What Is a Housing Cooperative (Co-Op) in Real Estate?

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What You Should Know

  • A Housing Cooperative is a unique type of homeownership that is more affordable than traditional property ownership like condominium ownership.
  • The residents of a Co-Op do not own their units directly, but instead they own a part of a corporation.
  • A single Co-Op owner may not have the power to change or even sell their unit without the board’s approval.
  • Before buying a Co-Op, it is important to understand its financial position, inflows and outflows, and a profile of other shareholders.

What is a Housing Cooperative?

Housing Cooperative

A Housing Cooperative (Co-Op) is a unique type of homeownership that is more affordable than traditional property ownership. Buying a property or renting one may be cost-prohibitive. Housing cooperatives provide an alternative property ownership structure that is intended to be cheaper than a sole ownership of a property.

A Housing Cooperative is usually structured as a corporation where each resident is a shareholder of the corporation. This means that the residents do not own their units directly, but instead they own a part of a corporation based on the relative value of the unit they live in. The value of similar units may be calculated based on the square footage of the units.

Buying a Housing Cooperatives
More Affordable Than Traditional PropertyDifficult to Buy-In
Social EnvironmentNo Independence
High Monthly Fees

How Cooperatives Work

People living in a Co-Op do not own the units directly. They own shares of the corporation that own the units. In comparison, condominiums are structured differently because the owners of condominium units own the unit directly, so they hold an ownership title of their unit. Because the shareholders of a Housing Cooperative hold shares instead of units, they also may be allowed to sell their shares in an open market if the Co-Op board permits them to do so.

Housing Cooperatives tend to require higher monthly payments for paying outstanding bills and management than HOA fees that need to be paid by condominium owners. On the other hand, they are cheaper than rental units because Co-Ops operate at-cost. This means that the bills that the shareholders of a cooperative pay account only for covering costs and do not account for making a profit.

The amount that the shareholders of a housing cooperative have to pay depends on the structure, type and amenities included in the cooperative housing. For example, if the housing cooperative is small and the tasks for maintaining the property are split between the shareholders, then the cost for management may be much lower than it would be if the board consisted of hired professionals. On the other hand, if the housing cooperative is large and has multiple amenities included, then the monthly payments might be higher due to increasing management costs and extra maintenance required.

Regardless of the size of a Housing Cooperative, the distinctive feature of Co-Ops is a social decision-making process. A single shareholder may not have the ability to make a decision regarding their property, so periodical meetings have to be called to discuss problems and find solutions that affect the whole community. Housing Cooperative ownership requires the owners to be much more social and participative than condominium ownership.

Pros & Cons of Cooperative Housing

Cooperative housing is more affordable and more social than traditional property ownership, but with a more attractive price, there are some drawbacks that must be considered:


  • Cheaper Price

    The main advantage of Cooperative Housing is the cheaper price than the price of traditional home ownership. Some people who are looking to build equity but do not want to have maintenance responsibilities may choose a Co-Op as a more favourable option.

  • Social Environment

    People who like to be social and know their neighbors might enjoy Co-Ops for their need to be social. Since Co-Ops are run like corporations, the owners have to communicate closely and discuss the matters related to the corporation.


  • Difficult to Get In

    One of the challenges of owning a Co-Op is getting into one. Co-Ops are very limited in their capacity, and they often require the approval of a board for a seller to sell their shares to a potential buyer. This means that not every buyer can easily get their hands on a Co-Op property.

  • No Independence

    The owners of the corporation do not directly own units in the Co-Op. All the matters that are related to the units are discussed with everyone and voted on. This means that a single owner may not have the power to change or even sell their unit without the board’s approval.

  • Monthly Maintenance Fees

    Even though the buy-in cost is cheaper for a Co-Op, the monthly fees may be quite expensive. They vary depending on the condition of the properties and the number of amenities included, so it is important to learn about monthly fees before purchasing Co-Op shares.

