Housing cooperatives

A housing cooperative, or housing co-op, is a legal entity, usually a cooperative or a corporation, which owns real estate, consisting of one or more residential buildings; it is one type of housing tenure. Housing cooperatives are a distinctive form of home ownership that have many characteristics that differ from other residential arrangements such as single family home ownership, condominiums and renting.

The corporation is membership based, with membership granted by way of a share purchase in the cooperative. Each shareholder in the legal entity is granted the right to occupy one housing unit. A primary advantage of the housing cooperative is the pooling of the members' resources so that their buying power is leveraged; thus lowering the cost per member in all the services and products associated with home ownership.

Another key element in some forms of housing cooperatives is that the members, through their elected representatives, screen and select who may live in the cooperative, unlike any other form of home ownership.

Housing cooperatives fall into two general tenure categories: non-ownership (referred to as non-equity or continuing) and ownership (referred to as equity or strata). In non-equity cooperatives, occupancy rights are sometimes granted subject to an occupancy agreement, which is similar to a lease. In equity cooperatives, occupancy rights are sometimes granted by way of the purchase agreements and legal instruments registered on the title. The corporation's articles of incorporation and bylaws as well as occupancy agreement specifies the cooperative's rules.

The word ''cooperative'' is also used to describe a non-share capital co-op model in which fee-paying members obtain the right to occupy a bedroom and share the communal resources of a house owned by a cooperative organization. Such is the case with student cooperatives in some college and university communities across the United States.

Legal status

As a legal entity, a co-op can contract with other companies or hire individuals to provide it with services, such as a maintenance contractor or a building manager. It can also hire employees, such as a manager or a caretaker, to deal with specific things that volunteers may prefer not to do or may not be good at doing, such as electrical maintenance.

In non-equity cooperatives and in limited equity cooperatives, a shareholder in a co-op does not own real estate, but a share of the legal entity that does own real estate. Co-operative ownership is quite distinct from condominiums where people own individual units and have little say in who moves into the other units. Because of this, most jurisdictions have developed separate legislation, similar to laws that regulate companies, to regulate how co-ops are operated and the rights and obligations of shareholders.

Ownership

Each resident or resident household has membership in the co-operative association. In non-equity cooperatives, members have occupancy rights to a specific suite within the housing co-operative as outlined in their "occupancy agreement", or "proprietary lease", which is essentially a lease. In ownership cooperatives, occupancy rights are transferred to the purchaser by way of the title transfer.

Since the housing cooperative holds title to all the property and housing structures, it bears the cost of maintaining, repairing and replacing them. This relieves the member from the cost and burden of such work. In that sense, the housing cooperative is like the landlord in a rental setting. However, another hallmark of cooperative living is that it is nonprofit, so that the work is done at cost, with no profit motive involved.

In some cases, the co-op follows Rochdale Principles where each shareholder has only one vote. Most cooperatives are incorporated as limited stock companies where the number of votes an owner has is tied to the number of shares owned by the person. Whichever form of voting is employed it is necessary to conduct an election among shareholders to determine who will represent them on the board of directors (if one exists), the governing body of the co-operative. The board of directors is generally responsible for the business decisions including the financial requirements and sustainability of the co-operative. Although politics vary from co-op to co-op and depend largely on the wishes of its members, it is a general rule that a majority vote of the board is necessary to make business decisions.

Management

In larger co-ops, members of a co-op typically elect a board of directors from amongst the shareholders at a general meeting, usually the annual general meeting. In smaller co-ops, all members sit on the board.

A housing cooperative's board of directors is elected by the membership, providing a voice and representation in the governance of the property. Rules are determined by the board, providing a flexible means of addressing the issues that arise in a community to assure the members' peaceful possession of their homes.

Finance

A housing cooperative is normally ''de facto'' non-profit, since usually most of its income comes from the rents paid by its residents (if in a formal corporation, then shareholders), who are invariably its members. There is no point in creating a deliberate surplus—except for operational requirements such as setting aside funds for replacement of assets—since that simply means that the rents paid by members are set higher than the expenses. (It is possible for a housing co-op to own other revenue-generating assets, such as a subsidiary business which could produce surplus income to offset the cost of the housing, but in those cases the housing rents are usually reduced to compensate for the additional revenue.)

In the lifecycle of buildings, the replacement of assets (capital repairs) requires significant funds which can be obtained through a variety of ways: assessments on current owners; sales of Treasury Stock (former rental units) to new shareholders; draw downs of reserves; unsecured loans; operating surpluses; fees on the sales of units between shareholders and new and increases to existing mortgages.

There are housing co-ops of the rich and famous: John Lennon, for instance, lived in The Dakota, a housing co-operative,
and most apartments in New York City that are owned rather than rented are held through a co-operative
rather than via a condominium arrangement.

Market-rate and limited-equity co-ops

There are two main types of housing co-operative share pricing: market rate and limited equity. With market rate, the share price is allowed to rise on the open market and shareholders may sell at whatever price the market will bear when they want to move out. In many ways market rate is thus similar financially to owning a condominium, with the difference being that often the co-op may carry a mortgage, resulting in a much higher monthly fee paid to the co-op than would be so in a condominium. The purchase price of a comparable unit in the co-op is typically much lower, however.

