Housing cooperative
Encyclopedia
A housing cooperative is a legal entity—usually a corporation
—that owns real estate
, consisting of one or more residential buildings. (This is one type of housing tenure
.) Each shareholder in the legal entity is granted the right to occupy one housing unit, sometimes subject to an occupancy agreement, which is similar to a lease
. The occupancy agreement specifies the co-op
's rules. 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 that is owned by a cooperative organization. Such is the case with student cooperatives in some college neighborhoods in the United States.
A shareholder in a co-op does not own real estate, but a share of the legal entity that does own real estate. Co-operative ownership is quite distinct from condominium
s where people own individual units and have little say in who moves into the other units. 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.
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
is generally responsible for the business decisions including the financial requirements and sustainability of the co-operative. Although politics vary from co-op to co-op and depend largely on the wishes of its members, it is a general rule that a majority vote of the board is necessary to make business decisions.
from amongst the shareholders at a general meeting, usually the annual general meeting
. In smaller co-ops, all members sit on the board.
The board typically elects its own officers, such as a president, vice-president and so on. Usually, the directors are volunteers, or are paid an honorarium
. The board may then establish standing committees from among the shareholders, who usually also volunteer their time, to either handle the business affairs of the co-op or make recommendations to the full board on such issues as its finance, membership and maintenance of its housing units.
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. (Note, however, that it's quite possible for a housing co-op to own other revenue-generating assets, such as a subsidiary business which could produce surplus income to offset the cost of the housing, but in those cases the housing rents are usually reduced to compensate for the additional revenue.)
It is relatively difficult to start a housing co-op because if the idea is, for instance, to build a building or group of buildings to house the members, this usually takes a significant mortgage loan
for which a financial institution will want assurances of responsibility. It may also take a year or more for the members to organize the design and construction, as well as time and foresight to establish even basic organizational policies. It is rare that these kinds of skills of organization are available in a random group of people who often have pressures on their existing housing. It may be somewhat easier to organize a group of closely related housing units. This opportunity may arise, for example, if an existing apartment building's owner is thinking about selling it.
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 between shareholders and new and increases to existing mortgages.
There are housing co-ops of the rich and famous: John Lennon
, for instance, lived in The Dakota
, a housing co-operative,
and most apartments in New York City
that are owned rather than rented are held through a co-operative
rather than via a condominium
arrangement.
With limited equity, the co-op has rules regarding pricing of shares when sold. The idea behind limited equity is to maintain affordable housing
. A sub-set of the limited equity model is the no-equity model, which looks very much like renting, with a very low purchase price (comparable to a rental security deposit) and a monthly fee in lieu of rent. When selling, all that is re-couped is that very low purchase price.
Co-ownership co-ops are generally older apartment buildings, incorporated before the Ontario Condominium Act, 1973 came into existence, where shareholders each own one voting share in the corporation that owns the building and have a registered right to occupy individual units as described on their share certificate. Most of these types of co-ops date from the thirties, forties and fifties and are in the city of Toronto. They are similar to condominiums, in that units may be bought and sold by private sale or on the open market. Until relatively recently, these units tended to be bought by older people with home equity who could buy the unit outright, as it was difficult to get a mortgage against these units. However, a number of Ontario credit unions are now offering limited financing, provided that that individual co-op corporations meet their fiscal standards, making these units affordable housing options for younger buyers. Incoming owners must be approved by the building's Board of Directors, and agree to abide by building bylaws and Occupancy Agreements.
Equity co-ops are buildings in which individuals purchase a percentage share of the building and the land on which it is built tied to the square footage of their unit; all owners own the building collectively, with exclusive rights to occupy their own unit. More credit unions will offer financing against them than against co-ownerships. They are a relatively new form of construction, designed to encourage owner occupancy by having the building's corporation hold back a percentage of the unit's share equity to ensure owner occupancy. This legal structure is used as an alternative to condominium registration, either when the government will not allow conversion of an existing apartment building to a condominium, or to avoid the expense and difficulty of doing so.
Then there are co-ops that provide all the privileges of ownership except for the right to make (or lose) money on a primary residence and are run by the people who live there.
The federal and provincial governments in Canada
developed legislation in the 1970s that aided potential co-ops by providing start-up funding and financing through mortgages via an agency called the Canada Mortgage and Housing Corporation
(CMHC). The government simultaneously began to encourage the development of resource groups to contract with fledgling boards of directors of housing co-ops to develop co-operatives either in turnkey buildings or buildings designed and constructed by architects and builders with which the board contracted to deliver the service. Supervised by the board, the resource groups marketed the units to suitable members, educated them about their rights and obligations as co-operators, and established a management structure which usually included paid staff. These organizations helped in forming initial policies and holding the organization together while all the necessary work is done.
The federal government tied its loan assistance to requirements that these housing co-ops provide a percentage of their units, usually at least 15 to 20 per cent, for what are termed income-tested residents. These people voluntarily provide information to the co-op on a confidential basis about their gross income, and their rent is calculated according to a formula. If the calculated rent is less than the market rent of the units, then the federal government, through another formula, would provide funding to those units to bring their unit revenue up to the market rate. This produced mixed-income co-op housing, in which relatively well-off people lived side-by-side with relatively low-income people and worked with them on committees. This often had the ripple effect of improving the financial health of those less well-off. (It's interesting to note that, depending on your political point of view, such government payments for offsetting the rent could be considered subsidy of the low-income people, or a contractual business arrangement between the government and the co-op which helps to stabilize revenue to the co-op in exchange for accomplishing a social goal for the government for a specific period. This dichotomy is typical of the fact that a housing co-op is somewhere between a corporation and a social agency, and where one places it depends on one's viewpoint—and the collective viewpoint of each housing co-op.)
Political will dissipated in Canada in the 1990s, however, as other issues occupied politicians and financial belt-tightening by the governments reduced the funds available for the mortgages. In 2004 and 2005, however, the political winds shifted back towards the idea of developing more low-income housing. However, not-for-profit housing co-operatives are committed to the mixed-income concept and have not been able to make much use of the few opportunities that have come available in recent years.Also, the term of many of the government agreements concerning funding for housing subsidies are coming to an end, provoking a debate in individual co-ops and the co-op movement on the extent to which co-ops should continue to be mixed-income forms of housing.
