What is a Co-op? Co-ops, formally known as housing cooperatives, serve as an alternative form of home ownership. Unlike the traditional way of owning a home, where residents are the owners, a corporation in this case owns the real estate (the building). Therefore, a prospective resident would not technically be applying for a mortgage at a bank, but rather they would be applying for a financing loan. As a matter of fact, residents are shareholders of the co-op and are entitled to a unit of the building. Being a member of a co-op has its benefits over traditional home ownership.
Taxes: Housing coop members enjoy some flexibility with taxation rules. Certain states allow co-op buildings to choose whether units are taxed individually or taxed as one estate. Thus, certain units that have better amenities or larger space can be taxed more, while smaller or less convenient units can be taxed less. However, overall, co-op members usually pay a lower tax rate than a regular home owner.
Representatives: Co-op members can vote each year to select representatives for their so-called “housing board.” Yes, this is very close to, and can be compared to, the “Board of Directors” of other corporations. These representatives are in charge of making sure that all building needs are addressed at all times. All building matters are supposed to run as smooth as possible so that owner residents would never need to take care of problems they have with their units or with the building by themselves. Should problems arise with heating or air conditioning, or with the amenities or other resident members’ units, the representatives of the co-op will be there to find a solution to the problem in a quick and timely manner. In addition, representatives also screen potential shareholder-resident candidates who wish to own a unit. Since the representatives are residents themselves, they have a better understanding of whom among potential candidates would be the best fit to live in their building.
Shared Responsibilities: Cooperatives often have a strong sense of community. Since co-op members are shareholders, they usually do share the same goal of improving the building. Instead of hiring professionals to maintain the building, members often volunteer themselves to handle the matters at hand in order to reduce costs.