What Is a Housing Cooperative?
A housing cooperative is formed when people join with each other on a democratic basis to own or control the housing and/or related community facilities in which they live. Usually they do this by forming a not-for-profit cooperative corporation. Each month they pay an amount that covers their share of the operating expenses of their cooperative corporation. Personal income tax deductions, lower turnover rates, lower real estate tax assessments (in some local areas), controlled maintenance costs, and resident participation and control are some of the benefits of choosing cooperative homeownership.
In the United States, more than 1.2 million families of all income levels live in homes owned and operated through cooperative associations. People of varying needs and desires have found several ways to apply cooperative concepts in meeting their housing needs.
Cooperative housing is not a new concept. The first housing cooperative in the nation was organized in New York City in the late 1800s. Today, large numbers of housing cooperatives are located in major urban areas such as New York City, Washington, D.C., Chicago, Miami, Minneapolis, Detroit, Atlanta, and San Francisco.
Cooperative members own a share in a corporation that owns or controls the building(s) and/or property in which they live. Each shareholder is entitled to occupy a specific unit and has a vote in the corporation. Every month, shareholders pay an amount that covers their proportionate share of the expense of operating the entire cooperative, which typically includes underlying mortgage payments (if applicable), property taxes, management, maintenance, insurance, utilities, and contributions to reserve funds. There are many benefits to cooperative ownership. Some of these include personal income tax deductions, lower turnover rates, lower real estate tax assessments, reduced maintenance costs, resident participation and control, and being able to prevent absentee and investor ownership.
Housing cooperatives come in many shapes and sizes: cooperatives include townhouses, garden apartments, mid-and high-rise apartments, single-family homes, student housing, senior housing, and mobile home parks. The purchase price of cooperative membership can be left to the market or the price can be maintained at below market in order to preserve affordability. All cooperatives share a common set of principles adopted by the International Cooperative Alliance.
The key aspect in any cooperative is democratic control by the members in order to achieve an agreed upon common objective. Democratic control is typically accomplished through governance by volunteer boards of directors elected from the entire membership. In addition to the board, co-ops often have many committees, such as a membership committee, maintenance committee, activities committee, and newsletter committee. Most co-ops hire a manager or management company to perform management functions; smaller co-ops will often have no paid staff or management but will have members handle all the maintenance and operations responsibilities.
Additional information on the history of housing cooperatives can be found in an article published by NAHC titled, “Brief History of Cooperative Housing.”
Comparison Chart
This comparison chart provides data on housing cooperatives, rental units, single-family ownership, and condominiums.
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Cooperative |
Rental |
Single Family |
Condominium |
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Ownership |
The residents are shareholders in a corporation that owns the property. Owning a share entitles you to occupy a unit. |
Tenants own nothing. On expiration of lease, tenants may be forced to vacate. |
Owners acquire individual title to their dwellings and yard. |
Unit "airspace" owned by individual, plus an undivided share of common elements. |
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Monthly Cost |
Members pay the Co-op for their share of the actual operating cost, building mortgage (if applicable), and real estate taxes, based on the non-profit operation of entire community. |
Tenants pay rent specified in lease. |
Owner must make his or her purchases of whatever is needed, often at higher retail costs. Owner makes mortgage and tax payments to lender. |
Same as cooperative, except mortgage payments and taxes are paid directly to the lender. |
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Move-in Cost |
New members buy their share in the cooperative and also pay the first monthly charge in advance. |
Usually one month's rent is paid as a security deposit, plus the first month's rent. |
Purchaser must buy the property, usually with a mortgage with a down payment of at least 5% and closing costs of 3% or more. |
Same as single family, plus first month's condo fee and often a "contribution to capital" of 1-2 months' fee. |
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Community Control |
Co-op resident members elect their board of directors, which decides all policy matters. The Board usually sets up several committees to help run the community. |
Renters usually have no voice at all in establishing and maintaining community standards. |
Individual owners have no jurisdiction over their neighbors. |
Condo owners, like cooperatives, elect a board of directors. |
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Community Service |
Co-ops provide a natural base for service and activity desired by its members. |
Provided at discretion of landlords. |
On your own. |
Condos similar to co-ops, unless limited by state law. |
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Federal Tax Benefits to Individuals |
Your share of mortgage interest and real estate taxes are deductible on personal income tax return. |
No benefit. |
Mortgage interest and real estate taxes are deductible on personal income tax return. |
Mortgage interest and real estate taxes are deductible on personal income tax return. |
There are a number of different types of housing cooperatives:
Market-Rate Cooperatives
In market-rate cooperatives, shareholders may buy and sell their shares at full market value. St. Francis Square is a market-rate cooperative.
Limited-Equity Cooperatives
Limited equity co-ops limit the resale value of shares. The maximum resale value is predetermined by a formula established in the cooperative's bylaws. Generally targeted at low- and moderate-income people, the purpose of limited-equity cooperatives is to prevent speculation, encourage long-term residency, and preserve the "affordable" character of the co-op for a wide variety of future residents. Many limited-equity cooperatives were developed by nonprofit organizations with government assistance.
Leasing Cooperatives
In a leasing cooperative, the cooperative does not own the building or property. Instead, the cooperative leases the property from its owner. Usually the cooperative has a long-term lease, sometimes with an option to buy. The residents manage and operate the housing on a cooperative basis.
Senior Housing Cooperatives
Senior housing cooperatives are housing communities designed for senior citizens. A number of different types of senior housing cooperatives exist. CSI Support & Development Services is a senior mutual housing association with over 40 buildings in 4 states, housing over 5,000 seniors of modest means. The Senior Cooperative Foundation helps develop senior housing cooperatives in rural areas. In addition, retirement oriented communities have been developed using the cooperative form of ownership, most notably in popular sunbelt locations.
Mutual Housing Association
A mutual housing association is a nonprofit corporation set up to develop, own and operate housing. Mutual housing associations always involve substantial resident participation in the community and are often also owned and controlled by the residents of the housing produced. As in leasing cooperatives, there is no equity accumulation for members, or credit for mortgage principal paid.
Other Cooperative-Like Organizations
The following are types of housing organizations share some similarities with housing cooperatives, but are not necessarily owned on a cooperative basis.
Intentional Communities
As the name implies, intentional communities are for people seeking a large level of community in their living situation, generally focused around a common purpose or shared values. The term intentional community encompasses a broad range of living situations, ranging from a neighborhood-like setting to more communal communities. Intentional communities are typically not technically organized as cooperatives, but they often follow cooperative principles and are democratically controlled by the residents. The Fellowship for Intentional Community is an excellent resource and publishes a directory of Intentional Communities.
Cohousing
Cohousing is a form of housing that offers residents a strong sense of community in a close-knit neighborhood environment. In addition to individual units, cohousing communities generally have extensive common amenities including a common house and recreation areas. Cohousing developments are designed and managed by the residents. Although a few cohousing communities in the U.S. are organized as cooperatives, most are structured as condominiums or planned unit developments. For more information on cohousing, visit the Cohousing Network's website.
Condominiums
In a condominium each resident owns their own unit in a building, instead of owning a share in a corporation that owns the whole building and related areas as in a cooperative. There are monthly carrying charges similar to cooperatives for the operational costs of the common areas and grounds. Also like cooperatives, condominium owners usually elect a board of directors to govern the operations.
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Rental |