In Canada, there are associations of housing co-operatives. The major one is the Co-operative Housing Federation of Canada (CHF Canada). Most provinces have similar organizations for their area, but many are stand-alone members of the CHF Canada, as opposed to being branches of it. Each such organization charges its member co-operatives a fee based on the number of housing units in the co-op to pay for staff to do its work. This includes lobbying governments, setting up self-help funding and the like. These organizations do not act for individual members, and do not give members advice when the member encounters problems with the Board of their co-op. In most jurisdictions there are no organizations for members of housing co-operatives, in contrast with tenants in a traditional landlord-and-tenant relationship, who can be assisted by various tenant advocacy groups.
In Ontario, the eviction of members of a housing co-operative is governed by special rules set out in the Co-operative Corporations Act. The Board of Directors of the co-operative initiates the process by sending the member a notice to appear, requiring the member to attend at a Board meeting at which that member's eviction will be considered. If the Board votes to evict, the member has a right of appeal to the membership as a whole. In order to enforce the eviction, the Board must bring an application to a judge of the Superior Court, on which occasion the member has the opportunity to present his/her case to the judge; the judge considers whether the eviction process was conducted fairly and in accordance with due process, and has a residual discretion to refuse the eviction should the judge consider it fair to do so, notwithstanding the decision of the Board. Sometimes this hearing is conducted like a trial, with oral evidence from both sides, while at other times it is conducted based only on written documents submitted to the court; the practice varies from judge-to-judge and courthouse to courthouse, and there is no consensus on the proper procedure or what right a member has to be heard. This process is different from evictions of rental tenants, which proceed in Ontario before a specialized tribunal and in which the tenant is always entitled to an oral hearing. The standard of deference that judges should show to the decisions of Boards is a controversial and unresolved issue in the law, with various cases taking seemingly inconsistent positions on the issue.
A co-operative housing project can resemble a traditional apartment building, or it can be the basis of an intentional community
.
"Building co-operatives
" ("self-build housing co-operatives" in British parlance, which distinguishes them from worker co-operatives in the building trade) are formed by members who cooperate to build their homes but own their houses on completion. Building co-ops were extremely popular across Canada from the 1930s to the 1960s.
Certain buildings are organized as "Cooperative Housing Societies" where one actually owns a share in the Cooperative rather than the flat itself. This structure was very popular in the past but has become less common in recent times. Most states have separate laws governing Cooperative Housing Societies.
However for most practical purposes there is very little difference in buying/living between the two options.
in the 19th century there were many housing cooperatives founded in Germany. Presently, there are over 2.000 housing cooperatives with over two million apartments and over three million members in Germany. The public housing cooperatives are organisated in the GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen
(The Federal association of German housing and real estate enterprise registered associations).
: bostadsrättsförening, Norwegian
: borettslag
, Danish
: andelsboligforening) is a legal term used in some Nordic countries
(Sweden
, Finland
and Norway
) for a type of joint ownership
of property in which the whole property is owned by a co-operative association, which in its turn is owned by the members. Each member holds a "stake" in the association that is proportional to the area of his apartment. Members are required to have a tenant-ownership, which represents the apartment
, and in most cases live permanently at the address. There are some legal differences between the countries, mainly concerning the conditions of ownership.
Tenant-owner's associations were established during the 19th century and were originally a United Kingdom
-based concept (building societies
). In Sweden, large non-profit organizations such as HSB and Riksbyggen has constructed thousands of properties for tenant-owner's associations. The market price of existing tenant-ownership shares is often very high, normally much higher than the original stake price.
co-op membership is a common form of real estate and home ownership. On the other hand, most Finns probably wouldn't use the co-op term for the form of ownership described here. Owning shares that correspond to one apartment in a housing company is generally considered as much owning your own home as actually directly owning a (single family) house.
Except for a very limited number of co-ops that follow the strict Rochdale Principles
of one vote, all Finnish co-ops are incorporated as (non-profit) limited-liability companies (asunto-osakeyhtiö
).
Membership of a co-op is obtained by buying the shares on the open market, most often through a real estate agent. No board approval is needed to buy shares. In some older co-operatives old members have the right of pre-emption, i.e. the right to buy the shares at the set market price.
Neither is there any requirement for members to live in the co-operative. Owning of apartments for rent is a common form of saving and private investment.
The first housing cooperatives were built around 1900, many of them in the Helsinki
neighborhood of Katajanokka
, in the national romantic Jugend style. Initially many co-ops were set up by the future members themselves, often workers or artisans in the same trade. By the 1920s co-op founding was the business of professional real estate developers. After World War II
nationwide non-profit developer organizations were formed and a system of government provided loans (ARAVA) was introduced. Sale of shares in co-ops with state loans were restricted by limited equity rules for 50 years, the price of the shares was limited by an index.
The Finnish model of the housing co-op was also the basis of the modern U.S. co-ops, as the first cooperative the Finnish Home Building Association in Brooklyn was started in 1918 by Finnish immigrants.
Each housing cooperative has their own bye-laws. The members hold annual meetings in the housing cooperative, in which they elect a board of directors that take on the responsibility of managing the cooperation during the upcoming year. In most normal-sized cooperatives the board members are recruited among the inhabitants. The board sets the annual fee, secures proper administrative procedures, keeps the property in good condition, and may initiate large renovation projects when necessary. The board is also involved when a member sells his apartment (i.e. sells his right to inhabit the apartment) to someone else, as the board has to make decisions on allowing the exit of old members and the entry of new members. If the buyer of a bostadsrätt is found financially viable, the board has no right to turn down a membership application. The board is also involved when individual members want to initiate large renovation projects, or when individual members want to rent out the apartment to a non-member.
The housing cooperative is a special legal entity, regulated in Swedish law. It has the same obligations of bookkeeping and issuing annual reports as companies and it can take mortgages in the property if needed. In addition, each member may also take mortgages in his bostadsrätt in order to finance his acquisition of it. The annual fee paid by the members to the cooperative is intended to cover the operational and financial expenditures of the cooperative. The financial situation of the Swedish cooperatives vary a lot, and on rare occasions cooperatives may go bankrupt. If bankruptcy occurs, the property is sold and the remaining assets are shifted out to the members (who may stay on as tenants or try to form a new cooperative).
In existing properties, tenants may form a housing cooperative together, and then make an offer to the owner to buy the property. When such a cooperative has been formed, it automatically becomes the first prospective buyer should the owner desire to sell. The acquisition is financed by a combination of equity (i.e. the 'stakes' paid by the members) and bank loans.
