Advantages of Housing Cooperatives
Housing co-operatives basically differ from other market actors by creating value for their members. With this in view UN-Habitant (2010) highlighted some advantages and there are noted below:
Economic Advantages
Co-operative society creates an opportunity for affordability of houses.Lower down payment, much lower closing costs, economies of scale, and a longer mortgage term all make co-operatives more affordable than other ownership housing. Members have no reason to increase monthly charges substantially unless taxes or operating costs go up, so monthly charges remain reasonable.
The cooperative member is usually considered a homeowner and, as such, can deduct his or her share of the real estate taxes and mortgage interest paid by the cooperative. Cooperatives can provide for accumulation of individual member equity. For market-rate cooperative societies, the accumulation of equity and resale prices are based on the market. Limited-equity coops establish limitations on the accumulation of equity to assure long-term affordability to new members.
Members have no personal liability on the cooperative mortgage. The cooperative association is responsible for paying off any mortgage loans. This can often make it possible for persons whose income might not qualify them for an individual mortgage to buy a membership in a limited equity coop.
With the involvement incooperative association, members can jointly exert influence in order to change tax rates and utility prices and obtain improved services from local governments. The cooperative, as consumer advocate, can also join with other organizations. Cooperative society encourages saving among members. Members can benefit from economy of scale in cooperative operating costs as well as from not-for-profit operation. Also, when there are transfers, only the out-going member’s equity must be financed by the incoming member. Transfers of shares are subject to fewer settlement costs (UN-Habitant, 2010).
- Social Advantages
Cooperatives housing offer control of one’s living environment and a security of tenure not available in rental housing. As mutual owners, member residents participate at various levels in the decision-making process. This is not true of tenants who usually do not have the opportunity to exercise responsibility. Members own the cooperative together and have the security of being able to remain in their homes for as long as they wish, as long as they meet their monthly obligations, and abide by the cooperative bylaws, rules, and regulations.
Many cooperative members indicate that the possibility for interaction with people from different backgrounds, cultures, and income levels is a positive factor in their decision to become a member.
By establishing cooperative procedures and working together, people are able to provide services for themselves that otherwise would be impossible to obtain. When one cooperatively organized venture is successful it often becomes clear that people can be successful in another area as well. As a result, the original effort often can be strengthened.
- Physical Benefits
Shared maintenance responsibilities: cooperative members usually have limited direct maintenance responsibilities. The cooperative association is responsible for major repairs, insurance, replacement of worn-out buildings, and upkeep of common grounds and facilities.
Vandalism and Security: cooperative members vigorously protect their association’s property. An important benefit of converting rental properties to cooperative ownership is reduction in vandalism and abuse of property and improved and shared security arrangements. Recent studies show that the cooperative’s presence in the neighbourhood brings neighbourhood crime down (UN-Habitant, 2010).
Standard cooperative practices: it is evident that cooperative housing associations are most successful when operated in accordance with specific recommended practices, in addition to the general co-op principles. The cooperative’s board of directors should keep its members informed of all its actions. A regular communication system for instance, through frequent newsletter, information bulletins, special meetings, solicitation of members for opinions and priorities-strengthens the relationship between the board of directors and the members.
The cooperative society must maintain adequate financial reserves to protect the cooperative and its members’ interests. These usually include a general operating reserve and a reserve for replacing components of buildings as they deteriorate. Such reserves reduce the possibility of members having to pay unexpected special charges in emergencies. An annual audit should be conducted by professional accountants and made available to all members. To protect the interests of the remaining residents, the cooperative board must have the right to approve incoming members who take the place of those leaving the cooperative. A credit check and a visit with the membership committee are usually required. This process also helps orient the incoming member to their rights and responsibilities as coop members (UN-Habitant, 2010).