Buying Into Co-operative Housing: How Does it Work?
Guest blog by Ryan Tollefson
If you are interested in buying into co-operative housing, you may be wondering how it works. Affordability is one of the key characteristics of co-operative housing. Yet co-ops aren't public housing that governmental agencies own and administer for low-income residents in Canada. They are communities of mixed-income residents run by their residents.
Housing co-ops are highly interactive, because everyone who lives in one helps govern and maintain the community. Communal events may include book clubs, enrichment classes, family movie nights and weekly dinners. And some co-ops are organized to serve people with specific interests and needs, such as communities of artists or senior citizens — seniors looking to simplify their lives might find this housing option to be favorable to other types of communities.
Sociability is important to consider when buying into cooperative housing. If you like keeping up with neighbours and helping out to improve your community, it might just be the right choice for you.
How Housing Co-ops Work
Most housing co-ops are nonprofits. Whether in urban or rural settings, they generally are housed in apartment-like buildings.
Instead of obtaining a mortgage to purchase a home you can resell — such as a condo, house or townhome — you buy a share in a nonprofit co-op housing corporation and pay a monthly housing fee. Unless you fail to pay your monthly fee or break important co-op rules — such as failing to participate in its maintenance — your tenancy is secure.
Unlike down payments for private homes, shares are moderately priced. For example, in British Columbia, the cost of a share typically averages $2,000 but may range of up to $7,000. However, the cost of a share may be closer to the price of a privately-owned home in the case of what are known as equity co-operatives and which are more rare.
You don't build equity in a nonprofit co-op, and a share is refunded if you move. Ownership reverts to the corporation, which sells the share to a new resident. The object of nonprofit housing co-ops isn't to make money. Instead, they aim at keeping housing affordable and comfortable for all residents. Co-op residents don't have to deal with a landlord who may unexpectedly raise rents or sell the property.
Whether buying into a non-profit or equity co-operative, it can be difficult to get a bank loan to help pay for your share according to RateHub financial writer Edward Trapunski. However, credit unions, which are banking co-operatives, are good places to get co-op housing loans.
Government Support for Co-ops
Another way that nonprofit housing co-ops keep costs down is through support from local and federal government. This help may involve preferential mortgage rates for co-op corporations, insurance coverage, financial assistance for low-income residents and subsidies for operating costs.
About 250,000 Canadians live in housing co-operatives according to the Co-operative Housing Federation of Canada (CHFC). It adds that roughly 20,000 households receive government subsidies to help them afford co-op housing. But federal and provincial government funding is decreasing, especially as co-ops pay off government mortgages.
In areas where rental and private housing prices are steep, such as downtown Toronto, members of some nonprofit co-ops say they need to refinance their properties to make needed repairs. The Toronto Star reports that this situation has become a quandary for co-ops such as Spruce Court, which may lose its subsidies for low-income residents early if it gives up its government mortgage for private refinancing.
However, the CHFC is working with the federal government to find ways to maintain co-op housing for low-income residents and to improve co-op management for greater sustainability.
Life in a Co-operative Village
Buying into co-op housing can be a great choice for many Canadians. Some may prefer this unique setup due to the participation in governance and the community. As Trapunski of RateHub notes, co-op housing is a place where they "can feel secure that they can put down roots for a long time." In some ways this "non-traditional" housing choice feels a bit more traditional in our increasingly globally-connected, locally-disconnected world.