In properties intended to be owned by housing cooperatives from the start, the construction company normally forms a cooperative when the building is erected, and then sells the different apartments (i.e. the rights to inhabit them) at fixed prices. When all apartments are sold, the new members take over the responsibility for the property and elect their own board of directors.
, housing co-ops are usually categorized as corporations or LLC
s and are found in abundance from Madison, Wisconsin
to the Greater New York metropolitan area
. There are also a number of cooperative and mutual housing projects still in operation across the US that were the result of the purchase of federal defense housing developments by their tenants or groups of returning war veterans and their families. These developments include seven of the eight middle-class housing projects built by the US Government between 1940-42 under the auspices of the Mutual Ownership Defense Housing Division
of the Federal Works Agency
.
laws that have made many landlords want to get out of the rental property market. In New York, cooperatives are scattered throughout New York City
itself, Westchester County, New York
(which borders the city to the north) and towns in New Jersey
that are immediately across the Hudson River from Manhattan
, such as Fort Lee
, Edgewater
, or Weehawken.
Unlike in other parts of the world, most of these housing co-ops did not develop as a result of social engineering
. Apartment buildings and multiple-family housing simply make up a more significant share of the housing stock in the New York City area than in most other US cities, and the cooperative form of ownership has dominated over the condominium form. Reasons suggested to explain why cooperatives are relatively more common than condominiums in the New York City area are:
In fact, the November 1882 edition of Harper's Magazine describes several cooperative apartment buildings already in existence, and describes plans to build more.
Most of the housing cooperatives in the Greater New York
area were converted to that status during the 1980s; generally they were large buildings built between the 1920s and 1950s that a single landlord or corporation owned and rented out that became unprofitable as rental properties. To encourage individual ownership of units, the initial buyers of units (buying from the owner of the entire building) did not have to be approved by a board. Also, the rental tenants living in the building at the time of the conversion were usually given an option to buy at a discount. If the tenants were rent controlled, the law usually protects them by allowing them to stay as renters and the unit may not be occupied by a purchaser until said tenant dies or moves out. Many of these buildings, especially in Manhattan
, are actually quite luxurious and exclusive; many celebrities live in them and some famous people are even rejected by the board. In the 1990s and 2000s some rental buildings in the Chicago
, Washington, DC, and Miami-Fort Lauderdale-West Palm Beach areas went through a similar conversion process, though not to the degree of New York
.
Many of the cooperatives originally built as co-ops were sponsored by trade union
s, such as the Amalgamated Clothing Workers of America
. One of the largest projects was Cooperative Village
in Lower East Side
of Manhattan
. The United Housing Foundation
was set up in 1951 and built the Co-op City
in Bronx, and were built by architect Herman Jessor
. One of the first subsidized, fixed-value cooperatives was Morningside Gardens
in Manhattan's Morningside Heights.
Another dynamic also contributed to the large number of cooperatives established in the 1980s and 1990s in New York City – in this case by low- and moderate-income tenant groups.
In the 1970s, many New York City private landlords were struggling to maintain their aging properties in the face of high interest rates, redlining, white flight and rising fuel costs. The period also saw some landlord-induced arson to obtain insurance proceeds and widespread non-payment of real estate taxes – over 20% of multi-family residential
properties were in arrears in the mid-1970s. In 1977, the city passed Local Law #45, which allowed the city to begin foreclosure proceedings after just one year of non-payment of taxes, not three, resulting in the takeover of thousands of buildings, many of them occupied, by the city of New York through a legal action known as an in rem foreclosure. In September 1978, the city’s housing agency, the New York City Department of Housing Preservation and Development
(HPD), created a series of new housing programs designed to give building residents and community groups control and eventual ownership of in rem buildings.
The Urban Homesteading Assistance Board
(UHAB), established in 1974, began to assist residents of these buildings to manage, rehabilitate and acquire their buildings, and form limited-equity housing co-operatives. Working with the city’s housing agency, its existing loan programs and the power to dispose of abandoned property to non-profit organizations, as well as the state laws governing the establishment of co-operatives, UHAB was able to provide low-income people with the tools – seed money, legal advice, architectural plans, bookkeeping training – to build and run limited-equity housing co-operatives. Through a long-standing contract with the city to provide training and technical assistance to residents of buildings in the Tenant Interim Lease (TIL) Program, UHAB has worked with more than 1,600 coops, preserving over 30,000 units of affordable housing.
Some cooperatives in New York City do not own the land upon which their building is situated. These are known as "Land Lease Buildings" and often have significant drawbacks for cooperative owners.
.
Most are based in urban areas and consist of affordable shared accommodation where the members look after the property themselves. Waiting lists can be very long due to the rarity of housing co-operatives. In some areas the application procedure is integrated into the council housing application system. The laws differ between England and Scotland. The Confederation of Co-operative Housing provides information on housing cooperatives in the United Kingdom. The Shelter website provides information on housing and has information specific to England
and Scotland
.
The Catalyst Collective provides information about starting co-operatives in the UK and explains the legal structure of a housing coop. Radical Routes
offers a guide on how to set up a housing co-operative.
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
—that owns real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
, consisting of one or more residential buildings. (This is one type of housing tenure
Housing tenure
Housing tenure refers to the financial arrangements under which someone has the right to live in a house or apartment. The most frequent forms are tenancy, in which rent is paid to a landlord, and owner occupancy. Mixed forms of tenure are also possible....
.) Each shareholder in the legal entity is granted the right to occupy one housing unit, sometimes subject to an occupancy agreement, which is similar to a lease
Lease
A lease is a contractual arrangement calling for the lessee to pay the lessor for use of an asset. A rental agreement is a lease in which the asset is tangible property...
. The occupancy agreement specifies the co-op
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
's rules. 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 that is owned by a cooperative organization. Such is the case with student cooperatives in some college neighborhoods in 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 things that volunteers may prefer not to do or may not be good at doing, such as electrical maintenance. However, as many housing cooperatives strive to run self-sufficiently, as much work as possible is completed by its members.A shareholder in a co-op does not own real estate, but a share of the legal entity that does own real estate. Co-operative ownership is quite distinct from condominium
Condominium
A condominium, or condo, is the form of housing tenure and other real property where a specified part of a piece of real estate is individually owned while use of and access to common facilities in the piece such as hallways, heating system, elevators, exterior areas is executed under legal rights...
s where people own individual units and have little say in who moves into the other units. 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. Members have occupancy rights to a specific suite within the housing co-operative as outlined in their "occupancy agreement", or "proprietary lease" which is essentially a lease.In some cases, the co-op follows Rochdale Principles
Rochdale Principles
The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The...
where each shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
has only one vote. Most cooperatives are incorporated as limited stock companies
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
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
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
is generally responsible for the business decisions including the financial requirements and sustainability of the co-operative. Although politics vary from co-op to co-op and depend largely on the wishes of its members, it is a general rule that a majority vote of the board is necessary to make business decisions.
