What Is A Co-Op And How Do They Work? (2023)

Victoria Araj5-minute read

May 22, 2023


What is a co-op? How does co-op housing differ from living in a condominium or garden-variety single-family apartment? And what does it mean to be part of a housing cooperative? These are good questions – and ones you’re probably wondering about if you’ve never lived in a big city like Washington, DC, or New York.

In some ways, co-op housing operates similarly to condo living. But at the same time, it’s worth noting they are not the same. Let’s take a closer look at what exactly a co-op is.

Co-Op Definition

Cooperative housing (commonly described by referring to an individual co-op) is a type of homeownership common to apartment buildings in big cities such as New York. For practical intents and purposes, a co-op can be defined as a building that is jointly owned by a corporation made up of all its inhabitants. When you buy into a co-op, you’re not purchasing a piece of property – rather, you’re personally buying shares in a nonprofit corporation that allows you to live in the residence.

Different Types Of Co-Ops

Many different types of co-ops are available. You may encounter consumer cooperatives, worker cooperatives, producer cooperatives and more. As a general rule of thumb, all exist with a stated purpose to help groups of people with shared interests work toward a common goal.

What Do Co-Op Homes Look Like?

In general, co-op housing is an apartment that’s part of a large building in a big city. However, several other co-op models exist. Also worth noting: A co-op can also take the form of a townhouse, duplex, or any other type of available housing – including single-family homes, mobile homes and groups of tiny houses situated on co-op land.

(Video) What is a Co-operative?

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What Is A Co-Op And How Do They Work? (2)

(Video) What is a Worker Cooperative?

Buying A Co-Op Vs. Buying A Condo

Although it’s common to think of condos and co-ops as being similar, it’s important to remember that they don’t operate in an identical fashion. Let’s take a look at the major differences you may encounter when buying a condo versus buying a co-op.

Buying A Condo

For sake of clarity, when you buy an apartment or condo, you’re typically buying the interior contents that lie behind a numbered door – one of many individual units. You’re effectively buying ownership of an individual unit in the building in which you’ll reside. As you hold the deed to the property, you also get to benefit from any equity or additional value that accrues in the property as well. As an added bonus, you may also enjoy a relative measure of flexibility when it comes to renovating, upgrading or performing DIY updates to your condo unit. Purchasing and acquiring financing for a condo is also generally easier than for co-ops as well.

Buying A Co-Op

On the flip side, if you elect to buy into a co-op, you’re effectively buying shares in the corporation that owns the overall property. Under the terms of a co-op, everyone who lives in the co-op is considered a shareholder, and the size of the apartment you inhabit determines your stake in the building. Everyone who resides on-premises enjoys access to certain common areas of the building (which, like the interior and exterior of the property, are owned by the corporation). Likewise, they all share in the expenses and responsibility for maintaining the upkeep of the property.

In other words: While you’re paying for the right to live in a specific unit of a building, you don’t actually own this unit outright – and may have fewer options when it comes to making changes, additions or renovations to the residence. Buying a co-op also tends to involve a more demanding application process and may involve being interviewed by the co-op board and financially vetted before you’re approved to purchase shares.

It should also be noted that you can’t usually finance a co-op with a mortgage. Co-ops require special financing because as a buyer, you’re purchasing a share in the company that owns the building, rather than the unit itself. Rocket Mortgage® only offers co-op financing in certain areas of New York. Purchasing a condo with traditional financing can provide you with a lot of the same benefits as co-op living, and you’ll enjoy a simpler financial process, including the ability to make your offer more compelling with a Verified Approval Letter.

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How Does Co-Op Housing Work?

