Defining a Housing Cooperative

A housing cooperative, often referred to simply as a co-op, can be an excellent residential choice for many people. Co-ops are not very popular in Boston, however there are some very nice co op developments such as Kenmore Towers in Boston's Fenway, as well as West End Place in the West End. Originating in the crowded and expensive housing market of New York City, co-ops have become popular options in many cities.

Click Here to Search

Boston Area Co-Ops For Sale

Like condominium associations, co-ops are formed by multiple housing units in one building:

• These buildings are governed by a set of bylaws that all members of the co-op are required to follow.
• A board of elected directors and officers enforces the bylaws.
• All occupants of the co-op must share the cost of the building's maintenance and utilities.
• These costs are collected in the form of monthly fees.

However, there are several key differences between condos and housing cooperatives:

• Units in a co-op are not purchased as real estate.
• Instead, the buyer purchases shares of the corporation or building.
• The corporation continues to own all the housing units in the building.
• Each member of the co-op has an equal share of the corporation.
• Members can obtain the right to occupy a unit through a proprietary lease or an occupancy agreement.
• When moving, the original share in the corporation is resold back to the member board rather than selling the property itself.

The Beauty of Co-Ops

Co-ops have flourished since their inception in the late 1800s because they offer a wide range of benefits to their members.

Greater Affordability

Most co-ops require a significantly smaller down payment for share purchases than traditional condo or single-family housing agreements. While most lending associations demand around 20 percent down before committing to a loan, co-ops are more in line with typical rental agreements. Most require first and last month's payments plus a security deposit.

Tax Benefits

One of the main reasons that housing cooperatives began, and why many people are still drawn to them today, is because of the tax advantages. Because entire properties are taxed, the members share the tax burden each year. Each shareholder is assessed a carrying fee that is paid into the co-op fund each month, eventually to pay the year's property taxes. In addition, the shareholder can claim federal income tax deductions for owning shares in the home.

Security Through Neighbor Selection

Most cooperatives include a clause requiring that the board of directors must approve any potential shareholders in the building. This means that the members of the co-op can voice an opinion and decide who can move into the building and who will not be allowed to buy shares. Most of the time this application process includes scrutiny of the potential member's finances. The board wants someone who will dutifully pay his or her mortgage, maintenance and tax fees each month.

Community Control

Because co-op residents are not renters, but rather mutual owners, they have a greater say in the overall running of the building. They vote people onto their board of directors, a governing body that makes decisions for everyone in the community. Such decisions could range from hiring a new garbage company to deciding when the building needs painted. These boards also must approve before any co-op can be sublet. This stipulation, as well as the application process for new members, ensures that the building will belong to and house a high-caliber pool of shareholders who are responsible and able to follow the guidelines established by the board. Because of these high standards, co-ops have a low turnover rate and an even lower loan default rate.

Different Types of Co-Ops

There are a variety of different types of housing cooperatives, each with its own set of regulations and income level. Others are organized specifically for elderly residents or for those working for the government. These are the main types of cooperatives:

1. Market-rate co-ops – Investors in this type are able to buy and sell their shares at reasonable market prices. Equity in the housing can increase or decrease, much the same as any other home ownership situation.
2. Limited equity co-ops – Intended to be more affordable than many upscale cooperatives, these typically feature lower-interest loans, grant opportunities and higher tax breaks. However, these financial advantages mean that tenants are typically restricted in their earned equity, and they will see less return if they choose to sell their shares.
3. Leasing co-ops or zero-equity co-ops – These are owned by outside investors or nonprofit organizations that lease the property to a group of tenants acting as a corporation. Eventually this group may be able to purchase the entire building and convert it to another type of co-op.
4. Mutual housing associations – Owned and operated by nonprofit organizations, the residents who live in the building make the decisions in this type.

Co-Ops in Boston

Despite the spread of cooperative housing across the United States, co-ops are not common in Boston. There are, however, two popular housing co-ops in the city.

Kenmore Towers

Featuring 111 units, Kenmore Towers sits in the heart of Boston's main city streets. Within short walking distance is the opportunity to sail in the bay, catch a game at Fenway Park or visit historic Boston Common. The building boasts a combination of one-bedroom, two-bedroom and studio units, each with a generous expanse of windows and a private balcony. In addition, the cooperative utilizes popular amenities such as collective laundry facilities, an outdoor swimming pool, underground parking and a concierge service at the front door.

West End Place

The newer building housing West End Place is intended for mixed-income residents. Featuring 183 units built in 1997, this cooperative is anchored by a street-level retail space, a private park and underground parking. Potential investors have the option of one-, two- or three-bedroom units, each with over-sized windows and high-end finishes. Quick access to Boston's public transportation system, as well as 24-hour security and concierge service make this location an in-demand commodity.

With a wide range of options at a variety of income levels, housing cooperatives offer residents the unique opportunity to become investors in a large property at very little personal risk.