- See also Strata titleStrata titleStrata title is a form of ownership devised for multi-level apartment blocks and horizontal subdivisions with shared areas. The 'strata' part of the term refers to apartments being on different levels, or "strata"....
Management
In larger co-ops, members of a co-op typically elect a board of directorsBoard of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
from amongst the shareholders at a general meeting, usually the annual general meeting
Annual general meeting
An annual general meeting is a meeting that official bodies, and associations involving the public , are often required by law to hold...
. In smaller co-ops, all members sit on the board.
The board typically elects its own officers, such as a president, vice-president and so on. Usually, the directors are volunteers, or are paid an honorarium
Honorarium
An honorarium is an ex gratia payment made to a person for their services in a volunteer capacity or for services for which fees are not traditionally required. This is used by groups such as schools or sporting clubs to pay coaches for their costs...
. The board may then establish standing committees from among the shareholders, who usually also volunteer their time, to either handle the business affairs of the co-op or make recommendations to the full board on such issues as its finance, membership and maintenance of its housing units.
Finance
A housing cooperative is normally de factoDe facto
De facto is a Latin expression that means "concerning fact." In law, it often means "in practice but not necessarily ordained by law" or "in practice or actuality, but not officially established." It is commonly used in contrast to de jure when referring to matters of law, governance, or...
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. (Note, however, that it's quite possible for a housing co-op to own other revenue-generating assets, such as a subsidiary business which could produce surplus income to offset the cost of the housing, but in those cases the housing rents are usually reduced to compensate for the additional revenue.)
It is relatively difficult to start a housing co-op because if the idea is, for instance, to build a building or group of buildings to house the members, this usually takes a significant mortgage loan
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
for which a financial institution will want assurances of responsibility. It may also take a year or more for the members to organize the design and construction, as well as time and foresight to establish even basic organizational policies. It is rare that these kinds of skills of organization are available in a random group of people who often have pressures on their existing housing. It may be somewhat easier to organize a group of closely related housing units. This opportunity may arise, for example, if an existing apartment building's owner is thinking about selling it.
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 between shareholders and new and increases to existing mortgages.
There are housing co-ops of the rich and famous: John Lennon
John Lennon
John Winston Lennon, MBE was an English musician and singer-songwriter who rose to worldwide fame as one of the founding members of The Beatles, one of the most commercially successful and critically acclaimed acts in the history of popular music...
, for instance, lived in The Dakota
The Dakota
The Dakota, constructed from October 25, 1880 to October 27, 1884, is a co-op apartment building located on the northwest corner of 72nd Street and Central Park West in the Upper West Side of Manhattan in New York City...
, a housing co-operative,
and most apartments in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
that are owned rather than rented are held through a co-operative
rather than via a condominium
Condominium
A condominium, or condo, is the form of housing tenure and other real property where a specified part of a piece of real estate is individually owned while use of and access to common facilities in the piece such as hallways, heating system, elevators, exterior areas is executed under legal rights...
arrangement.
Market-rate and limited-equity co-ops
There are two main types of housing co-operative financing methods, market rate and limited equity. With market rate, the share price is allowed to rise on the open market and shareholders may sell at whatever price the market will bear when they want to move out. In many ways market rate is thus similar financially to owning a condominium, with the difference being that often the co-op may carry a mortgage, resulting in a much higher monthly fee paid to the co-op than would be so in a condominium. The purchase price of a comparable unit in the co-op is typically much lower, however.With limited equity, the co-op has rules regarding pricing of shares when sold. The idea behind limited equity is to maintain affordable housing
Affordable housing
Affordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the...
. A sub-set of the limited equity model is the no-equity model, which looks very much like renting, with a very low purchase price (comparable to a rental security deposit) and a monthly fee in lieu of rent. When selling, all that is re-couped is that very low purchase price.
Canada
Housing co-ops in Canada take on many different forms. In Ontario, there are co-ownership, equity and occupant-run co-ops.Co-ownership co-ops are generally older apartment buildings, incorporated before the Ontario Condominium Act, 1973 came into existence, where shareholders each own one voting share in the corporation that owns the building and have a registered right to occupy individual units as described on their share certificate. Most of these types of co-ops date from the thirties, forties and fifties and are in the city of Toronto. They are similar to condominiums, in that units may be bought and sold by private sale or on the open market. Until relatively recently, these units tended to be bought by older people with home equity who could buy the unit outright, as it was difficult to get a mortgage against these units. However, a number of Ontario credit unions are now offering limited financing, provided that that individual co-op corporations meet their fiscal standards, making these units affordable housing options for younger buyers. Incoming owners must be approved by the building's Board of Directors, and agree to abide by building bylaws and Occupancy Agreements.
Equity co-ops are buildings in which individuals purchase a percentage share of the building and the land on which it is built tied to the square footage of their unit; all owners own the building collectively, with exclusive rights to occupy their own unit. More credit unions will offer financing against them than against co-ownerships. They are a relatively new form of construction, designed to encourage owner occupancy by having the building's corporation hold back a percentage of the unit's share equity to ensure owner occupancy. This legal structure is used as an alternative to condominium registration, either when the government will not allow conversion of an existing apartment building to a condominium, or to avoid the expense and difficulty of doing so.
Then there are co-ops that provide all the privileges of ownership except for the right to make (or lose) money on a primary residence and are run by the people who live there.
The federal and provincial governments in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
developed legislation in the 1970s that aided potential co-ops by providing start-up funding and financing through mortgages via an agency called the Canada Mortgage and Housing Corporation
Canada Mortgage and Housing Corporation
Canada Mortgage and Housing Corporation is a Crown corporation, owned by the Government of Canada, founded after World War II to provide housing for returning soldiers...