With limited equity, the co-op has rules regarding pricing of shares when sold. The idea behind limited equity is to maintain affordable housing. A sub-set of the limited equity model is the no-equity model, which looks very much like renting, with a very low purchase price (comparable to a rental security deposit) and a monthly fee in lieu of rent. When selling, all that is re-couped is that very low purchase price.

Research on housing cooperatives

Research found that housing cooperatives had residents rate themselves as having the highest quality of life and housing satisfaction of any housing organization in the city. Other research among older residents from the rural United States found that those living in housing cooperatives felt much safer, independent, satisfied with life, had more friends, had more privacy, were healthier and had things repaired faster. Australian researchers found that cooperative housing built stronger social networks and support, as well as better relationships with neighbours compared to other forms of housing. They cost 14% less for residents and had lower rates of debt and vacancy. Other research has found that housing cooperatives tended to have higher rates of building quality, building safety, feelings of security among residents, lower crime rates, stable access to housing and significantly lower costs compared to conventional housing.

By country

Canada

Co-ops in Canada offer an affordable alternative to renting, but waiting lists for the units can be years-long.

France

In 2013, the opening of ''La Maison des Babayagas'', an innovative housing co-op in Paris, gained worldwide attention. It was formed as a self-help community and built with financial assistance from the municipal government, specifically for female senior citizens. Located in the Paris suburb of Montreuil after many years of planning, it looks like any other apartment building. The senior citizens stay out of nursing homes, by staying active, alert, and assisting one another.

The purpose of the Baba Yaga Association is to create and develop an innovative lay residence for aging women that is: (1) self-managed, without hierarchy and without supervision; (2) united collective, with regard to finances as well as daily life; (3) citizen civic-minded, through openness to the community /city and through mutual interaction, engaging in its political, cultural and social life in a spirit of participatory democracy; (4) ecological in all aspects of life, in conformity with the values and actions expressed in the Charter of Living of the House of Babayagas.

Generally, the association's activities are tied to the purpose above, in particular, the development of a popular entity called the University of Knowledge of the Elderly (UNISAVIE: Université du savoir des vieux), and the initiation of a movement to promote other living places that are organized into similar networks.

The community charter sets out expectations for privacy. Each apartment is self-contained. Monthly meetings assure the optimal routines of the building and ensure that each person may participate fully and with complete liberty of expression. Plans set out the routine intervention of a mediator who could help get to the bottom of the causes of eventual conflicts in order to allow for their resolution.

The success of the Paris co-op inspired several Canadian grassroots groups to adopt similar values in senior housing initiatives; these values include autonomy and self-management, solidarity and mutual aid, civic engagement, and ecological responsibility.

Germany

In the Industrialisation in the 19th century there were many housing cooperatives founded in Germany. Presently, there are over 2,000 housing cooperatives with over two million apartments and over three million members in Germany. The public housing cooperatives are organised in the GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen (The Federal association of German housing and real estate enterprise registered associations).

Egypt

The Housing cooperative project in Egypt aims to serve the low-income class, as it provides them with housing units consisting of two rooms, a hall or three rooms and a fully finished hall, with an area ranging from 75 to 90 square meters. In addition, these units are offered at a cost price only, with direct support ranging from 5 to 25 thousand pounds. The beneficiary of this unit can pay its price over a period of 20 years, as 538,000 units have been implemented in all governorates and new cities until 2022, implemented by Ministry of Housing, Utilities & Urban Communities.

India

In India, most 'flats' are owned outright. i.e. the title to each individual flat is separate. There is usually a governing body/society/association to administer maintenance and other building needs. These are comparable to the Condominium Buildings in the USA. The laws governing the building, its governing body and how flats within the building are transferred differ from state to state.

Certain buildings are organized as "Cooperative Housing Societies" where one actually owns a share in the Cooperative rather than the flat itself. This structure was very popular in the past but has become less common in recent times. Most states have separate laws governing Cooperative Housing Societies.

for additional information.

Netherlands

In the Netherlands there are three very different types of organization that could be considered a housing cooperative:

Housing corporation

A ''housing corporation'' (''woningcorporatie'') is a nonprofit organization dedicated to building and maintaining housing for rent for people with lower income. The first housing corporations started in the second half of the 19th century as small cooperative associations. The first such association in the world, ''VAK'' ("association for the working class") was founded in 1852 in Amsterdam. Between 2.4 and 2.5 million apartments in the Netherlands are rented by the housing corporations, i.e. more than 30% of the total of household dwellings (apartments and houses).

Owner association

A ''(house) owners' association'' (''Vereniging van Eigenaren'', VvE) is by Dutch law established wherever there are separately owned apartments in one building. The members are legally owners of their own apartment but have to cooperate in the association for the maintenance of the building as a whole.

Living cooperation

A ''living cooperation'' (''wooncoöperatie'') is a construct in which residents jointly own an apartment building using a democratically controlled cooperative, and pay rent to their own organisation. They were prohibited after World War II and legalised in 2015.

New Zealand

"Company-share" apartments operate in the New Zealand housing system.

Philippines

In the Philippines, a ''tenant-owner's association'' often forms as a means to buy new flats. When the cooperative is set up, it takes the major part of the loan needed to buy a property. These loans will then be paid off during a fixed period of years (typically 20 to 30), and once this is done, the cooperative is dispersed and the flats are transformed into condominiums.

Scandinavia

A ''tenant-owner's association'' ( Swedish: ''bostadsrättsförening'', Norwegian: ''borettslag'', Danish: ''andelsboligforening'') is a legal term