This guide to co-op housing attempts to answer your questions regarding ownership, responsibilities and benefits of living in a senior housing cooperative. In the United States, more than 1.5 million families of all income levels live in homes owned and operated through cooperative associations.

What is a senior housing co-op?

A housing cooperative forms when people come together to own and control the buildings in which they live. They form a co-op corporation and pay a monthly amount (called carrying charges) that covers operating expenses. It is the cooperative that owns the building, land and any common areas and the members buy shares in the co-op. Senior housing cooperatives may limit membership on the basis of age. Pullman Place is a 55+ cooperative.

How many different kinds of housing cooperatives are there?

By altering the basic legal and finance structures, many different types of housing cooperatives can be developed.

  1. A market rate cooperative sells shares at full market value in the original sale and permits a market rate of return on re-sales by its members.
  2. A limited equity cooperative limits the return allowed when shares are sold. The amount of return is determined by a formula established in the corporation’s bylaws.
  3. A tiered pricing cooperative offers different payment options to home buyers. The more you pay down, the less the monthly cost is.

Pullman Place is a limited equity senior housing cooperative.

How does a co-op work?

The co-op is a legal corporation. Members of the co-op are the people living in the co-op and they run the co-op – from organizing social activities, to maintenance, to handling finances, to landscaping. The members set the by-laws of the co-op and also elect, from among themselves, a board of directors. The board makes sure that things run smoothly and according to the co-op’s bylaws and operating agreements. The board will organize members’ meetings on a regular basis and will usually hire staff to attend to the day-to-day business of the co-op.

Who owns the cooperative?

Cooperative members each own a cooperative share. Together, the members own 100% of the cooperative and the cooperative owns all of the building, land and any common areas. The right to reside in each specific dwelling unit is allocated solely to a specific cooperative member and governed by that member’s occupancy agreement.

What do I own as a member of a housing co-op?

As a member, you own a cooperative share that is the combination of two things:

  1. Your ownership interest in the cooperative corporation (represented by a certificate of membership or corporate shares), and
  2. An exclusive right to occupy a particular dwelling unit that is owned by the cooperative corporation (represented by an occupancy agreement).

What do I pay at closing?

As a new member buying a cooperative share, you only pay the equity or share price at closing.

What monthly payments do I have to make?

The occupancy agreement requires each member to pay only his/her pro-rata share of the budgeted costs of the cooperative. These costs may include taxes, mortgage payments, repairs and maintenance. If the utility costs are not part of the cooperative budget, the member must pay them directly to the utility company. At Pullman Place Cooperative, members pay for electricity and are encouraged to purchase personal contents insurance. Phone, Internet, and DirecTV services are provided through the Cooperative at a discounted rate.

What tax benefits are available to me?

Members can deduct their pro-rata share of the cooperative’s mortgage interest and real estate taxes on their personal state and federal income tax returns. They have the same rights to exemption from capital gains taxation as any other homeowner.

How do I acquire equity?

As with any mortgage, as the market value of your cooperative interest increases, you build home equity. At Pullman Place Cooperative, the equity increases at a rate of 1% on the share value each year on October 1st.

What’s the difference between owning a co-op and owning a condo?

  1. A cooperative member owns a cooperative interest (an ownership interest in the cooperative corporation and its property as a whole, plus the exclusive right to occupy a particular dwelling unit). Co-ops usually assist members to find perspective purchasers and no real estate commission fees are involved. One of the more unique features of owning a membership interest in a cooperative is that, in addition to exterior maintenance free living, the co-op offers interior maintenance free living which includes: a maintenance person on staff, scheduled preventative maintenance services and the cooperative repairs and replaces appliances at the cooperatives expense, not at the individual members expense.
  2. A condominium owner owns fee title to a dwelling unit plus an undivided interest in the common property of the condominium development (the land and the buildings themselves). Owners must find their own buyer and the sale is a real estate transaction. Exterior maintenance free living only.

How can members afford owning a co-op?

Cooperative ownership takes people out of the rental market at what can be the same or slightly lower monthly costs. Members decide whether or not to increase monthly fee based on actual expenses. Members also receive the tax benefits of ownership.

Why is being a cooperative member better than renting?

  1. Lower monthly costs: Because cooperatives operate at cost, co-op carrying charges are often below rental market value.
  2. Tax deductions: For income tax purposes, co-op members are considered homeowners and can deduct their share of the real estate taxes and mortgage interest paid by the cooperative.
  3. Home equity: Co-ops provide for accumulation of individual member equity.
  4. Limited liability: Cooperative member/owners have no personal liability and need not individually qualify on the co-op blanket mortgage. The cooperative corporation is responsible for paying off any blanket loans.
  5. Overall savings: Co-op members benefit from economies of scale in co-op operating costs as well as from not-for profit operation. Bulk purchasing of major building improvements provide substantial savings on a per-member basis. The spreading of costs among co-op members cushions the economic shock of emergency repairs.
  6. Community building: Cooperatives provide homes for members and build community for the co-op as a whole through group activities and social functions.
  7. Security: Tenure is secure, within the guidelines of the law, co-op bylaws and occupancy agreements.
  8. Democratic member control: Each membership provides the right to occupy a unit and each unit has one vote.