(CMHC). The government simultaneously began to encourage the development of resource groups to contract with fledgling boards of directors of housing co-ops to develop co-operatives either in turnkey buildings or buildings designed and constructed by architects and builders with which the board contracted to deliver the service. Supervised by the board, the resource groups marketed the units to suitable members, educated them about their rights and obligations as co-operators, and established a management structure which usually included paid staff. These organizations helped in forming initial policies and holding the organization together while all the necessary work is done.
The federal government tied its loan assistance to requirements that these housing co-ops provide a percentage of their units, usually at least 15 to 20 per cent, for what are termed income-tested residents. These people voluntarily provide information to the co-op on a confidential basis about their gross income, and their rent is calculated according to a formula. If the calculated rent is less than the market rent of the units, then the federal government, through another formula, would provide funding to those units to bring their unit revenue up to the market rate. This produced mixed-income co-op housing, in which relatively well-off people lived side-by-side with relatively low-income people and worked with them on committees. This often had the ripple effect of improving the financial health of those less well-off. (It's interesting to note that, depending on your political point of view, such government payments for offsetting the rent could be considered subsidy of the low-income people, or a contractual business arrangement between the government and the co-op which helps to stabilize revenue to the co-op in exchange for accomplishing a social goal for the government for a specific period. This dichotomy is typical of the fact that a housing co-op is somewhere between a corporation and a social agency, and where one places it depends on one's viewpoint—and the collective viewpoint of each housing co-op.)
Political will dissipated in Canada in the 1990s, however, as other issues occupied politicians and financial belt-tightening by the governments reduced the funds available for the mortgages. In 2004 and 2005, however, the political winds shifted back towards the idea of developing more low-income housing. However, not-for-profit housing co-operatives are committed to the mixed-income concept and have not been able to make much use of the few opportunities that have come available in recent years.Also, the term of many of the government agreements concerning funding for housing subsidies are coming to an end, provoking a debate in individual co-ops and the co-op movement on the extent to which co-ops should continue to be mixed-income forms of housing.
In Canada, there are associations of housing co-operatives. The major one is the Co-operative Housing Federation of Canada (CHF Canada). Most provinces have similar organizations for their area, but many are stand-alone members of the CHF Canada, as opposed to being branches of it. Each such organization charges its member co-operatives a fee based on the number of housing units in the co-op to pay for staff to do its work. This includes lobbying governments, setting up self-help funding and the like. These organizations do not act for individual members, and do not give members advice when the member encounters problems with the Board of their co-op. In most jurisdictions there are no organizations for members of housing co-operatives, in contrast with tenants in a traditional landlord-and-tenant relationship, who can be assisted by various tenant advocacy groups.
In Ontario, the eviction of members of a housing co-operative is governed by special rules set out in the Co-operative Corporations Act. The Board of Directors of the co-operative initiates the process by sending the member a notice to appear, requiring the member to attend at a Board meeting at which that member's eviction will be considered. If the Board votes to evict, the member has a right of appeal to the membership as a whole. In order to enforce the eviction, the Board must bring an application to a judge of the Superior Court, on which occasion the member has the opportunity to present his/her case to the judge; the judge considers whether the eviction process was conducted fairly and in accordance with due process, and has a residual discretion to refuse the eviction should the judge consider it fair to do so, notwithstanding the decision of the Board. Sometimes this hearing is conducted like a trial, with oral evidence from both sides, while at other times it is conducted based only on written documents submitted to the court; the practice varies from judge-to-judge and courthouse to courthouse, and there is no consensus on the proper procedure or what right a member has to be heard. This process is different from evictions of rental tenants, which proceed in Ontario before a specialized tribunal and in which the tenant is always entitled to an oral hearing. The standard of deference that judges should show to the decisions of Boards is a controversial and unresolved issue in the law, with various cases taking seemingly inconsistent positions on the issue.
A co-operative housing project can resemble a traditional apartment building, or it can be the basis of an intentional community
Intentional community
An intentional community is a planned residential community designed to have a much higher degree of teamwork than other communities. The members of an intentional community typically hold a common social, political, religious, or spiritual vision and often follow an alternative lifestyle. They...
.
"Building co-operatives
Building co-operatives
Building co-operatives are co-operative housing corporations where individuals or families work together to directly construct their own homes in a cooperative fashion....
" ("self-build housing co-operatives" in British parlance, which distinguishes them from worker co-operatives in the building trade) are formed by members who cooperate to build their homes but own their houses on completion. Building co-ops were extremely popular across Canada from the 1930s to the 1960s.
India
In India most 'flats' are owned outright. i.e the title to each individual flat is separate. There is usually a governing body/society/assocation to administer maintenance and other building needs. These are comparable to the Condominium Buildings in the USA. The laws governing the building, its governing body and how flats within the building are transferred differ from state to state.Certain buildings are organized as "Cooperative Housing Societies" where one actually owns a share in the Cooperative rather than the flat itself. This structure was very popular in the past but has become less common in recent times. Most states have separate laws governing Cooperative Housing Societies.
However for most practical purposes there is very little difference in buying/living between the two options.
Germany
In the IndustrialisationIndustrialisation
Industrialization is the process of social and economic change that transforms a human group from an agrarian society into an industrial one...
in the 19th century there were many housing cooperatives founded in Germany. Presently, there are over 2.000 housing cooperatives with over two million apartments and over three million members in Germany. The public housing cooperatives are organisated in the GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen
GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen
The GdW Bundesverband deutscher Wohnungs- und Immobilienunternehmen e.V. is a technical and a syndicate of the housing co-operatives in Germany...
(The Federal association of German housing and real estate enterprise registered associations).
Nordic countries
A tenant-owner's association (SwedishSwedish language
Swedish is a North Germanic language, spoken by approximately 10 million people, predominantly in Sweden and parts of Finland, especially along its coast and on the Åland islands. It is largely mutually intelligible with Norwegian and Danish...
: bostadsrättsförening, Norwegian
Norwegian language
Norwegian is a North Germanic language spoken primarily in Norway, where it is the official language. Together with Swedish and Danish, Norwegian forms a continuum of more or less mutually intelligible local and regional variants .These Scandinavian languages together with the Faroese language...
: borettslag
Borettslag
Borettslag or BL is the legal entity for housing cooperatives in Norway. The company is owned by those who live in the cooperative, the partholders. Each part gives the right to live in the cooperative, and thus in a particular apartment or house. A partholder is free to sell their part, but the...
, Danish
Danish language
Danish is a North Germanic language spoken by around six million people, principally in the country of Denmark. It is also spoken by 50,000 Germans of Danish ethnicity in the northern parts of Schleswig-Holstein, Germany, where it holds the status of minority language...
