What is a housing cooperative?
A housing cooperative, or co-op, is a multi-unit residential building owned by a corporation. Instead of buying a unit, shareholders purchase shares in the corporation and acquire the right to occupy a specific unit. The corporation owns the building itself and is responsible for its upkeep and maintenance. Shareholders pay a monthly fee to cover these costs.
Co-op residents elect a board of directors to oversee building operations and make decisions on behalf of shareholders. The board sets policies, approves new buyers, and handles issues that arise within the building. Each shareholder gets one vote in board elections and other important decisions.
Pros of Co-op living
Co-ops offer several advantages over other housing options:
- Affordability: Shares often cost less than comparable condos or single-family homes in the same area.
- Strong community: Residents govern the building together and have a voice in important matters.
- Flexible financing: Banks may offer better mortgage terms for co-ops than condos.
- Maintenance and repairs covered: The co-op corporation handles exterior and shared space upkeep.
Cons of Co-op living
However, co-op living also comes with some downsides to consider:
- Application process: Getting approved by the board can be rigorous and competitive.
- Strict rules: Co-ops tend to have many guidelines governing alterations, pets, rentals, and other matters.
- Limited financing: Not all lenders provide co-op mortgages.
- Lack of equity: Share prices don’t necessarily correlate to real estate market values.
- Ongoing fees: Monthly carrying charges may increase over time.
Key questions to ask about a Co-op
If you’re thinking about purchasing into a co-op building, be sure to ask about:
- The application and approval process
- The co-op’s financial health
- Size of maintenance fees and history of increases
- Any restrictions on alterations, pets, rentals, etc.
- Required reserve funds or other upfront costs
- Any upcoming capital projects or repairs
Co-op living offers many benefits but also requires compromise. By going in eyes wide open, you can decide if it’s the right homeownership choice for you.
