Benefits of Housing Co-operatives – A Co-operative Guide

There are two main types of Housing Co-operative, non-profit and for-profit. While this guide does not look at the differences between the two, many provinces require that housing co-ops operate on a non-profit basis. If the co-op is non-profit, members cannot sell their shares in the co-op. In for-profit housing co-operatives, members own a share of the co-op, but not the individual unit they live in.

Housing Co-operatives offer several advantages to its members, some of the advantages of Co-operatives are explained as under:

Affordability: Housing co-ops are member-owned and controlled organizations. The monthly housing charges are set by the members to cover the costs of running the co-op.

Governance: Governance is about the overall direction of the co-op and is the job of directors and members of the co-op. Co-ops are democratically run and each member has a vote. Members elect the board of directors, approve the annual budget and set policy.

Security of tenure: A member's right to live in the co-op is protected. A member can live in a co-op for as long as he or she wishes as long as he or she follows the rules (by-laws) of the co-op and pays his or her housing charge (rent) on time.

Community: Housing co-ops can also be strong communities, where members actively participate in the business of the co-op. In addition to standard tasks, such as approving the annual budget, members often volunteer with maintenance tasks (e.g. lawn care) and are involved in other community-based projects such as producing a co-op newsletter.

Some of Benefits of Housing Co-operatives are enlisted as under:

Lower down payment, much lower closing costs, economies of scale, longer mortgage term all make co-ops more affordable than other ownership housing.

Tax Deductions:
For Income Tax purposes, the Co-op member is usually considered a homeowner and, as such, can deduct his or her share of the real estate taxes and mortgage interest paid by the cooperative.

Living in a Co-op Stays Affordable:
Members have no reason to substantially increase monthly charges unless taxes or operating costs go up, so monthly charges remain reasonable. Further all the expenses are divided within all members of the society, as opposed to a single house, where the owner has to bear all the expenses.

Co-ops can provide for accumulation of individual member equity. For market-rate co-ops, the accumulations of equity and resale prices are based on the market. Limited-equity co-ops establish limitations on the accumulation of equity to assure long-term affordability to new members.

Limited Liability:
Members have no personal liability on the Co-op mortgage. The cooperative association is responsible for paying off any mortgage loans. This can often make it possible for persons whose income might not qualify them for an individual mortgage to buy a membership in a limited equity co-op.

Consumer Action:
Through their Co-operative association, members can jointly exert influence in order to change tax rates and utility prices and obtain improved services from local governments. The Co-op, as consumer advocate, can also join with other organizations.

Co-op members can benefit from economy of scale in Co-op operating costs as well as from not-for-profit operation. Also, when there are "transfers", only the out-going member's equity must be financed by the incoming member. Transfers of shares are subject to fewer settlement costs.

Elimination of Outside Landlord:
Co-ops offer control of one's living environment and a security of tenure not available in rental housing.

Community Control:
As mutual owners, member residents participate at various levels in the decision-making process. This is not true of tenants who usually do not have the opportunity to exercise responsibility. Members own the cooperative together and have the security of being able to remain in their homes for as long as they wish, as long as they meet their monthly obligations, and abide by the co-op bylaws, rules, and regulations.

Cultural Diversity:
Many Co-op members indicate that the possibility for interaction with people from different backgrounds, cultures, and income levels is a positive factor in their decision to become a member.

Extended Services:
By establishing cooperative procedures and working together, people are able to provide services for themselves that otherwise would be impossible to obtain. When one cooperatively organized venture is successful it often becomes clear that people can be successful in another area as well. As a result, the original effort often can be strengthened. Examples include athletic teams, co-op preschools, credit unions, tutoring, food-buying clubs, arts and crafts, and senior health care and support services.

Shared Maintenance Responsibilities:
Co-op members usually have limited direct maintenance responsibilities. The co-operative association is responsible for major repairs, insurance, replacement of worn-out equipment, and upkeep of common grounds and facilities.

Vandalism and Security:
Co-op members vigorously protect their association's property. An important benefit of converting rental properties to co-op ownership is reduction in vandalism and abuse of property and improved and shared security arrangements. And recent studies show that the co-ops presence in the neighborhood brings neighborhood crime down.

Members of the National Association of Housing Cooperatives agree that Co-operative Housing associations are most successful when operated in accordance with specific recommended practices, in addition to the general co-op principles.

The co-operatives board of directors should keep its members informed of all its actions. A regular communication system-a frequent newsletter, information bulletins, special meetings, solicitation of members for opinions and priorities-strengthens the relationship between the board of directors and the members. Leader accountability is central to the co-op concept. The board of directors should depend upon the two-way nature of communication to guide them in all decision-making.

The Co-operative association must maintain adequate financial reserves to protect the cooperative and its members' interests. These usually include a general operating reserve and a reserve for replacing components of buildings as they deteriorate. Such reserves reduce the possibility of members having to pay unexpected special charges in emergencies. An annual audit should be conducted by professional accountants and made available to all members.

To protect the interests of the remaining residents, the co-op board must have the right to approve incoming members who take the place of those leaving the cooperative. A credit check and a visit with the membership committee are usually required. This process also helps orient the incoming member to their rights and responsibilities as co-op members.

Subleasing should be permitted only for the short-term absence of a member, if allowed at all. If permitted, the length of the sublease agreement and the amount of payment should be determined by the cooperative. To allow subleasing on any larger scale is seen as a return to absentee rental ownership.

-      Adv. R. P. Rathod.