Housing Cooperatives: A Unique Type Of Home Ownership

A housing cooperative, or co-op, is a legal entity, usually a corporation, which owns real estate, consisting of one or more residential buildings.

Housing cooperatives are a distinctive form of home ownership that has many characteristics that differ from other residential arrangements such as single family 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.

Co-ops are often less expensive than apartments because they operate on an at-cost basis, collecting money from residents to pay outstanding bills.

Another key element is that the members, through their elected representatives, screen and select who may live in the cooperative, unlike any other form of home ownership. Occupancy rights are sometimes granted subject to an occupancy agreement, which is similar to a lease. The corporation’s articles of incorporation and bylaws, as well as occupancy agreement specify the cooperative’s rules. Co-ops must abide by the laws that govern fair housing, but they can be more restrictive than other housing options when it comes to ownership requirements. Because there is no landlord and there are no tenants, the rules for purchasing shares in the partnership are set by the partners. For example, new buyers may be required to have a specific net worth or a certain debt-to-income ratio in addition to demonstrating the ability to meet the financial obligations of the co-op purchase. A background check and credit check may also be required.


Each resident or resident household has membership in the co-operative association. 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. 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 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. 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.


A housing cooperative is normally de facto non-profit, since usually most of its income comes from the 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 fees paid by members are set higher than the expenses. 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; drawdowns of reserves; unsecured loans; operating surpluses; fees on the sales of units between shareholders and new and increases to existing mortgages.

Advantages and Benefits

Many people like the living environment of co-ops, since they tend to have a low turnover of neighbors, all the maintenance and repairs are taken care of by the corporation, and they have a say in many aspects of the building. Additionally, having so many people working together can make it easier to get new services from local governments, or to get discounts on things like utilities or cleaning services. Co-op apartments may provide services not found in other living arrangements, like planned activities. Generally speaking, co-ops are more secure than other types of housing, and have fewer instances of vandalism. Because of the inherent self-governance in cooperative housing, members are motivated to be active in community service activities and social organizations. This is the driving philosophy behind cooperative housing, which can be attractive as the underpinning for a deliberate community social structure. Transferring the membership of a co-op apartment can be easier than selling another type of housing, since, as long as the board approves the sale, the resident just needs to transfer a stock certificate to the new resident. This eliminates the need for paperwork like deeds. Also, some of the monthly fees may be tax-deductible. Real estate taxes generally are deductible.

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