Housing cooperative

A housing cooperative, or housing co-op, is a legal entity which owns real estate consisting of one or more residential buildings. The entity is usually a cooperative or a corporation and constitutes a form of housing tenure. Typically, housing cooperatives are owned by shareholders, but in some cases they can be owned by a non-profit organization. They 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.[1]

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 or membership agreement, which is similar to a lease. In equity cooperatives, occupancy rights are sometimes granted by way of purchase agreements and legal instruments registered on the title. The corporation's articles of incorporation and bylaws together with the occupancy agreement specify the cooperative's rules.

The cooperative is membership based, with membership in equity cooperatives 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 or a membership committee, screen and select who may live in the cooperative, unlike any other form of home ownership.

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 upkeep tasks at which volunteers may hesitate or may not be skilled, such as electrical maintenance.

In equity cooperatives and in limited equity cooperatives,[2] a shareholder owns a share of the co-operative housing corporation, but does not directly own any real estate.[3] In non-equity co-operatives, the people who live in them are members but have no equity at all, owning neither shares nor land. Co-operative ownership is quite distinct from condominiums where people own individual units and have little say in who moves into the other units.[4] 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",[5] 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.[6]

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

Management

In larger co-ops, members of a co-op typically elect a board of directors from amongst themselves 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.[7]

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 renting out space in the cooperative commercially, or a subsidiary business which could produce surplus income to offset the cost of the housing, but in those cases the revenue is used to reduce the costs of housing for the members.)

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 by shareholders; and increases to existing mortgages.

Housing cooperatives include buildings such as The Dakota. In New York City, a portion of owner-occupied apartments are held through cooperative arrangements rather than condominiums.

Research on housing cooperatives

Research in Canada 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.[8] 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.[9] 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.[10] They cost 14% less for residents and had lower rates of debt and vacancy. Other US 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.[11]

By country

See also

• Cohousing
• Condop
• Subsidized housing
• Worker cooperative

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