The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
Co-Op Housing In Canada
Loans Canada: The Country's Best Loan Comparison Platform
If you’re a first-time homebuyer whose primary concern is price, it can be a struggle to find a home that fits nicely with your budget. Or maybe you already own a home and are looking to downsize – but affordable properties remain elusive, leaving you with few options.
If you’re feeling priced out of the housing market, an alternative to consider is co-op housing.
What Is Co-Op Housing?
A housing co-op is a corporation that owns a group of multi-unit residences and is usually run as a non-profit organization. Having emerged as a popular type of living arrangement in the 1960s, today’s co-op housing communities come in many forms and serve diverse groups of people.
Check out this First-Time Home Buyers’ tax credit.
How Does Co-Op Housing Work?
While co-ops’ structure resembles that of a condo on the surface, they operate quite differently. In a co-op, you own a share of the entire co-op housing complex and don’t own any equity in your unit. This is in stark contrast to a condo where you own your unit and are solely responsible for its upkeep, while the condo corporation is responsible for maintaining the common property.
Interested in owning a home? Consider the rent-to-own program.
A co-op is run by a board of directors elected by the co-op members. Each co-op member gets one vote. The board is responsible for maintenance, renovations, security, budgeting, and the day-to-day operations of the co-op. However, they may choose to outsource some functions as well. Individual co-op members are also more heavily involved in setting rules compared to a condo corporation.
In addition to the purchase price, you must also pay a monthly “housing charge,” which is the equivalent of rent you would pay to live in an apartment.
Check out the pros and cons of a joint mortgage.
Housing Co-Ops And Government Funding
Housing co-ops may seek government funding to help subsidize a certain number of units. The co-op offers subsidized units at a discount to members who earn a low income, providing them with an opportunity to join the co-op without paying the market price for a unit.
Co-ops must adhere to the rules described in the funding agreement to qualify for government subsidies. They can receive funding at the municipal, provincial, or federal government level.
Learn more about the affordable housing crisis in Canada
Difference Between Co-Op Housing And Private Low-Income Housing
Housing co-ops operate differently from private low-income and government-run social housing and have features that set them apart. These include a unique legislative framework, a share-based ownership structure, and flexible pricing for individual units.
Are you new to Canada? Check out these mortgages for newcomers.
Governed By Three Types Of Legislation
Three types of legislation oversee housing co-ops.
Firstly, co-ops are governed by a co-op act set by each province and territory. Co-op acts outline how co-ops can be formed and operated. The rules and regulations vary depending on which province or territory a co-op resides in, but most cover areas such as:
- The obligations of co-op members
- The process for admitting new members
- The process for evicting members
- Mandatory requirements for annual general meetings, bylaw creation, and board elections
Secondly, co-ops must exercise sound moral judgements and observe human rights laws that pertain to discrimination. Co-ops are prohibited from denying housing unit applications based on individuals’ age, race, religion, sex, ethnicity, family or marital status, political beliefs, and other protected attributes. The only exception relates to age – under some circumstances, co-ops may set a minimum age requirement for admittance as a member.
Learn the difference between renting and buying.
Lastly, co-ops must operate on the principles of natural justice. They must treat co-op members fairly, such as allowing their grievances to be heard and providing notifications about new policies that could affect them. Each member should have the right to voice their opinion and express their concern safely and adequately. The board should only initiate eviction and legal actions against members for valid reasons.
Check out the tenant laws and rights across Canada.
As mentioned already, when you purchase a co-op housing unit, you’re buying a share rather than equity ownership. As a result, your co-op unit is not considered real property from an investment perspective, like a detached home.
As a shareholder, you have the right to live in your unit, participate in setting rules, vote for board members, and cooperate with other members to support and enhance the co-op. While co-op shares can appreciate, the returns tend to be modest compared to other types of real estate.
Offer Market-Value Units And Geared-To-Income (Subsidized) Units
Unlike private low-income housing or city-run housing programs, co-op housing offers both market-value and geared-to-income units:
- Market-value unit: You’ll pay the regular market rate for the share as well as the full monthly housing charge.
- Geared-to-income unit: You’ll pay a discounted share price and a lower monthly housing charge, which typically is 30% of your gross monthly household income.
Check out how you can make money with real estate.
Advantages Of Co-Op Housing
Co-op housing offers several advantages compared with other housing options:
- Affordability: Co-ops units are typically cheaper to purchase than condos or townhouses. Monthly housing costs are also reasonable, particularly if you buy a geared-to-income unit.
- Safety: Co-op housing environments are generally safe places. Individual members interact with each other frequently and collaborate to keep the property safe and secure. Co-op housing members are more attuned to unusual behaviours or activities that may present safety concerns and can work to resolve them.
- Community involvement: Active involvement within a co-op housing community is encouraged, which results in a shared sense of trust, responsibility, and camaraderie among members. Housing co-ops are highly democratic, where everyone helps maintain the community and partakes in critical decision-making to ensure the co-op is run according to its values and vision. Co-ops also organize social events such as art classes, dinners, and movie nights, all of which help enrich the community and add to a sense of belonging.
Avoid these 10 common mistakes renters make.
Disadvantages Of Co-Op Housing
Co-op members work together to ensure the units are properly maintained, financial obligations are met, and conflict is minimized. Active engagement from members is expected, which means you’ll have to shoulder more responsibility than if you were living in a regular house or condo.
If you’re primarily a private person and would rather not interact with your neighbours too often, you’ll likely find the co-op lifestyle burdensome and invasive. To remain in good standing with the co-op, you’ll also have to maintain a certain net worth and prove your ability to meet your ongoing financial obligations.
Co-op housing is generally more restrictive than other living arrangements with strict rules in place governing what you can and can’t do with your unit. For example, the co-op’s bylaws may prohibit you from subleasing your unit.
How To Become A Member Of A Housing Co-Op
Each co-op has its unique approval process for admitting new members. The increase your chance of being accepted, you should research the co-op to assess whether it’s the right choice for you. Some co-ops actively promote their co-op by holding information sessions for potential members. Attending these sessions is an excellent way to get acquainted with their core values, admissions process, and services offered.
Once you’ve submitted your application, a co-op staff member will contact you to conduct an interview. If the co-op board determines you’re a good fit for the co-op, they’ll offer you a unit. Before the board finalizes your membership, you’ll have to sign an occupancy agreement, which outlines your rights and obligations as a co-op member.
If no units are available, the co-op will place you on a waiting list. Vacant units are provided on a first-come, first-served basis, so it may take some time to secure one, especially if you’ve signed up for a geared-to-income unit.
What kind of people live in co-op Housing?
What’s the difference between subsidized and market units?
Can a co-op tenant be evicted?
What types of co-op housing exist?
How do I find co-op housing near me?
It can take a real effort to find an affordable home, especially when the real estate market is thriving, and few properties are available at bargain prices. If you find yourself in such a predicament, co-op housing may be a viable alternative.
Housing co-ops offer units priced at standard market rates and subsidized units at a generous discount, presenting opportunities for those on modest or low incomes. Co-op units present some disadvantages, such as strict bylaws and limited equity growth. Still, they can be the right option if you’re keen on active participation within the co-op community, all while keeping your living expenses in check.
Rating of 5/5 based on 1 vote.
Largest Lender Network In Canada
Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.
goPeer — Helping Consumers Achieve Financial Freedom by Connecting Canadians Looking For Financing With Canadians Looking to Invest
goPeer is Canada's first consumer peer to peer lending platform and connects creditworthy Canadians looking for a loan with everyday Canadians looking...