What is an “equity co-op?”

Finally found a good, clear description of the corporate form known as equity co-op, courtesy of the Municipal Property Assessment Corporation (MPAC).

I have not previously felt the need to thank MPAC for anything, but I’m grateful for this.

An equity co-operative is a housing development that is collectively financed by its members.  In equity co-operatives, the residents (i.e., members) contribute equity (i.e., money) in exchange for shares.  As a shareholder, the resident does not own the real estate, but owns a share of the legal entity of the co-operative corporation. The co-operative corporation owns the real estate.

In exchange for their investment, residents are granted the right to occupy a housing unit and use the common amenities. Each member also receives an occupancy agreement, which sets out the rules and outlines the rights and obligations of the residents.  In addition, each resident contributes to the mortgage and maintenance costs (equally or proportionately, as set out in the corporation’s bylaws) through a monthly housing charge.

What sets co-operatives apart from other types of housing is its democratic nature. Co-operatives operate on a “one member, one vote” system, which ensures that all members have an equal say in how the co-op is run and managed.

When a resident decides to leave the co-operatives, they are entitled to sell their shares and to receive at least their initial equity and perhaps some part, or all, of the appreciated value of their shares. This depends on the approach taken by the co-operative.  With market rate financing, the share price is allowed to rise on the open market and shareholders may sell their shares at whatever price the market will bear. With limited equity financing, the co-operative bylaws dictate the pricing of shares when sold.  By capping the resale price of the shares, affordability is maintained for future residents.

This is taken from a longer explanation of MPAC’s Assessment Procedure for the Valuation of Equity Co-operative Housing Projects.


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