As briefly touched on prior, a co-op is a nonprofit organization. This means it comes with a board of directors and shareholders, as well as several other entities that keep the co-op running smoothly. These entities are:

  • The board of directors: The co-op board is responsible for setting policies and making decisions that are in the co-op’s best interest. Policies handed down by the board, which govern life within the co-op, are generally referred to as by-laws – and these by-laws commonly come in the form of rules and restrictions.
  • The co-op association: This entity is responsible for managing and collecting membership fees, which are used to cover property taxes, building maintenance, amenities and any mortgages attached to the property.
  • Shareholders: Shareholders are those who buy into the co-op. They own a portion of the company that owns the building in which they reside. All co-op owners are responsible for the co-op’s mutual financial obligations. Payments often cover common expenses such as building maintenance and upkeep, renovations or improvements to common areas, underlying mortgages attached to the property and its units, etc.
  • A management company: The cop-op board may hire a management company to deal with day-to-day issues such as building maintenance.

Advantages And Disadvantages Of Co-Op Living

As with any form of housing, co-op living comes with upsides and downsides attached – including pros and cons you’ll want to be aware of before buying into a co-op.

Pros Of Co-Ops

  • Lower purchase price: If you live in a large city such as Washington, DC, or New York, you’ll generally find that co-ops tend to be slightly cheaper and require less closing costs than if you purchased a condo.
  • Less responsibility: If you’ve ever owned a piece of property, then you know you’re responsible for any maintenance needs that come up. Owning a co-op apartment may feel similar to renting in that you’ll find that you aren’t responsible for major items of upkeep that take place beyond the boundaries of your own unit.
  • Better insight into your neighbors: Because co-op boards require detailed and extensive financial records and character references from applicants, you’ll at least have some idea of who they are and some sense of any interests or values that they may share.
  • Tax benefits: Properties in select areas of the country may allow you to deduct interest on your loan for your share of the property, and your share of the interest on the blanket mortgage the co-op holds for the building. Likewise, certain maintenance fees may be tax deductible. If you have questions, contact a qualified tax professional.

Cons Of Co-Ops

  • Higher monthly fees: Although the purchase price of a co-op often comes in lower than buying a condo, minimum down payments are typically higher. Monthly expenses and charges tend to be higher, based on what expenses these fees cover (such as utilities, parking, etc.).
  • Greater restrictions: Don’t forget to read the by-laws in-depth before buying into a co-op. These rules will sketch out what is and isn’t permissible for building residents (like if you can have pets or if you can sublease your apartment). A careful reading can also help you get a better sense of what renovations, upgrades, or changes to your apartment unit can be made as well.
  • Limited buying pool: By-laws incorporated into co-op housing residences can place significant restrictions on shareholders’ ability to resell their shares and divest themselves of real estate holdings. Then again, keep in mind that during COVID, co-ops held value better than condos in NYC because co-op boards weed out financially risky prospects.

Cooperative Housing FAQs

As you might imagine, prospective co-op applicants may have many frequently asked questions when it comes to cooperative housing. Below, you’ll find answers to several common queries.

What’s the difference between a condo and a co-op?

Differences between a condo versus a co-op largely come down to whether you own the individual property unit, or hold shares in a building, respectively. Condos typically offer owners more options when it comes to renovating or rehabbing their units and are easier to finance. Co-ops (in which you buy shares of a property) are generally more stringent when it comes to modifying the residence and who’s allowed to live in the building.

Should I buy a co-op?

That depends on your individual situation. Do you want less responsibility? To live in a property that’s harder to divest yourself of, but has a more stringent qualification process on who’s approved to live in the building? Are you comfortable with owning shares in a non-profit housing corporation vs. an actual piece of property in the form of a unit (and purchasing them using a share loan instead of a mortgage)? You’ll need to consider a variety of these factors – including how hard it might be to resell your shares on the back end – especially if you’re considering purchasing a co-op as a means of investing in real estate.

Can I finance a co-op purchase with a mortgage?

Technically, no: Because co-op owners do not own real estate, the financing process is slightly different from a standard mortgage application. Rather than apply for a home mortgage loan, you’ll need to take out something called a share loan instead. During the application process, you’ll provide information to your lender about how the co-op operates. The lender will also look into the board of directors and take a look at the underlying mortgage. Some co-ops already have existing relationships with certain lenders, which can make the financing process much easier. This all said, because the share loan provides you with a place to live, financing a co-op has the same end result as financing a condominium – you acquire a home that you own.

