Cooperative Living (Co-op) Option for Affordable Housing

Cooperative ownership or shared equity ownership has great potential for providing affordable housing to families and individuals of modest incomes. Cooperative living creates opportunities for tight knit communities to develop and sustain themselves for generations. Being part of a co-op requires that residents work together, build trust and soon networks creating positive social capital for the community. The residents of a co-op can develop aspects of their community that are most important to them like community gardening, job training or even recycling efforts.

There are many aspects that must be integrated in order to develop a successful affordable housing cooperative. Often cooperative housing developments form a type of corporation, similar to a business, but this corporation only generates money that goes directly into operating and maintaining the building. In this way, the corporation is like that of a non-profit, however is not incorporated as a 501 (c) (3). Once this corporation is set up there are various policies that need to be adopted to ensure the corporation continues to provide affordable housing. These policies vary between co-ops because they are democratically run and every community has different definitions of affordability, priorities and values.

The following is a list of items integral for co-op developments. These elements have been adapted from “The Urban Homesteading Assistance Board” (UHAB) and more information can be found at

  • Understanding the initial definition of affordability, (i.e. what population will this corporation serve?)
  • Outlining the qualifications of those seeking the housing, (i.e. income and asset restrictions)
  • Setting the initial sales price for the shares of the corporation
  • Adopting a resale price cap
  • Allocating a “flip tax” to financially assist the co-op during sales
  • Waiting list for purchasers internal and external
  • Establishing Resale procedures
  • Setting up Regulatory Agreements and by-laws for residents
  • Monitoring and enforcing all policies
  • Initial and ongoing education for those entering the co-op lifestyle and understanding ownership responsibilities

Defining Affordability, Income restrictions & Initial Sales Price:

One way to define affordability is to use the Federal Government’s Department of Housing and Urban Development (HUD) categories of income levels as follows:

Percent of Area Medium Income

Income Category


Very Low Income


Low Income


Moderate Income


Middle Income

This method may work for identifying what type of income levels you want the co-op to serve. The policy for the co-op can stipulate that it will house people of “low incomes” which would be 80% of the defined area medium income (AMI).

Often times however, the defined AMI will be much higher then you would expect because it includes the larger metropolitan area. The metropolitan area will include households with higher incomes and therefore skew the “medium income.” For example, if the AMI is $100,000 then a family is considered “low income” if making 80% or $80,000. This may not be the “low income” population your co-op was hoping to serve. (This is not always the case, but it is a good idea to check with the US Census Bureau to see what is considered the AMI.)

As an alternative look at the neighborhood level, the school district or the local census track to get a more accurate and local medium income level. The Center for Urban Pedagogy put together a great toolkit to help visualize what the median income is based on their neighborhood vs. the AMI. An interactive map can also be found at to better understand what is actually considered affordable in a neighborhood. (Sorry Denver this is just in NYC for now.)

It is also important to consider that the cost of purchasing shares of this co-op may require the purchaser to take a loan. So on top of the monthly co-op maintenance fee the resident has an individual mortgage. Many affordable housing advocates support that residents should only pay 30% to 35% of their monthly income on their cost of housing.

Taking all this into consideration the co-op can develop its policies around the type of people they want to provide housing for and how much they will charge incoming residents.

Resale Price Cap, “Flip Tax,” Waiting List, and Resale Procedures:

There is no official legislation, federal or state, around affordable cooperative housing and therefore, in order to sustain a co-op as an affordable housing method resale policies have to be adopted by the shareholders.

The co-op sustains itself financially through the monthly maintenance fees and the sale of shares. Resale caps have to be carefully thought out, taking into consideration that the co-op makes money off of the sale (flip tax, which will generally go into a reserve fund) and the individual shareholder makes money off the sale (their reasonable profit). Resale caps can increase over time to compensate for inflation rates and can take into consideration any major capital improvements the building has received.

It is important for shareholders to understand that they are a part of something that initially allowed them to have housing at an affordable rate and that they should ensure that they provide that same opportunity to the next shareholder. The financial equity a shareholder builds in an affordable housing co-op is limited. However there are many qualitative benefits a shareholder gains by being a part of this type of community. Having stable housing is the first step toward gaining things like a stable job, higher education and social networks. These factors all have to be a part of defining a resale price.

Regulatory Agreement, Enforcement and Continual Education:

Regulatory agreements can outline the requirements that help make a co-op function. Many times lenders will require a regulatory agreement be in place and will add their own terms to the agreement, like an income limit. Establishing regulatory agreements and by-laws also helps the residents understand their rights and responsibilities as a co-op owner. No two co-op agreements will ever be a like because the shareholders democratically govern their co-op and all that define it.

Aspects of Regulatory Agreements often include:

  • Income Restrictions
  • Resale Prices
  • Procedures
  • Resale Policy
  • Annual Elections
  • Budgeting and Monthly Charges
  • Subletting
  • Financial Statements and Audits
  • Insurances
  • Physical Conditions and Inspections
  • Commercial Spaces and Leasing
  • Reserves
  • Taxes

Finally, the most important aspect of successful affordable housing cooperatives is on-going training and education. Often times those who are a part of affordable co-ops are not accustom to being an owner of property. The more the shareholder understands that they are responsible for minor repairs and improvements the more they will care for the property. New homeowners need to be educated not only about physical up keep of the property but also the political up keep of the corporation. Residents of co-ops must be active in co-op board elections and be aware of any changes to their regulatory agreements.

Though cooperative living is not for everyone, it can provide sustained affordable housing to those who are engaged in their communities.

Here are some other great resources for understanding the limit equity co-op option!

National Association of Housing Cooperatives:

The Boulder Housing Coalition:

The Urban Homesteading Assistance Board (UHAB) and

Cooperative Housing Coalition:


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