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It's a form of affordable home ownership, but what exactly is co-op housing?

You pay monthly, but it's not a rent. You're a landlord and a tenant at the same time. Sort of. Confused? We'll explain.
You may have heard the term "Co-op Housing" and that it is a way for some B.C. residents to own affordable homes. But what does it entail?

The housing is affordable, though it’s certainly not low-income housing.

It’s governed similarly to a strata, but the financials are markedly different.

There is security in tenure, but it doesn’t come by way of a traditional agreement signed between renter and landlord.

Indeed, co-op housing has elements similar to renting a one-bedroom apartment or buying into a condo development, yet it stands alone in the housing marketplace as very much its own thing.

So what exactly is co-op housing?

Co-operative Housing Federation of BC CEO Thom Armstrong spoke to Vancouver Is Awesome to define the specifics around this housing type.

Starting from the ground up, non-profit co-ops are the product of governments, namely municipalities,  making land available for little to no cost to get the ball rolling. Service providers, non-profit developers and provincial agencies - BC Housing or B.C.’s Community Land Trust, for example - then typically chip in to help purchase, renovate and run buildings meant to house those who may not be able to afford market rents.

A board of directors oversees the day-to-day of a co-op and acts in a role similar to a traditional landlord: vetting prospective tenants, taking care of repairs and tallying capital costs that ultimately help establish what each co-op member pays to live there.

Armstrong explains the rest of the nuances around co-op housing in terms of tenure, expectations and what the sector needs to expand.

What members pay to live in a co-op is referred to as a “housing charge” rather than rent. Explain the difference between the two.

In some ways it’s exactly the same as rent in the sense that it’s a monthly payment meant to cover the owner’s debt service, operating costs and reserve requirements. The reason we don’t call it rent is because co-ops don’t fall under the Residential Tenancy Act and the relationship between a co-op and its members is not one of landlord and tenant. If you live in a housing co-op you don’t own the unit that you live in – but you are member/owner of the non-profit association that owns all of the housing. So in a sense you’re both the landlord and tenant at the same time. Because you’re operating at cost or a not-for-profit-basis, you’re not delivering a dividend to a shareholder or profit to a landlord, that’s where you can achieve savings against market rents over time.

Given that co-ops exist outside of the Residential Tenancy Act, what are the rules around living in a co-op?

There are only three reasons you can be tossed out of a co-op: you don’t pay what you owe, you breach the occupancy agreement, or engage in what’s called “conduct detrimental to the co-op.” Other than that, you have security of tenure, you’re free to live there as long as the co-op meets your needs and you meet the obligations of membership.

Apartment dwellers typically sign a lease and/or renter’s agreement when they move into a new place. What is the equivalent in a co-op?

You make a share purchase, which is the equivalent of a rent deposit, and then there is no term to your occupancy. The rules of the co-op apply to you as if it were a contract that you had signed. The occupancy agreement starts out by saying the member is granted the right to occupy this particular unit in the co-op for as long as it meets their needs and as long as they continue to meet the obligations of membership.

What are the primary differences between a co-op and a strata?

The big difference on the governance side is that it’s one member, one vote. The big difference on the financial side is that in the vast majority of co-ops, you don’t own an investment that’s accruing equity; you own a par-value share where you buy in for $1,000 and you get $1,000 when you leave. The financial gain you get is affordability against the market, not a return on equity.

Outside of the standard credit and reference checks, what does the vetting process in a co-op look like?

Typically there’s an interview with one or more members of the membership committee or board of directors. The questions they are concerned about are: are you going to be able to meet your financial obligations to the co-op, are you likely to be a good neighbour who will keep your home in good condition and not be a nuisance to others and are you interested in living in a co-op where the expectation is that you don’t disappear behind your door at the end of every day and no one knows you. In a co-op you’re part of a community, you’re part of a volunteer effort to make the community a better place to live.

We are in the midst of the highest inflation seen in decades and there is even talk of a recession. How do these economic pressures affect the co-op housing sector?

With existing co-ops, whenever there is inflation pressure in the market, a co-op’s operating costs will increase. If the co-op has to re-finance any existing debts and interest rates have gone up, then the cost of debt service increases and that translates directly into higher housing charges. For new builds, the impact is more dramatic. It’s a lot more difficult to start up a new co-op from scratch these days because of the cost of land, the cost of construction, the cost of labour and financing costs have all gone up. It’s much more difficult to do that in a way that generates housing charges that would be attractive to anybody who couldn’t afford the full market rent.

Waitlists for some co-ops exceed three years, which means there is a dearth of that housing type in Metro Vancouver. If it was up to you, what would you change to get more co-ops built and built quickly?

1 - Set up a wide-scale program to set aside public land for non-profit and co-op developers.

2 – Waive all development fees and levies to make the cost of building co-ops more affordable.

3 – Get rid of the ridiculous rezoning and public hearing process that just makes a mockery of the stated intention of delivering affordable housing into communities.

4 – A more robust rent supplement program, so that people who can’t even afford the break-even housing charge in a co-op can have a bridge between the rent they could afford and what they would pay in the co-op.

5 – A well-capitalized acquisition fund so that we can beat the [real estate investment trusts] in the market to get private, purpose-built rental housing such that we can buy it, move it into the community housing sector and secure that long-term affordability forever. This way your housing doesn’t get gobbled up by REITs [real estate investment trusts] and investment trusts, and you don’t see people renovicted and demovicted, along with the doubling and tripling of rents like we’ve watched in the market for so long.

This interview has been edited and condensed for clarity