Limited equity cooperatives are a form of affordable, resident-controlled homeownership that is gaining popularity in Massachusetts. Co-ops can be flexible for serving affordable housing goals and secure because of the sharing of responsibilities and liabilities.
What is a limited equity housing cooperative?
Co-op ownership is shared ownership of housing. A co-op is a corporation made up of the people who live in the housing. The housing can be apartments, townhouses, or individual houses. There are a growing number of mobile home park co-ops.
In a co-op, the individual resident owns a share(s) of stock in the corporation made up of all of the residents. They do not own their own unit. This is different from a condominium where the individual owns their own unit individually. It is different from typical single family homeownership where there is no sharing of ownership obligations.
In a limited equity cooperative, the individual does not need a mortgage for their unit. Individual share purchase prices are very low. Co-op share ownership entitles one to a long-term lease on a unit and a vote in corporate governance. The individual is both a "tenant" because of their lease with the corporation, and an "owner", because of their stock ownership and participation in group governance. The co-op members elect a Board of Directors who make most decisions about the co-op.
In a co-op, residents are never evicted unless they violate their lease. Many members stay for decades. When residents leave they sell their share(s) of stock and not their unit, as condominium owners would. In a limited equity cooperative, the value one can obtain for one's stock at sale is restricted by a specific formula, to make the housing affordable for current and future residents. Limited equity co-ops are non-speculative homeownership.
Why develop limited equity cooperatives?
Co-ops provide many of the benefits of property ownership to their members. They provide direct control over one's housing. There is no landlord profit. Limited equity cooperatives are a uniquely accessible form of property ownership. Share purchase prices are typically much less than downpayments on comparable condominiums. Therefore, co-ops can service a broad range of income groups.
What is different about a "syndicated" co-op?
In a syndicated co-op, corporations provide a lot of money for the original construction (Over many years, this money is paid back to them by the government). In return, the corporations become "limited partners", which means that they keep some control. For example, they have to approve the budget every year, and they would have to approve any change in affordability or management company. By and large, however, the co-op board still has control over most aspects of the co-op.
One other difference in a syndicated co-op is that there is usually a "start-up" period of a year or so. During this period, the developer is in charge of the co-op while the members are trained, and while the co-op attains financial stability.
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