Starting a new Cooperative
|Housing Cooperative Overview||NCB HOMEBASE|
There are a number of publications available for sale on developing housing cooperatives. Downloadable documents above are free and offer a wealth of information on cooperative start up. Visit NCBA’s cooperative publications list for documents available on their website.
Visit the USDA’s website for a selection of free publications on cooperatives available as PDF files.
In addition, there are a number of nonprofit organizations that can be a resource for developing a new cooperative. Visit our “Resources” page for other areas.
One of the most common methods of developing new housing cooperatives today is converting an existing rental building or buildings into cooperative housing. If you are thinking of converting an existing property to a cooperative, be realistic about the feasibility of the project and be sure to research the costs thoroughly. Often existing buildings require major repairs, rehab, and/or replacement of appliances. A detailed physical inspection and consultation with contractors can help determine the condition of the existing property and the rehab costs. In addition, examine the demographics of the current residents. Will most residents have the resources to qualify for membership in the cooperative? How will costs compare to other housing in the area? Also, it is important to investigate what level of interest potential residents have in cooperative ownership. These are important considerations for the success of the cooperative.
Cooperatives can also be built from the ground up as new housing, although new construction cooperatives are less common today. Cooperatives for low and moderate income families today are being financed by local government or using a federal property disposition program. A number of senior housing cooperatives have been built in the last decade and a few new cohousing communities have been developed using cooperative ownership. As with any new construction, it is important to determine the financial feasibility of the project and what residents in the area will be able to afford.
Decide the type of equity model you plan to use for the cooperative. As in other forms of homeownership, equity accrual is generally an important concern for homeowners. In market-rate cooperatives, cooperative shares can be bought and sold at a market price and members can build equity in their investment. However, if there is a desire to keep the housing permanently affordable, the limited-equity or zero-equity models might be good options to consider.
Typically, you’ll need professional help from a number of sources (the “development team”) to plan and implement a new housing cooperative. You’ll also need to research various financing options (see the article on “Fifty plus ways to finance cooperative housing” from our Cooperative Housing Journal).
Also, keep in mind that cooperative housing does not always include ownership of the housing. In a leasing cooperative, the cooperative does not own the housing, but leases it from a landlord. While this model lacks the benefits of full ownership, it does have some advantages over rental housing. The cooperative may be able to secure a long-term lease at more affordable rates than if each tenant rented separately, giving cooperative members more security and control over their living environment.
Cooperatives are a flexible tool that can be applied in many different ways to meet a variety of special needs.
Regardless of the type of cooperative that you want to start, you’ll want to address these questions:
- Is cooperative ownership the most appropriate option available?
- What will the mission of the cooperative be and what type of cooperative structure will best suit that mission?
- Is the project financially feasible and where can financing be obtained?
- What types of legal documents will be required?
- What types of technical assistance and support will be needed (and what will the costs be) to make the cooperative a success?
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