Re: Equity Co-op
From: Patty Nowlin & Pat Guyn (pattypattelus.net)
Date: Mon, 13 Jan 2003 23:58:01 -0700 (MST)

Hello Maggie,
Sorry for the delay, it's a very busy time here as our project completion in May is now looming. I'm happy to give you some background on our decision to re-form as an equity co-op (officially a Strata Title Home Ownership Cooperative). This may be long winded, so those not interested in Co-ops can feel free to hit the delete key...

Your question has a couple of parts to it:

What did this decision entail?
Firstly it required us looking at what we were trying to achieve philosophically as a cohousing community, and then seeing how that could best be facilitated in a legal entity. For the first several years of our groups existence, we were a standard condominium corporation. This was fine during the period of time where we were forming and trying to find land. However once we purchased a site and really started looking into what we wanted to achieve, it became apparent that although a condominium structure provided us with the home ownership we desired, it was weak in providing the legal tools to maintain the cohousing ideals of a collective group. Fortunately for us we have been using the services of a developer consultant group who are very experienced in Housing and Community development. The Communitas Group of Edmonton has developed over 50 projects, many of which are either equity or non-equity co-ops. They also were participants in the recent changes to the Cooperatives legislation of Alberta (which I'm told is one of the better ones in Canada).

What are the Reasons for choosing this model?
There are several. Non-profit Co-ops are democratic and open to all who are able and willing to accept the defined responsibilities of membership. All members are actively involved in decision making, with equal voting rights (although our co-op bylaws override this with our "consensus" decision making process). Economic contributions to the co-op are equal, and the assets of the co-op cannot be paid out or divided up among the members. Co-ops have the right to both the approval of membership and the termination of membership (try that in a condo!), and following along on that unpleasant situation, an option to purchase the unit of a terminated member. So we get to own our units as Strata land titles and realize changes in market value. However, wrapped around that ownership is the owners membership in the cooperative, with all the responsibilities (backed up by bylaws encumbered to the strata title) which govern the "living there issues", etc. The co-op has title to the common land which the strata titles hover overtop of. I suspect there might be people who would say that there is no reason you can't achieve the above as a condominium? But in Alberta as a condominium, you would be starting out with a legal structure that required a great deal of legal changes to both restrict and add the necessary features. And still you might be vulnerable to having your community principles defeated, as there is a significant amount of case law on condo's which might not lean the way you want in a disagreement. As a cooperative, many of the features desirable to cohousing groups are already in place, so you are just fine tuning legally with the addition of specific bylaws.

How is it different from other housing co-ops?
I'm not an expert, but the main difference is that a non-equity housing co-op owns all the units, and rents them out to members of the co-op. The co-op would also maintain the units. Another key benefit I see with being a cohousing co-op would be to easily allow it to hybridize, and have some units in the co-op be non-equity and some equity. One of the knocks often heard against cohousing (which I agree with) is that it is mostly a middle class phenomenom. Some of the people in our group have talked about possibly having our co-op purchase some of our units and then renting them to lower income people (single parents, students, recent immigrants, disabled people, etc.), so we can achieve more economic diversity. The problem of course is the co-op getting that seed capital, but there are some options out there. Like issuing a mortgage backed bond on the common property that's RSP eligible, but that's another story...

Hope this helps and best regards in 2003,

Patrick Guyn
Prairie Sky Cohousing Cooperative
Calgary, Alberta

Raines Cohen wrote:

On 12/28/02 11:06 AM, Maggie < mdutton [at] shaw.ca> wrote:


I understand that Prairie Sky Cohousing in Calgary (formerly Whole Life
Housing Society) in Calgary, Canada, decided to be an equity co-op.  Could
someone from Prairie Sky tell us what that decision entailed and the reasons
why the group chose this model?  How is it different from other housing
co-ops?


I can't speak for Calgary, but I recently had a discussion with Hank Obermayer of Mariposa Grove Cohousing here in Oakland, CA, an artists' community/physical retrofit project.

He mentioned that they had been planning on a transition from his sole ownership to a limited equity condo, but were lately moving towards co-op rather than condo, because:

- One of the members had recently declared bankruptcy, and so would be unable to qualify for a mortgage, negating the "finance it through standard purchase mechanisms" benefit that a condo structure would offer

- Another one had never sought or obtained credit... with the same result.

[there may have been other reasons, but they were lost in the chaos of the delightful holiday party there where I learned these things]

A co-op ownership structure can provide for investment in shares of the organization, with the mortgage held on the entire structure collectively by the organization. Downsides include higher interest rates; possible benefits include use of a Land Trust or similar mechanism to detach the land value from the unit prices.

Raines

Raines Cohen <my initials,2,dash,coho,dash,L at my first name .com>

  Member, Swan's Market Coho [Oakland, CA] <http://www.swansway.com/>
Where a neighbor cooked a birthday common dinner tonight.

  Facilitator, East Bay Cohousing [on hiatus] <http://www.ebcoho.org/>
Plotting a transition to regional group / umbrella form.

  Boardmember, The Cohousing Network <http://www.cohousing.org/>
Preparing an update to its communities list.


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