(Video) What is a Cooperative Business? A business owned and run jointly by its members

The Bottom Line: Could A Co-Op Home Be Right For You?

At the time that you buy into a co-op, you’re not purchasing a specific piece of property but rather investing in shares of stock in a housing cooperative. Commonly confused with condos, co-ops can often take the form of apartments, duplexes, townhomes and other traditional forms of residential structures, but operate according to a different set of rules entirely.

Co-ops generally offer a more affordable way to buy into housing in big cities. But at the same time, governed by boards and by-laws and equipped with more stringent application processes, they often come with more rules and restrictions attached. Be sure to take ample time to do your research and homework when deciding if you’re going to be a tenant or if you’re going to buy a co-op.

Rocket Mortgage offers co-op loans only in specific areas of New York state. If you’re looking to buy a co-op in this area and are ready to get started, start the approval process with our Home Loan Experts today.

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(Video) What is a (Housing) Co-operative?

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How does a co-op work? ›

When you buy into a co-op, you're not purchasing a piece of property – rather, you're personally buying shares in a nonprofit corporation that allows you to live in the residence.

What is a co-op for dummies? ›

A co-op is a housing unit within a building or development that is jointly owned by all the people who live in its different units.

What's the meaning of co-op? ›

co-op noun (ORGANIZATION)

an organization, business, store, or farm that is owned and managed by a group of people who also work in it: Pete worked in a large food co-op in Boston.

What makes something a co-op? ›

Cooperatives are businesses owned by “member-owners”. Co-ops are democratically controlled by their member-owners, and unlike a traditional business each member gets a voice in how the business is run. Services or goods provided by the co-op benefit and serve the member owners.

Is a co-op a good thing? ›

If you need a place to live and fall in love with a co-op, it is an excellent investment. You're getting a great place to stay, and the value will grow. By the time you're ready to move, you will be able to sell it at a high price. If you don't plan on living in the co-op, it is not a wise investment.

What is the benefit of a co-op? ›

Pros of owning shares in a co-op

Cooperatives generally come with a lower price tag than condos or houses. High owner occupancy means that other tenants are just as invested in the shared spaces as you are. Co-ops are great to live in because they harbor a sense of community and long-term housing security.

What are 3 examples of co-op? ›

Types of Cooperatives
  • Producer / Marketing Cooperatives.
  • Consumer Cooperatives.
  • Worker Cooperatives.
  • Housing Cooperatives.
  • Financial Cooperatives.
  • New Generation Cooperatives.
  • Multi-Stakeholder Cooperatives.
  • Non-profit Community Service Cooperatives.

Why is it called co-op? ›

The Co-op Group has its origins in the co-operative consumer societies started by the Rochdale Pioneers. In 1863, independent co-op societies formed The Co-operative Wholesale Society (CWS). They provided Co-op products to sell in hundreds of Co-op stores.

How do you structure a co-op? ›

If you decide to incorporate your cooperative, you must complete the following steps:
  1. File Articles of Incorporation. ...
  2. Create Bylaws. ...
  3. Create a Membership Application. ...
  4. Conduct a Charter Member Meeting and Elect Directors. ...
  5. Obtain Licenses and Permits. ...
  6. Hiring Employees.

How would you describe co-op? ›

A cooperative (also known as co-operative, co-op, or coop) is "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise".

What is co-op and why is it important? ›

A co-op is a mutually beneficial arrangement between you, your school, and an employer. Companies hire freshly trained and eager students to help support their business while students gain valuable work experience that is related to their field of study.

What is the difference between co-op and coop? ›

Co-op is never inflected because it is a noun (although it can function as an adjective). Both words are usually hyphenated to reflect pronunciation (and to prevent confusion with coop).

What type of ownership is a co-op? ›

A co-op owner has an interest or share in the entire building and a contract or lease that allows the owner to occupy a unit. While a condo owner owns a unit, a co-op owner does not own the unit. Co-ops are collectively owned and managed by their residents, who own shares in a nonprofit corporation.