: andelsboligforening) is a legal term used in some Nordic countries
Nordic countries
The Nordic countries make up a region in Northern Europe and the North Atlantic which consists of Denmark, Finland, Iceland, Norway and Sweden and their associated territories, the Faroe Islands, Greenland and Åland...
(Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
, Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
and Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
) for a type of joint ownership
Housing equity partnership
Equity sharing, also known as shared ownership or in the US as housing equity partnership , allows a person to purchase a share in their home even if they cannot afford a mortgage on the whole of the current value...
of property in which the whole property is owned by a co-operative association, which in its turn is owned by the members. Each member holds a "stake" in the association that is proportional to the area of his apartment. Members are required to have a tenant-ownership, which represents the apartment
Apartment
An apartment or flat is a self-contained housing unit that occupies only part of a building...
, and in most cases live permanently at the address. There are some legal differences between the countries, mainly concerning the conditions of ownership.
Tenant-owner's associations were established during the 19th century and were originally a United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
-based concept (building societies
Building society
A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially mortgage lending. These institutions are found in the United Kingdom and several other countries.The term "building society"...
). In Sweden, large non-profit organizations such as HSB and Riksbyggen has constructed thousands of properties for tenant-owner's associations. The market price of existing tenant-ownership shares is often very high, normally much higher than the original stake price.
Finland
In FinlandFinland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
co-op membership is a common form of real estate and home ownership. On the other hand, most Finns probably wouldn't use the co-op term for the form of ownership described here. Owning shares that correspond to one apartment in a housing company is generally considered as much owning your own home as actually directly owning a (single family) house.
Except for a very limited number of co-ops that follow the strict Rochdale Principles
Rochdale Principles
The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The...
of one vote, all Finnish co-ops are incorporated as (non-profit) limited-liability companies (asunto-osakeyhtiö
Osakeyhtiö
Osakeyhtiö, literally a "stock company", is the Finnish equivalent of a limited company or Gesellschaft mit beschränkter Haftung . It is abbreviated to Oy and is used either before or after the company's name, sometimes with the addition of the Finland-Swedish equivalent Ab...
).
Membership of a co-op is obtained by buying the shares on the open market, most often through a real estate agent. No board approval is needed to buy shares. In some older co-operatives old members have the right of pre-emption, i.e. the right to buy the shares at the set market price.
Neither is there any requirement for members to live in the co-operative. Owning of apartments for rent is a common form of saving and private investment.
The first housing cooperatives were built around 1900, many of them in the Helsinki
Helsinki
Helsinki is the capital and largest city in Finland. It is in the region of Uusimaa, located in southern Finland, on the shore of the Gulf of Finland, an arm of the Baltic Sea. The population of the city of Helsinki is , making it by far the most populous municipality in Finland. Helsinki is...
neighborhood of Katajanokka
Katajanokka
Katajanokka is a neighbourhood of Helsinki, Finland, with around 4000 inhabitants in 2005. The district is located adjacent to the immediate downtown area, though in the first major town plan for Helsinki from the mid-18th century, the area fell outside the fortifications planned to encircle the...
, in the national romantic Jugend style. Initially many co-ops were set up by the future members themselves, often workers or artisans in the same trade. By the 1920s co-op founding was the business of professional real estate developers. After World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
nationwide non-profit developer organizations were formed and a system of government provided loans (ARAVA) was introduced. Sale of shares in co-ops with state loans were restricted by limited equity rules for 50 years, the price of the shares was limited by an index.
The Finnish model of the housing co-op was also the basis of the modern U.S. co-ops, as the first cooperative the Finnish Home Building Association in Brooklyn was started in 1918 by Finnish immigrants.
Sweden
In Sweden, members of a housing cooperative (bostadsrättsförening) formally own the right (bostadsrätt) to inhabit their respective apartment for an unlimited time, a right that can be bought and sold on the open real estate market. This is one of the main forms of home ownership in the country, and a membership in a housing cooperative is generally held to be the same thing as owning (as opposed to renting) an apartment. The most usual physical/legal form is a block of flats owned freehold by a cooperative.Each housing cooperative has their own bye-laws. The members hold annual meetings in the housing cooperative, in which they elect a board of directors that take on the responsibility of managing the cooperation during the upcoming year. In most normal-sized cooperatives the board members are recruited among the inhabitants. The board sets the annual fee, secures proper administrative procedures, keeps the property in good condition, and may initiate large renovation projects when necessary. The board is also involved when a member sells his apartment (i.e. sells his right to inhabit the apartment) to someone else, as the board has to make decisions on allowing the exit of old members and the entry of new members. If the buyer of a bostadsrätt is found financially viable, the board has no right to turn down a membership application. The board is also involved when individual members want to initiate large renovation projects, or when individual members want to rent out the apartment to a non-member.
The housing cooperative is a special legal entity, regulated in Swedish law. It has the same obligations of bookkeeping and issuing annual reports as companies and it can take mortgages in the property if needed. In addition, each member may also take mortgages in his bostadsrätt in order to finance his acquisition of it. The annual fee paid by the members to the cooperative is intended to cover the operational and financial expenditures of the cooperative. The financial situation of the Swedish cooperatives vary a lot, and on rare occasions cooperatives may go bankrupt. If bankruptcy occurs, the property is sold and the remaining assets are shifted out to the members (who may stay on as tenants or try to form a new cooperative).
In existing properties, tenants may form a housing cooperative together, and then make an offer to the owner to buy the property. When such a cooperative has been formed, it automatically becomes the first prospective buyer should the owner desire to sell. The acquisition is financed by a combination of equity (i.e. the 'stakes' paid by the members) and bank loans.
In properties intended to be owned by housing cooperatives from the start, the construction company normally forms a cooperative when the building is erected, and then sells the different apartments (i.e. the rights to inhabit them) at fixed prices. When all apartments are sold, the new members take over the responsibility for the property and elect their own board of directors.
