort to keep up his 
maintenance charges. Simultaneously, the Board of Directors, the House 
Committee, and management agreed that as long as a member made the effort, 
though he actually was unable to pay the required monthly charge, no 
action would be taken against him.

However, if in the opinion of management, a member who could pay 
deliberately tried to avoid payment, drastic action was to be taken. At 
the end of 1936, the corporation found itself with $156,000 in rents 
receivable; however, during this period, eviction proceedings were taken 
against only two members (both not members of any union). This large sum 
of receivables, it must be stated, was eventually collected without the 
loss of a single dollar. Occupancy during the worst months of the 
depression dropped to 95%. It is interesting to note that in the early 
days of the depression the members who were employed set up a fund to 
assist those who were out of work. As the depression deepened this fund 
had to be discontinued.

The second problem was how to repurchase the stock of members who had to 
withdraw. If the cooperative could not offer some plan to repurchase these 
stock, future applicants would loose confidence in the organization. The 
reputation of the cooperative was at stake. The following policies were 
therefore adopted:

1. The outgoing members, instead of receiving their investment in full at 
one time, were all paid an equal share in proportion to their investment.

2. Every dollar not used up in the maintenance of the project was 
channeled to repay the outgoing members.

3. The resources of the A. H. Consumers Society, Inc., the parallel 
cooperative business organization functioning in the development, were to 
be used for repurchasing members' stock.

4. In the case of Amalgamated Dwellings, when members withdrew, the 
Amalgamated Bank was authorized by Messrs. Lehman and Rabinowitz to extend 
loans to the cooperative up to the par value of the stock. This enabled 
the cooperative to redeem the members' stock without difficulty.

These efforts had a beneficial effect. Member-cooperators who were 
wavering whether to stay in the community or to leave, were encouraged to 
remain.

With little money available for investment in a co-op apartment, the 
corporations agreed to rent some of the vacant apartments. In cases where 
an individual was hesitant about making the investment, a plan was 
developed by which he could join on a temporary basis by investing only 
$100 per room. In these cases, families signed a lease for a 2 1/2-year 
period and paid a fixed rental. This rental was usually about $5 to $10 
per month higher than the maintenance charge paid by cooperators for the 
same apartment. If after the 2 1/2 years or at anytime during that period, 
the tenant decided to join as a cooperator, the excess charge was credited 
against the investment. If he decided not to become a member and wanted to 
withdraw, his $100 per room was refunded to him. In such cases, it was 
optional for the corporation to allow him to continue as a tenant.

In all these transactions, A. H. Consumers Society, Inc. acted as an agent 
for the housing corporation. The highest amount of the cooperative stock 
taken over by A. H. Consumers Society during this period was $275,000 or 
almost 30%. The depression years were our darkest hour. By the emergency 
measures described above and by the cooperative spirit of the people, we 
survived. Two other large cooperative developments which had been 
organized about the same time were not so fortunate and became casualties 
of the depression. 

Rebuilding was a slow and tedious process. It took all of ten years before 
the havoc created by the depression could be overcome and new work 
undertaken. As the economic depression subsided, the stock was resold to 
new cooperators and the money was used to pay off the loans, repay the 
deferred payments on the mortgage amortization, and the other obligations 
incurred. The members who had left the community eventually received back 
every dollar of their investment.
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A. H. Consumers Society, Inc.

Immediately after the completion of the first 303 units of the Amalgamated 
Housing Corporation, it was felt desirable to develop other activities 
along cooperative lines. Some of these activities were necessities. For 
example, the public school to which all the children were assigned was 
about nine-tenths of a mile away. City folks are not used to walking that 
far. At a meeting of the cooperative it was decided that if all members 
would contribute $15 per family, a bus would be purchased and the children 
could be taken to and from school as well as brought home for their 
lunches.

