What is a Housing Cooperative?
A housing cooperative is a residence that is collectively owned and controlled by its members (usually the people who live there). Each community is unique and co-ops can vary greatly in size, demographics, and house culture. Cooperative living tends to be more affordable since it allows groups of people to jointly purchase property and food and share resources ranging from babysitting to yard work. Co-ops also operate at-cost. Occupancy charges are based on the actual costs of the home, so there is no landlord making a profit off of the residents.
Housing co-ops can be set-up in several main ways:
Market Rate or Equity Co-op: Individual units are bought and sold at market value similar to a condo. However, members own a share of the co-op, not a specific piece of property. While living at the co-op, residents have a lease to occupy a specific unit. Co-op member-owners control who is eligible to purchase a co-op unit. When a member leaves the co-op, their share must be "bought out" by a new member. This option can be a good match for people who want to earn equity and/or who have funds from selling a house that they want to reinvest. This model is not accessible to people without savings.
Limited Equity Co-op: In its bylaws, a co-op can limit the maximum resale price of its units. This helps to keep the co-op affordable. When a member sells their unit, any return on the sale is limited by the pre-determined formula stated in the bylaws.
Zero Equity Co-op: Residents have full decision-making power but do not own shares in the co-op. Each resident has a contract similar to a lease that allows them to live in a specific unit. Members pay a monthly fee to the co-op (similar to rent) that covers the operating expenses of the co-op. When a member leaves, they do not receive any equity. New members do not need to "buy in", they only need to pay the monthly fee for their unit. This option is accessible for people who do not have the financial resources to buy a share of a co-op.
Leasehold Co-op: The co-op leases property from a landlord or non-profit organization, and operates the building as a cooperative. Members do not have any ownership in a leasehold co-op, but, the leasehold arrangement often gives residents access to inexpensive buildings owned or controlled by charitable organizations and to management help and oversight. Reasons for this arrangement: 1) When the non-profit partner wants to maintain some control over the use and occupancy of the building, 2) When the housing is intended to serve a population that is temporary or transitional (such as student co-ops), or 3) To qualify for types of financing that do not permit resident ownership, like low-income housing tax credits.