How does co-op housing work in Canada?

Co-op housing is unique and distinct from all other forms of housing, so much so that it's even got its own legislation known as the Canada Cooperatives Act. 

Pioneered within Canada during the 1970s and ‘80s, housing co-ops were built because of a dire need for affordable social housing, due to a crisis of both affordability and supply.  

Sound familiar to you? Today, the demand for cooperative housing is increasing. Earlier this year, the Canada Mortgage and Housing Corporation (CMHC), in a joint effort with the Co-operative Housing Federation of Canada (CHFC) announced the roll-out a $1.5 billion co-op housing development program.  

But what exactly is a co-op, how do you get in, and are they truly the solution to Canada’s affordability crunch?  

Are housing co-ops different from renting or owning a unit?

While housing co-operatives can be extremely varied in terms of how they function, in general, they are nonprofit corporations that own a multi-unit residential property, usually with a land lease. 

And beyond that, housing co-ops are distinct from traditional rental agreements and strata or condominium housing in more ways than one.  

Co-op members typically will purchase ‘shares’, otherwise known as a share purchase agreement, which is how you ‘buy in’ to the co-op.  

However, unlike a traditional down payment, shares don’t appreciate, and in most co-ops you’re not going to earn interest on them. They function more like a security deposit, and they also entitle you to a vote in general meetings. 

Putting forward shares makes you a member who then occupies a certain unit within the co-op, once you can pay the monthly housing charge.  

In a well-run housing co-op, housing charges can be significantly lower than the market rental rate. And ideally, members will volunteer their time, skills and expertise in order to keep the co-op operational, well maintained and financially sound. 

But even though you technically share ownership in the property (and get a say in general meetings), you don’t ever ‘own’ a unit in a co-op. Instead, you ‘buy in’ with your shares.  

As long as the co-op is functioning and financially viable, and you don’t violate the occupancy agreement, you can continue to occupy your unit.  

When you move, you relinquish your shares, and your money is returned to you (unless it’s being used to cover damage to the property or to settle a debt with the co-op).  

How do you qualify for co-op housing?

High demand for co-op spots means that getting your foot in the door of a co-op can be a challenge, especially when it comes to those co-ops that are well maintained. The best place to start finding co-ops near you is your local or provincial housing co-op organization, for example CHFBC in British Columbia, or CHFT in Toronto. 

Generally housing co-ops will open for new applications once a year, although waitlists can be long, and low rates of movement often mean potentially years of waiting before you are even invited to interview.  

You might also need to renew your application periodically in order to stay on the list for any given co-op. Some co-ops operate with two waitlists – one for internal moves and another for external applicants, with internal moves prioritized (i.e. established members moving around within the co-op). 

If you successfully interview for an open unit in a co-op, you’ll then need to pass credit and reference checks, and then pay your share purchase agreement and your first month’s housing charge. 

Once that’s all done, you’ll sign your membership and occupancy agreements, and be ready to move in. 

What’s the best way to insure your co-op?  

Co-op insurance is nearly identical to condo insurance, and many insurers will treat it as such. As in the case of both a condo that you own, you are not responsible for damage that occurs to the property grounds or shared common areas outside your unit – instead, that is covered by the co-op corporation’s building insurance.  

Also like condo insurance, co-op insurance includes coverages for your possessions inside the unit, additional living expenses in the event of an emergency that forces you to live elsewhere, liability coverage for any potential legal disputes that take place in your unit. Renovations will also be insured under your own policy, rather than the building policy.  

How can you finance a move into a co-op? 

Because most co-ops are low-equity, shares won’t typically cost that much, although prices could vary widely from one co-op to another even within the same city.  

Shares range anywhere from $1,000 to $7,000, with most falling somewhere in the middle. 

As mentioned earlier, when you purchase shares and move into a co-op, you don’t have any equity. And because you don’t have any stake in terms of equity, a traditional lender would view any loan as too risky, since there’s no clear way to foreclose if you were to default.  

For similar reasons, traditional lenders are generally reluctant to provide mortgages to co-ops in their entirety. 

Alternative lenders

If you do need a loan in order to afford a share purchase agreement, there are alternative lenders who specialize in financing for those looking to move into a housing co-op.  

While these lenders will use the term ‘mortgage’ in relation to co-op housing, really what you’re getting is a small co-op home loan, and it isn’t anything like an actual mortgage, since you cannot buy equity in a co-op.  

Similarly, a “down payment” really just refers to a share purchase agreement. 

Related: What’s the difference between A lenders, B lenders and private mortgage lenders? 

Subsidy and rental assistance 

While co-ops are not considered low-income housing, some co-ops will have agreements in place to receive government assistance in order to help house lower income members. This is often referred to as subsidy.  

Co-ops generally require members to meet the maximum housing charge in order to be accepted for a unit, while at the same time spending no less than 30% of your monthly income to meet those charges.  

For this reason, co-ops will generally cite a gross monthly income that is required in order to afford the housing charges for a specific unit size. 

However, there may be a limited number of subsidized units available in some co-ops. Subsidized units are available with a significantly reduced housing charge, sometimes as low as 25% of the market, or full housing charge. Some co-ops may also have an internal subsidy pool. 

Government assistance programs

There are also various federal and provincial rental assistance programs, including the Federal Community Housing Initiative (FCHI) and the Ontario Community Housing Renewal Strategy which may have agreements with certain housing co-ops to provide financial support to lower income members. 

Currently, available spots in housing co-ops remain few and far between – especially if you’re looking for a subsidized unit. However, this unique housing structure offers low- to middle-income people a secure home and a sense of community, and it’s increasingly finding new relevance in today’s housing market.