What is a fact about co-op? ›

There are 3 million co-ops around the world – with 1.2 billion members. That means 12% of the people on Earth are part of a co-op. Co-ops employ 280 million people across the globe – that 10% of the world's employed population.

What is the downside of a co-op? ›

Disadvantages of a co-operative include that:

members have equal voting rights regardless of investment - which may not suit an investor-driven business. legal limits on payments of dividends on shares may not suit an investor-driven business.

Do you make money during co-op? ›

On average, students can earn $1,700 to $2,500 per month while on a co-op assignment. Each co-op employer sets the wage and pays the student. Just like salaries, co-op wages vary by field, industry, and level of experience. View average hourly co-op wages.

What is the downside to living in co-op? ›

Co-op fees tend to be higher than condo fees because co-ops roll all the monthly expenses into one bill, including gas, water and property tax. For example, if a co-op shareholder owns 2 percent of the property, they will pay 2 percent of the electric bill.

How do co-op owners make money? ›

They may get their operating funds from membership fees, common or preferred stocks, bonds, by borrowing from banks, or from other sources. Many cooperatives also finance themselves to a considerable extent from members' savings kept in the business in the form of reserves.

What happens when you pay off your co-op? ›

When you pay off the cooperative loan, the bank will return the original stock and lease to you and will also forward a “UCC-3 Termination Statement” that must be filed in order to terminate the bank's security interest in your cooperative shares.

What are the 4 stages of co-op? ›

The four cornerstones in the Food Co-op Development Model are Vision, Capital, Talent, and Systems. Each is critical to the success of a new cooperative.

What are co-op members involved in? ›

Join Co-op and you'll get access to personalised, paper-free offers you can use in Co-op Food stores. Each week, you can: go online or on the app to see new offers on products you like to buy or might want to try. choose the 2 offers you want to use - scan your Co-op Membership card in the app to use your offers.

Is co-op ethical? ›

The company received Ethical Consumer's best rating for Carbon Management and Reporting, Timber Sourcing, Toxic Chemicals and Environmental Reporting.

Why is co-op so expensive? ›

However, we're a convenience store, not a big supermarket which means we have higher running costs, especially due to the urban and residential locations of most of our stores, where delivery costs can be higher.

What are the coops 6 values? ›

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity.

What is a co-op interview like? ›

Co-op boards use interviews to check whether candidates can pay their bills and follow the rules of the association. Be prepared to answer personal questions about your finances, background and application.

How do you succeed in a co-op? ›

5 tips for a successful co-op work term
  1. Learn the culture. One of the most important tips for success I can give you is to learn the culture of your workplace. ...
  2. Get involved. ...
  3. Network. ...
  4. Don't be afraid to ask questions and ask for work. ...
  5. Don't be afraid to fail.

How do you get a good co-op? ›

7 Tips On How To Get A Great Internship Or Co-op
  1. Tell everyone that you're looking to get an internship. ...
  2. Reach out to people in the industry you want to get an internship in. ...
  3. Look at specific job boards. ...
  4. Look for internship programs all year round. ...
  5. Attend networking events and tradeshows.

What is co-op experience? ›

Co-op, short for cooperative education, is a program that balances classroom theory with periods of practical, hands-on experience prior to graduation. Through the co-op program, students are able to alternate academic study with full-time employment, gaining practical experience in their field of study.

What is the 7 principles of cooperative? ›

Cooperative Principles
  • Open and Voluntary Membership. ...
  • Democratic Member Control. ...
  • Members' Economic Participation. ...
  • Autonomy and Independence. ...
  • Education, Training, and Information. ...
  • Cooperation Among Cooperatives. ...
  • Concern for Community.
Dec 1, 2016

What makes co-op unique? ›

A co-operative (co-op) is a different kind of business. Our Co-op is owned by individual members and other co-ops, not big investors, and our members get a chance to have a say in how we're run. Profits mean members receive money, rewards and offers and a co-op can support its local community.