The same idea was carried further. Why should each family buy its door to 
door delivery of milk separately? Why not buy the 400 to 500 quarts of 
milk from one source and have our own man distribute it? The same idea 
could be applied to electricity and other commodities and services. The 
problem was who was going to conduct all these business activities? The 
members agreed that a separate corporation be organized to administer 
these activities and each member would invest $10 for one share of stock. 
This corporation was originally called the A.C.W. Service, Inc. This was 
subsequently replaced by A. H. Consumers Society, Inc.

Before very long, this organization assumed the responsibility for many 
activities and proved to be an invaluable adjunct of the housing 
corporation.

This corporation had its own Board of Directors and conducted its business 
separately from the housing cooperative. However, it recognized the fact 
that it existed only by virtue of the existence of the housing 
organization. With that in mind, the president and manager of Amalgamated 
Housing Corporation always acted in the same capacity for the A. H. 
Consumers Society. From time to time, joint meetings were held of the 
House Committee and the Board of Directors of the A. H. Consumers Society 
to act on matters that concerned the community.

In 1936, the public utility company attempted to increase the cost of 
electricity of the housing cooperative by asking the Public Service 
Commission to eliminate conjunctional billing. Up to that time, the 
cooperative was purchasing current at wholesale and metering it to the 
individual cooperator at the prevailing retail rate. The profit was 
rebated to the members in one form or another. Faced with increased 
electrical costs, A. H. Consumers Society built a small power plant, 
generating its own electricity and distributed the current to the members 
of the housing society. During World War II, at the urgent request of the 
government not to use fuel oil, the plant was shut down. By that time the 
plant was fully depreciated.

With the completion of building 9, the A.C.W. Corporation was dissolved 
and the functions performed by that corporation of repurchasing the stock 
from the outgoing members and later reselling it to the incoming members, 
was taken over by the A. H. Consumers Society, Inc. This function, as 
already described, proved to be of immense importance. Several years 
later, when it was agreed to establish a reserve fund for this particular 
purpose, A. H. Consumers Society was made the trustee of this fund. The 
fund at this time amounts to $430,000. 

In 1940 to 1941, when a demand for small units came from an elderly group 
of cooperators, A. H. Consumers Society took on the responsibility to 
erect forty-eight such units-in three two-story buildings. These buildings 
were later incorporated in the Amalgamated Housing development.

Post-War Expansion

After the war, the supply of construction materials was still regulated 
and construction was permitted to be undertaken only for veterans. A pilot 
project was undertaken to accommodate the veterans of the community. Soon 
after that, the Legislature of New York State extended the benefits of the 
Housing Act of 1926 for another period.

Plans were developed to expand the Bronx community by approximately 750 
units. Our plans called for the construction of four large apartment 
buildings, a garage for three hundred automobiles, and a central heating 
plant to serve the entire development.

The new buildings doubled the size of our community; the expansion program 
was undertaken at a cost of approximately $8,000,000. Due to increasing 
costs, each building was constructed separately. The Korean conflict 
delayed our construction somewhat, and the program was not completed until 
1952.

The post-war buildings are much different in appearance from the older 
units. They are twelve stories high and are completely fireproof. 
Balconies and terraces were added to a number of the apartments; this 
innovation has become quite popular recently. The roof of the garage under 
building 8 was landscaped and an off-the-street playground and garden was 
provided for the cooperators. The new buildings were numbered 8, 10, 12, 
and 14.

To avoid a great deal of red tape and technicalities, A. H. Consumers 
Society undertook to take the responsibility of erecting these buildings 
and to turn them over, at cost, to the housing corporation upon 
completion. To do this work under the control of the housing corporation 
would have meant that every subcontract would have to be approved by the 
Commissioner of Housing, thus leading to a lot of delay and other 
complications.

During the same period, A. H. Consumers Society acquired a taxpayer of 
twenty-one stores in the immediate neighborhood of the housing 
development. The enlarged community needed adequate shopping facilities; 
the small co-op food store, which had operated for many years in one of 
the buildings of the Amalgamated Housing Corporation, was by far too 
small. The taxpayer was rebuilt to provide a large co-op supermarket and 
other stores.

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