What are the benefits of housing cooperatives?

By: HowStuffWorks.com Contributors

The system of co-op ownership has its advantages. Housing cooperatives are commonly owned by all the shareholders -- the tenants -- so taxes are a shared expense and not billed individually. The monthly fee paid by each tenant for maintenance, called the carrying fee, includes the shareholders portion of the taxes. In addition, just like other homeowners, you get a federal tax deduction for your share.

Trying to get into a co-op may not be so simple. Because it is jointly owned, there is an elected board of directors that must approve each potential tenant. This is an essential part of the co-op's governing, for the benefit of the people who already live there and share ownership. The approval procedure requires close scrutiny of every applicant. Co-ops want to be sure that the people who come to live there as shareholders are responsible people that can pay their bills, and will not default on their debts. If one of the tenants defaults on any of the payments, whether it is the co-op maintenance, taxes or mortgage, the other co-owners have to pay up. And what happens if the corporation can't pay all the bills because some of the shareholders have not paid their share? Then the property, which is the corporation's single asset, will be in danger of foreclosure, and that means all the shareholders lose their interests in the property.


Once you live in the co-op, you will still need approval of the board if you want to sub-let your apartment. The corporation has rules and bylaws that must be adhered to, and anyone who lives there must abide by them. The owners are usually financially stable and responsible individuals whose interests as part of the corporation are the same as the other shareholders.