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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. 

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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.

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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. 

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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.

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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.

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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. 

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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. 

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No Equity 

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.

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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. 

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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.

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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.

Co-Op Housing FAQs

What kind of people live in co-op Housing?

Co-ops are notable for their diverse communities where people of varying backgrounds, ages, occupations, incomes, and beliefs live closely with one another. Despite the diversity, there is a shared sense of responsibility and cooperation among members. Sociability, active community engagement and commitment to the co-ops’ vision help reinforce shared values among co-op members.

What’s the difference between subsidized and market units?

Most co-ops offer two types of housing units: market-value and geared-to-income. The designations refer to how the price for the share of a unit is determined. Market-value units are priced at whatever the current market price is for a comparable unit.  Geared-to-income (or subsidized) unit prices are based on the prospective occupant’s gross monthly income, so they are less expensive than market-value units. Subsidized units’ housing charges are also lower and usually set at about 30% of occupants’ gross monthly household income.

Can a co-op tenant be evicted?

Yes. Like apartment tenants, the board can evict co-op members for valid reasons, which include breaking the co-op’s rules or bylaws. A common reason for terminating individuals’ co-op membership is failure to pay monthly housing charges.  The eviction process typically involves notifying the member of their membership cancellation. The notification will provide details on the reason for the eviction, which must be reasonable and free from bias. The co-op must allow the terminated member sufficient time to organize their affairs and provide them with an opportunity to speak at a meeting related to the eviction with their legal counsel present.

What types of co-op housing exist? 

While co-ops exist to serve a wide variety of people, some are organized to service-specific community sectors. These can include students, women, artists, hospitality industry workers, families, and senior citizens.

How do I find co-op housing near me? 

You can find co-ops in your area by visiting the Co-operative Federation of Canada directory website, which lists all the co-ops that operate in the country. Here, you can find details on co-ops’ history, member services, and contact details.

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Final Thoughts

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.

Mark Gregorski avatar on Loans Canada
Mark Gregorski

Mark is a writer who specializes in writing content for companies in the financial services industry. He has written articles about personal finance, mortgages, and real estate and is passionate about educating people on how to make smart financial decisions. Mark graduated from the Northern Alberta Institute of Technology with a degree in finance and has more than ten years' experience as an accountant. Outside of writing, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.

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