Why would an individual want to join a co-op? ›

Develop new skills that you could help you with excel in the workplace. Learn how to conduct oneself on the job. Professional behaviour is important in any business or workplace setting and is invaluable in your transition from school to the workforce.

What is the difference between co-op and regular? ›

Being in co-op calls for an alternating sequence of study and work terms, whereas the regular program follows a traditional stream of being in school from the beginning of September to the end of the April.

Is a co-op a legal entity? ›

Like other businesses, a cooperative incorporates as a legal entity under state statutes, which provide a framework for governance and operations.

What is the most common type of co ownership called? ›

tenancy in common. The most basic form of co-ownership is tenancy in common. You can think of it as the default category.

Who has control and ownership in a cooperative? ›

A cooperative is a user/owner (democratically) controlled form of business; however, in most cooperatives, members cannot make all the decisions directly. Members exercise control over a cooperative directly by voting at membership meetings and indirectly through election of a board of directors.

What do owners in co-op buildings actually own? ›

A co-op owner has an interest or share in the entire building and a contract or lease that allows the owner to occupy a unit. While a condo owner owns a unit, a co-op owner does not own the unit. Co-ops are collectively owned and managed by their residents, who own shares in a nonprofit corporation.

Do you get paid in co-op? ›

Co-ops are traditionally full-time, paid positions. "Internship" usually refers to a one-term work assignment, most often in the summer, but not always. Internships can be full- or part-time, paid or unpaid, depending on the employer and the career field.

What is an example of a co-op business? ›

Cooperatives provide services in areas where private for-profit businesses don't see sufficient profit potential. Common examples of cooperatives include agricultural cooperatives, electric cooperatives, retail cooperatives, housing cooperatives and credit unions.

What is the advantage and disadvantage of cooperative? ›

Although being part of a business collective can increase a company's purchasing power and cut its costs through service sharing, joining a cooperative can also have drawbacks. These include losing some control over operations and becoming less competitive.

Is a coop a type of ownership? ›

A housing cooperative or "co-op" is a type of residential housing option that is actually a corporation whereby the owners do not own their units outright. Instead, each resident is a shareholder in the corporation based in part on the relative size of the unit that they live in.

How much does it cost to live in co-op city? ›

Apartments cost between $13,500, for a basic one-bedroom, and $29,250, for a three-bedroom with one and a half baths and a balcony. Monthly carrying charges range from $646 to $1,394. Floor height plays a part in determining those fees; the high-rises range from 24 to 33 stories.

Is co-op a franchise? ›

Our focus is on high quality Co-op Franchise stores and this means only the very best opportunities will make it through. It has to be the right store in the right location with the right franchisee. Your property will undergo a detailed selection process, with over 2,500 stores we know where Co-op stores work well.

How many hours do you work in co-op? ›

Co-op Defined

To qualify as a co-op work term, the position you're hiring for should be: At least 420 hours per 4-month work term (full-time work) Paid at an appropriate salary for the industry and level of responsibility, as well as meeting regional or provincial/federal employment laws.

Can I work full time on co-op? ›

You can work up to 20 hours per week. You can work full-time. o Must be a full-time student both before and after the break. breaks.

What does co-op money mean? ›

You are buying shares in a cooperative corporation, which gives you the right to occupy one of those units. The co-op is managed by a board operated by members who can vote on rules and policies and changes to them.

Who is financially liable in a cooperative? ›

Liability: Shareholders of a cooperative enjoy limited liability for the debts and obligations of the business, including liability for the unlawful acts of other shareholders and employees.


1. What is a Co-op Program? - Experiencing Conestoga
(Conestoga College International)
2. NRECA: The Electric Cooperative Story
3. What is a Co-op?
4. Why the cooperative model is a revolution | Melanie Shellito | TEDxIWU
(TEDx Talks)
5. What is Co-op? | Advantages and Disadvantages of Co-op | International Students in Canada | IamTapan
6. Anu Puusa: The case for co-ops, the invisible giant of the economy | TED
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