Philippines
In the Philippines, a tenant-owner's association is often used as a means to buy new flats. When the cooperative is created, it takes the major part of the loan needed to buy the property. These loans will then be paid off during a fixed periods of years (typically 20-30), and once this is done, the cooperative is dispersed and the flats are transformed into condominiums.United States
In the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, housing co-ops are usually categorized as corporations or LLC
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
s and are found in abundance from Madison, Wisconsin
Madison Community Cooperative
Madison Community Cooperative, or MCC, is an umbrella organization composed of 11 housing cooperatives in Madison, Wisconsin with around 200 residents and food co-opers. MCC is a member of North American Students of Cooperation as well as the Northcountry Cooperative Development Fund ....
to the Greater New York metropolitan area
New York metropolitan area
The New York metropolitan area, also known as Greater New York, or the Tri-State area, is the region that composes of New York City and the surrounding region...
. There are also a number of cooperative and mutual housing projects still in operation across the US that were the result of the purchase of federal defense housing developments by their tenants or groups of returning war veterans and their families. These developments include seven of the eight middle-class housing projects built by the US Government between 1940-42 under the auspices of the Mutual Ownership Defense Housing Division
Mutual Ownership Defense Housing Division
The Mutual Ownership Defense Housing Division of the Federal Works Agency part of the United States government, operating from about 1940 to 1942 under the leadership of Colonel Lawrence Westbrook, was an attempt by the United States Government, late in the New Deal, to respond to the housing needs...
of the Federal Works Agency
Federal Works Agency
The Federal Works Agency was an independent agency of the Federal government of the United States which administered a number of public construction, building maintenance, and public works relief functions and laws from 1939 to 1949...
.
The New York Cooperative
In New York City, another significant factor in the rise of co-op and condominium ownership is strict and complicated rent controlRent control in New York
Rent control in New York refers to rent control and rent stabilization programs in New York State, USA. Each city may choose whether to participate or not, and , 51 municipalities participated in the program, including Albany, Buffalo and most famously, New York City, where over one million...
laws that have made many landlords want to get out of the rental property market. In New York, cooperatives are scattered throughout New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
itself, Westchester County, New York
Westchester County, New York
Westchester County is a county located in the U.S. state of New York. Westchester covers an area of and has a population of 949,113 according to the 2010 Census, residing in 45 municipalities...
(which borders the city to the north) and towns in New Jersey
New Jersey
New Jersey is a state in the Northeastern and Middle Atlantic regions of the United States. , its population was 8,791,894. It is bordered on the north and east by the state of New York, on the southeast and south by the Atlantic Ocean, on the west by Pennsylvania and on the southwest by Delaware...
that are immediately across the Hudson River from Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
, such as Fort Lee
Fort Lee, New Jersey
Fort Lee is a borough in Bergen County, New Jersey, United States. As of the 2010 United States Census, the borough population was 35,345. Located atop the Hudson Palisades, the borough is the western terminus of the George Washington Bridge...
, Edgewater
Edgewater, New Jersey
Edgewater is a borough located along the Hudson River in Bergen County, New Jersey. As of the 2010 census, the borough had a population of 11,513...
, or Weehawken.
Unlike in other parts of the world, most of these housing co-ops did not develop as a result of social engineering
Social engineering (political science)
Social engineering is a discipline in political science that refers to efforts to influence popular attitudes and social behaviors on a large scale, whether by governments or private groups. In the political arena, the counterpart of social engineering is political engineering.For various reasons,...
. Apartment buildings and multiple-family housing simply make up a more significant share of the housing stock in the New York City area than in most other US cities, and the cooperative form of ownership has dominated over the condominium form. Reasons suggested to explain why cooperatives are relatively more common than condominiums in the New York City area are:
- Inspired by Abraham Kazan, Cooperatives appeared at least as far back as the 1920s while a legal basis for condominium form of ownership was not available in New York State until 1964. Passage of the Condominium Act then opened a wave of construction of condominium buildings.
- The cooperative form can be advantageous as a building mortgage can be carried by the cooperative corporation, leaving less financing to be obtained by each co-op owner. Under condominium ownership only the separate condo owners provide financing. Particularly when interest rates are high, a conversion sponsor may find unit buyers more easily under the cooperative arrangement as buyers will have less financing to arrange on their own; the apparent purchase price of a unit in a cooperative building holding an underlying mortgage is lower than a condo purchase. Cooperative unit buyers may not accurately weigh their share of the building's mortgage.
- Also, later in a building's life after conversion, major new investments required to repair or replace building systems can be raised by a new central mortgage in a cooperative, while in a condominium funds could only be raised by onerous assessments being required of each individual unit owner. However, New York's condominium law was amended in 1997 to allow condominium associations to borrow money.
- The 1974 creation and then subsequent influence on policy by the Urban Homesteading Assistance Board, a housing advocacy group, which enabled the conversion of over 1,600 foreclosed, city-held rentals into limited-equity, resident-controlled co-ops.
- A co-op building's board can exercise its own business discretion to impose restrictions on shareholders, and reject prospective purchasers without explanation, as long as the board does not violate federal and state housing or civil rights laws.
In fact, the November 1882 edition of Harper's Magazine describes several cooperative apartment buildings already in existence, and describes plans to build more.
Most of the housing cooperatives in the Greater New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
area were converted to that status during the 1980s; generally they were large buildings built between the 1920s and 1950s that a single landlord or corporation owned and rented out that became unprofitable as rental properties. To encourage individual ownership of units, the initial buyers of units (buying from the owner of the entire building) did not have to be approved by a board. Also, the rental tenants living in the building at the time of the conversion were usually given an option to buy at a discount. If the tenants were rent controlled, the law usually protects them by allowing them to stay as renters and the unit may not be occupied by a purchaser until said tenant dies or moves out. Many of these buildings, especially in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
, are actually quite luxurious and exclusive; many celebrities live in them and some famous people are even rejected by the board. In the 1990s and 2000s some rental buildings in the Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
, Washington, DC, and Miami-Fort Lauderdale-West Palm Beach areas went through a similar conversion process, though not to the degree of New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
.
Many of the cooperatives originally built as co-ops were sponsored by trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...
s, such as the Amalgamated Clothing Workers of America
Amalgamated Clothing Workers of America
The Amalgamated Clothing Workers of America was a United States labor union known for its support for "social unionism" and progressive political causes. Led by Sidney Hillman for its first thirty years, it helped found the Congress of Industrial Organizations...