Cooperative Housing Vs. Condominiums

Cooperative Housing is similar to condominiums in a way that both usually provide multi-dwelling accommodation that is split into separate units. The main difference between the two is that condominium unit ownership allows the owner to make decisions regarding their unit while Housing Cooperatives require approval from a board of directors. This also applies to selling a unit. If a condominium owner chooses to sell their unit, they can do it without anyone’s approval. On the other hand, if a shareholder of a Co-Op chooses to sell their shares, then they might need to get approval from the board or the other shareholders. In this sense, condominium ownership is much more personal than ownership of a Co-Op.

In addition to that, condominium ownership implies the ownership of real property. This means that a condominium owner has a legal title of ownership for the unit they own. Unlike condominiums, Co-Ops are not considered real property. An owner of a Co-Op does not get a legal title of ownership for their unit, but instead, they get partial ownership of the corporation that owns the unit they live in.

Types of Housing Cooperatives

There are many different structures different Co-Ops may offer. Similar structures may also vary from state to state because of the applicable laws in a particular state. It is important to carefully pick the Co-Op with the most suitable structure because the structure affects monthly payments and the share price of a corporation. In the United States, the most common structures include:

  • Market Rate Co-Ops

    In the Market Rate Cooperative Housing, the buyers may freely purchase the shares of the Co-Op. The price of a share for such a Cooperative is determined by the market. This structure is considered one of the least restrictive ones because a shareholder may sell their shares given that there is demand for them.

  • Limited Equity Co-Ops

    These types of Co-Ops set restrictions on the price at which the shares can be bought or sold. It might be difficult to sell the shares of a Limited Equity Co-Op because it requires approval from the board of directors.

  • Leasing Co-Ops

    This structure implies that the corporation does not own the building, but it leases it for the shareholders. In this case, the corporation essentially pays rent for the building and does not accumulate the ownership equity. This structure allows buyers to purchase shares at a lower price at the expense of higher monthly payments.

Costs of Housing Cooperatives

Before purchasing shares of a Housing Cooperative, it is important to understand its financial position, inflows and outflows, and a profile of other shareholders. Meeting other shareholders is essential since they are the ones making decisions about how the cooperative is managed. If the values and prospects of the shareholders do not align with the values and financial position of a buyer, then the buyer might be better off looking for another cooperative.

When the buyer got to know other shareholders, who will potentially be their business partners, the buyer should consider the following factors:

  • Co-Op Structure

    It is very important to see how the Co-Op is structured. It does not matter whether the buyer purchases the shares for living in the Co-Op or renting it out, the type of a Housing Cooperative will affect the future return on the investment.

  • Location

    Location is another major factor to consider. If the buyer chooses to live in the Co-Op, they have to ensure that the location fits their needs. It is important to look for nearby stores, restaurants, and other amenities as well as estimate how long it takes to commute to the most visited places.

  • Amenities

    Housing Cooperatives, just like condominiums, usually provide certain amenities like parking spots, a swimming pool, a gym, and others. The more amenities offered, the higher the cost to maintain the building. These costs will fall on the owners of the Co-Op, so it is important to look through the list of amenities included and make sure that the buyer is comfortable with having them all.

  • Maintenance & Management Costs

    The owners of a Co-Op are faced with monthly fees that go to maintaining and managing the property. Before purchasing shares of a Housing Cooperative at an attractive price, the buyer should ensure that they can handle the payments associated with the upkeep of the building.

  • Unit Leasing Policies

    If the buyer wants to purchase a Co-Op for investment purposes, then they would likely want to rent out their unit. Unlike condominiums, Co-Ops may have tight restrictions on leasing out units to other people. If a buyer chooses Co-Op as a rental opportunity, they must ensure that the policies allow them to rent out their units.

  • Insurance Requirements

    Another important consideration that might increase the cost of owning a Co-Op is the cost of insurance that might be required. It is important to look through insurance requirements to estimate how much it will contribute to the total costs of owning a Co-Op. Even though this cost is not the most significant, it might still affect the return on investment over time.

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