Chicago Housing Cooperatives, Explained

How are housing cooperatives different from communes and who are they for? These and more common questions about co-ops answered.

By Jhaylin Benson, Grace Del Vecchio, Annabel Rocha, Sonal Soni, Jerrel Floyd and City Bureau

This story was produced by City Bureau, a civic journalism lab in Bronzeville, and co-published by the Chicago Reader.

For the last century, housing cooperatives have provided residents of major American cities increased opportunity for homeownership — especially for low-income and lower-middle-class residents for whom homeownership may not be financially feasible.

Some of Chicago’s first co-ops were created in South Shore, a community that in recent years has seen a sharp uptick in evictions. Community members have pushed for an increase in affordable housing as well as policies and programs to help South Shore residents remain in the neighborhood. In July, the city approved a pilot program that will provide loans and grants to condo and co-op owners living in multi-unit buildings in South Shore and whose homes need repairs. The pilot program was created after years of pressure from local leaders, housing advocates and residents who feared displacement and wanted housing protections ahead of the Obama Presidential Center’s opening. Though the program is a welcome resource, many of the organizers’ demands have yet to be fulfilled.

City Bureau reporters surveyed more than a dozen South Shore residents about their views and feelings on housing co-ops, as we explore whether they could play a bigger role as an affordable housing solution. We learned that there is a lot of confusion about what co-ops are. Below we answer some of the most common questions. Later this year we’ll publish a more in-depth report on co-ops in Chicago.

What is a housing cooperative?

From the outside, they look like any other home in Chicago. They can be townhouses, a collection of buildings or a large apartment complex with hundreds of units. A housing cooperative is essentially an entity that “owns real estate, consisting of one or more residential buildings” according to the International Cooperative Alliance, an organization that helps raise awareness about cooperatives around the world.

From the inside, housing co-ops may look different. The financial structure and agreements between residents regarding responsibilities, building maintenance and use of common areas can be targeted to the needs of the members. Some co-ops are organized to support people based on their income level, background, political ideology or immigration status.

Many co-ops face obstacles that can stem from different members having different visions for the space, or financial challenges raised by needed renovations and updates.

How are cooperatives financed?

While there are several different financial models for establishing a housing co-op, zero equity, limited equity and market rate co-ops are some of the three most common models in Chicago.

Zero equity: Individual members of the co-op do not have any ownership in the property. Instead, ownership is handled by a group usually outside of the actual co-op building. So typically the members will not make a profit if they decide to leave the co-op.
Limited equity: Individual members only own a portion of their unit in the building where the co-op is located. The other portion is owned by the cooperative as a whole. This structure is typically seen as an option for people of limited income to reach a form of home ownership, while also helping them build wealth.
Market rate: The units in the co-op can be sold at market value, with each member owning the entirety of the unit. When selling the unit, members receive full market value. This model provides an alternative route to home ownership for those who cannot go the traditional route.

Limited and zero equity co-ops were created to make housing co-ops more accessible to lower-income people and families. By limiting or eliminating the value increase on the property, the co-op members ensure that their cost of living remains the same or nearly the same.

Is a cooperative open to people of diverse incomes?

The first housing cooperatives in Chicago were built in the 1920s, situated along the northern and southern shores. Many were owned by upper-middle-class white residents who wanted to enjoy home ownership at a cheaper price and “handpick” their neighbors, as a 1927 Chicago Tribune article stated. In contrast, one of the biggest selling points for cooperatives in recent decades is their potential to accommodate residents of a variety of economic standings (zero equity and limited equity co-ops in particular meet this need).

The down payment, or “initial share” payment, varies depending on the co-op and whether they are market rate, limited equity or zero equity. Co-op members do pay monthly fees, which are used for the mortgage, property taxes, shared utilities and repairs. But those fees tend to be lower than those incurred by homeowners. The average, initial-share fee for a one-bedroom affordable housing co-op is roughly $4,600, and about $12,000 for two- or three-bedroom units, according to a Chicago Mutual Housing Network 2004 report, the most recent available. However, some co-ops receiving federal subsidies may require the equivalent of a deposit or a month’s rent.

What decisions can you make in a cooperative? How much say do you have?

Housing cooperatives embody democratic principles, according to “Cooperative Housing Toolbox: A Practical Guide for Cooperative Success” by the Northcountry Cooperative Foundation. Co-ops might use different governance models, but most have individual members, a board of directors and committees, and they primarily use the “one member, one vote model.”

In most housing co-ops, members collectively decide on policies, approve new members and choose whether they want a management company. Members also work on the budget together and might divide maintenance work. Every decision also takes both individual and collective benefits into account, and each member has an equal say in the co-op’s housing guidelines. There are also opportunities for members to take part in leadership positions, like on a committee or the board of directors.

How is this different from a commune?

Similarities: Both communes and housing cooperatives are types of communal living where a group of individuals typically live in a shared house or property.

According to the Foundation for Intentional Communities, both communes and housing cooperatives may use a cohousing model. Chapeltown Cohousing explains that in this approach, communities often include both private dwellings and shared facilities, like a common house or garden, and they foster neighborly connections. Some housing co-ops operate with shared living spaces whereas others only have separate and private units.

Differences: Unlike housing cooperatives, communes may combine each member’s income for additional shared expenses like groceries. People who live in a commune may also share work responsibilities like cleaning, cooking meals and childcare.

A cooperative is an ownership and management model. This means that the property is owned by the cooperative and all members have an equal say in the management of the housing, regardless of their share in the property. People in housing co-ops must be able to work together as fellow shareholders and as neighbors in the same building, but they are not required to share income, meals or childcare responsibilities.

Who are cooperatives for?

People who have a trusted network of friends: Investing into a cooperative with an established network could help mitigate the challenge of building trust with a new group of people. It may be easier to make shared decisions like choosing a location, allocating funds, etc., with folks you already know.
People who do not want to deal with a landlord: In a co-op you own a share of the building and have decision-making power. Co-op owners may collectively decide to outsource a building manager to handle administrative work or other duties around maintaining the space. But you are their boss.

People looking for lower-cost ownership options: Co-op buyers buy shares of a property, rather than an entire house or building, which could make it a more affordable option than purchasing an entire property on your own. Owners are responsible for paying mortgage, utilities, maintenance fees and property taxes, but because costs are shared, they might be lower.
People looking for a sense of community: You do not need to approach a co-op with an established network. Shared decision-making and living in close proximity to others may provide a sense of community, though this will vary by group.
People who are undocumented: There is no law that prohibits non-U.S. citizens from purchasing property. In fact, about a quarter of undocumented people in the U.S. own a home, according to the Washington-based Migration Policy Institute, a nonpartisan think tank. Undocumented people can purchase homes by paying with cash or through special mortgages for people who only possess an Individual Taxpayer Identification Number.

Can a formerly incarcerated person be able to move into a cooperative?

Legally, yes. Formerly incarcerated people can legally purchase homes, though barriers to access loans might make it difficult, or impossible, for some.
They might also face obstacles when applying to already established co-ops. The ownership board may review an applicant’s personal history, then vote to accept or reject potential new owners. While owners do have the right to deny an application, a 2016 Guidance on the Fair Housing Act to Cooperatives notes that denying housing to anyone with a prior arrest or criminal conviction is not justified and violates the Fair Housing Act.

Jhaylin Benson, Grace Del Vecchio, Annabel Rocha and Sonal Soni are 2022 Fall Civic Reporting Fellows. Jerrel Floyd is City Bureau’s engagement reporter covering development and segregation in Chicago. You can reach him with tips at Jerrel@citybureau.org.

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