. One of the largest projects was Cooperative Village
Cooperative Village
Cooperative Village is a community of housing cooperatives on the Lower East Side of Manhattan, New York City. The cooperatives are centered around Grand Street in an area south of the entrance ramp to the Williamsburg Bridge and west of FDR Drive...
in Lower East Side
Lower East Side
The Lower East Side, LES, is a neighborhood in the southeastern part of the New York City borough of Manhattan. It is roughly bounded by Allen Street, East Houston Street, Essex Street, Canal Street, Eldridge Street, East Broadway, and Grand Street....
of Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
. The United Housing Foundation
United Housing Foundation
The United Housing Foundation is a real estate investment trust in New York that is best known for constructing Rochdale Village.- Purpose :...
was set up in 1951 and built the Co-op City
Co-op City, Bronx
Co-op City , located in the Baychester section of the Borough of the Bronx in northeast New York City, is one of the largest cooperative housing developments in the world. Situated at the intersection of Interstate 95 and the Hutchinson River Parkway, the community is part of Bronx Community Board 10...
in Bronx, and were built by architect Herman Jessor
Herman Jessor
Herman J. Jessor was an American architect who helped build more than 40,000 units of cooperative housing in New York City. He, along with Abraham Kazan, was a driving force of the cooperative housing movement in the United States....
. One of the first subsidized, fixed-value cooperatives was Morningside Gardens
Morningside Gardens
Morningside Gardens refers to a private housing cooperative in the borough of Manhattan, New York City. It is composed of six apartment buildings of 21 stories each, for a total of 980 apartments. Some spaces that would otherwise be apartments are used by affiliated groups such as the pre-school...
in Manhattan's Morningside Heights.
Another dynamic also contributed to the large number of cooperatives established in the 1980s and 1990s in New York City – in this case by low- and moderate-income tenant groups.
In the 1970s, many New York City private landlords were struggling to maintain their aging properties in the face of high interest rates, redlining, white flight and rising fuel costs. The period also saw some landlord-induced arson to obtain insurance proceeds and widespread non-payment of real estate taxes – over 20% of multi-family residential
Multi-family residential
Multi-family residential is a classification of housing where multiple separate housing units for residential inhabitants are contained within one building or several buildings within one complex. A common form is an apartment building...
properties were in arrears in the mid-1970s. In 1977, the city passed Local Law #45, which allowed the city to begin foreclosure proceedings after just one year of non-payment of taxes, not three, resulting in the takeover of thousands of buildings, many of them occupied, by the city of New York through a legal action known as an in rem foreclosure. In September 1978, the city’s housing agency, the New York City Department of Housing Preservation and Development
New York City Department of Housing Preservation and Development
The New York City Department of Housing Preservation and Development is the mayoral agency of New York City responsible for developing and maintaining the city's stock of affordable housing. HPD is headquartered in Lower Manhattan, and includes smaller branch offices in each of the city's five...
(HPD), created a series of new housing programs designed to give building residents and community groups control and eventual ownership of in rem buildings.
The Urban Homesteading Assistance Board
Urban Homesteading Assistance Board
The Urban Homesteading Assistance Board, or UHAB, is a 35-year old non-profit organization in New York City that helps create and support self-help housing. UHAB works with residents to acquire, rehabilitate and manage their apartments...
(UHAB), established in 1974, began to assist residents of these buildings to manage, rehabilitate and acquire their buildings, and form limited-equity housing co-operatives. Working with the city’s housing agency, its existing loan programs and the power to dispose of abandoned property to non-profit organizations, as well as the state laws governing the establishment of co-operatives, UHAB was able to provide low-income people with the tools – seed money, legal advice, architectural plans, bookkeeping training – to build and run limited-equity housing co-operatives. Through a long-standing contract with the city to provide training and technical assistance to residents of buildings in the Tenant Interim Lease (TIL) Program, UHAB has worked with more than 1,600 coops, preserving over 30,000 units of affordable housing.
Some cooperatives in New York City do not own the land upon which their building is situated. These are known as "Land Lease Buildings" and often have significant drawbacks for cooperative owners.
Student housing cooperatives
Two examples of many on the west coast are the Berkeley Student Cooperative and the Santa Barbara Housing CooperativeSanta Barbara Student Housing Cooperative
The Santa Barbara Student Housing Coop is a student housing cooperative designed to provide affordable housing for students, faculty, and staff of the University of California, Santa Barbara. It is a member of NASCO. The first coop was established in 1976, and currently there are four houses;...
.
United Kingdom
Housing co-operatives are uncommon in the UK, making up about 0.1% of housing stock.Most are based in urban areas and consist of affordable shared accommodation where the members look after the property themselves. Waiting lists can be very long due to the rarity of housing co-operatives. In some areas the application procedure is integrated into the council housing application system. The laws differ between England and Scotland. The Confederation of Co-operative Housing provides information on housing cooperatives in the United Kingdom. The Shelter website provides information on housing and has information specific to England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
and Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
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The Catalyst Collective provides information about starting co-operatives in the UK and explains the legal structure of a housing coop. Radical Routes
Radical Routes
Radical Routes is a United Kingdom-based co-operative federation. The organisation provides support to housing and worker co-operatives as well as social centres. This support is given in the form of mutual aid...
offers a guide on how to set up a housing co-operative.
See also
- Affordable housingAffordable housingAffordable housing is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the...
- Co-operative living arrangementsCo-operative living arrangementsCo-operative living arrangements occur when three or more unrelated people chose to live together and share a common residential structure.Typically, in these co-ops, several people occupy a single dwelling unit, such as a large house, with each person having a private area, including a bedroom...
- CohousingCohousingA cohousing community is a type of intentional community composed of private homes supplemented by shared facilities. The community is planned, owned and managed by the residents – who also share activities which may include cooking, dining, child care, gardening, and governance of the...
- CondopCondopA condop in real estate is a term for a residential establishment that includes both a condominium and cooperative ownership structure...
- CooperativeCooperativeA cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
- Intentional CommunityIntentional communityAn intentional community is a planned residential community designed to have a much higher degree of teamwork than other communities. The members of an intentional community typically hold a common social, political, religious, or spiritual vision and often follow an alternative lifestyle. They...
- Mutual Ownership Defense Housing DivisionMutual Ownership Defense Housing DivisionThe Mutual Ownership Defense Housing Division of the Federal Works Agency part of the United States government, operating from about 1940 to 1942 under the leadership of Colonel Lawrence Westbrook, was an attempt by the United States Government, late in the New Deal, to respond to the housing needs...
- NASCONorth American Students of CooperationThe North American Students of Cooperation is a federation of housing cooperatives in Canada and the United States, started in 1968. Traditionally, NASCO has been associated with student housing cooperatives, though non-student cooperatives are included in its network...
- Subsidized housing