What’s the Issue?
With the ongoing housing crisis in recent years in most major cities in Canada, many jurisdictions are looking to find solutions to expand affordable housing options. One such proposal is to increase new development of non-profit housing cooperatives. Development of new housing cooperatives is in fact a key part of the current liberal government’s strategy to address the Canadian housing crisis, and the government’s Budget 2022 and the 2023 Fall Economic Statement announced $1.5 billion in funding for the Co-op Housing Development Program to expand cooperative housing. According to some sources, this represents the largest public investment supporting the cooperative housing sector in the last 30 years, and could support the development of thousands of new, affordable cooperative housing units by 2028.[1]
Housing cooperatives are often touted as an alternate form of rental housing where a person can obtain a higher quality and standard of living for less monthly cost than traditional residential rentals. This is, in fact, a slight oversimplification of what a housing cooperative is, what it offers to its members, and how it operates. To understand the benefits and burdens of cooperative living, it is important to first look at what a housing cooperative is from a legal standpoint.
What are Non-Profit Housing Cooperatives?
In Alberta, non-profit continuing housing cooperatives are incorporated entities, constituted in accordance with the terms of Part 18 of the Cooperatives Act, SA 2001, c C-28.1. The cooperative entity provides housing to its members in accordance with the Cooperatives Act, its Bylaws, and typically Share Subscription and Occupancy Agreements that all members are required to sign before occupying a housing unit within the cooperative. This is generally true of non-profit housing cooperatives in jurisdictions across Canada, including British Columbia, where the governing statute is the Co-operative Association Act, and in Ontario, where the Co-operative Corporations Act applies.
From the outside looking in, cooperative living may appear deceptively like renting an apartment wherein a landlord/tenant relationship is created. Even when discussing housing cooperatives, there is often semantic slippage in describing the relationship between member and cooperative as that of tenant and landlord, with housing charges often referred to as rent. However, this is not generally the case. Cooperative legislation across Canada explicitly excludes the default application of residential tenancy laws. While there may be some exception to allow cooperative bylaws to incorporate residential tenancy concepts, the usual default is that those laws and concepts do not apply to relationship between a non‑profit continuing housing cooperative and its members.
Instead, non-profit housing cooperatives are a unique form of residential, collective living whereby the members each subscribe to shares in an incorporated entity (the cooperative). That entity owns residential real property for the benefit of its membership. The housing agreements and bylaws in place will give members certain rights to occupy housing units within the cooperative’s property. Rather than holding any proprietary interest in the cooperative’s real property, though, the members in the cooperative are granted a “right to occupy” a housing unit in the cooperative in accordance with a cooperative’s bylaws, any policies passed by the board or membership, and any agreement between the cooperative and the member.[2]
How are Non-Profit Housing Cooperatives distinct from other forms of housing?
Historically, the concept of “tenancy” embodies the rules for allocating land rights and corresponding obligations. This is based on the medieval feudal concept of an “estate” in land, which defines the temporal limits of the tenant’s tenurial rights in the land. A tenancy is a form of subordinate estate in land where the tenant’s rights to the lands may be limited in time (such as with a residential tenancy) and the tenant will typically be required to pay rent. Rent itself is the payment from the tenant to the landlord given in exchange for the use and occupation of land.
The distinction with non-profit housing cooperatives is that cooperative members are not tenants, and as such they do not have any tenurial rights in the land or a specific housing unit. Housing cooperatives can be more restrictive than other types of housing options when it comes to membership requirements and because there is no landlord, and there are no tenants, the rules for purchasing shares in the cooperative entity are set by the articles of incorporation and the applicable bylaws. Accordingly, membership in a non-profit housing cooperative does not come with any rights in real property. When a person buys membership shares in a cooperative, they effectively become a shareholder in a corporate entity that owns the property. As a shareholder, they are entitled to exclusive use of a housing unit in the property, which will be assigned to them in accordance with the terms of the cooperative’s bylaws and a housing agreement.
Membership shares in non-profit housing cooperatives are not open to the general public, and a person must be approved for membership by the cooperative’s board of directors, made up of current members who are elected to their positions on the board. Unlike other forms of collective housing arrangements, such as residential condominiums, housing cooperatives are able to screen applicants for membership, effectively choosing who may and may not live in the cooperative.
As the relationship between the cooperative and its members is not one of landlord and tenant, a housing/occupancy agreement is not a tenancy agreement and monthly housing charges are not rent paid in exchange for the right to occupy a particular housing unit. Rather, each member occupying a unit is responsible for their proportional share of the cooperative’s annual budget to cover the collective expenses of operating the cooperative property. That share is their assigned housing charges.
What is key to understand is that cooperative members have no proprietary or tenurial interest in their housing unit, which is owned by the cooperative. Conceptually, the relationship between a housing cooperative and its individual members may be thoughts of as a private club, with housing charges being comparable to “membership dues” that allow the club (here, the cooperative) to operate and provide services to its members. In the case of a housing cooperative, that service is housing.
A Model for the Future?
Through this mechanism, housing cooperatives allow their members to come together, pooling their collective resources and efforts to achieve a higher standard of living than they may otherwise be able to obtain individually. Membership in a housing cooperative may also include volunteer requirements, whereby members are obliged to participate on community committees to support the communal activities of the cooperative for the benefit of all members (such as participating on the maintenance committee and assisting with spring and fall clean up). This won’t necessarily apply to all non-profit housing cooperatives at all times, but many of them are also able to channel government housing subsidies to lower-income members. Also, some co-ops are able to apply operating surpluses to establish security of tenure funds, on either a single-site or multiple site basis.
In this way, non-profit housing cooperatives are able to maintain high standards of living for their members at low cost, provided that all members pull their own weight and contribute to the collective expense of operating the cooperative by paying their housing charges and contributing their time and effort through community volunteering. For these reasons, housing cooperatives offer an attractive alternative for affordable housing solutions, as they enable communities to come together in support of one another to provide enhanced housing options. Some may have commercial property management and require less volunteer effort, which may or may not be more economical than the alternatives, but in any event the model is intended to provide greater community control and security of tenure than traditional rental housing.
An added benefit of the cooperative model is that high level of community support and participation, which can be a positive influence in a person’s life. Particularly for those who may struggle with difficult or complex social or financial issues, the communal nature of cooperative living may provide them with the level of local support that empowers them to take responsibility and contribute to the community in a very local, safe, and controlled environment. In this way, not only does cooperative offer an alternative option for affordable housing, but it can also be a stabilizing force and help give people a foundation on which to build a life and be a contributing member to society at large.
Cooperative living will undoubtedly not be suitable for every person and every family. Housing cooperatives do, though, offer an alternative and likely underutilized housing model to traditional mortgage backed home or condo purchases or residential tenancy options. For all of these reasons, non-profit housing cooperatives will be an important and growing part of Canada’s housing market for many years to come.
[1] https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/co-op-housing-development-program#:~:text=The%20first%20application%20window%20is,will%20be%20in%20winter%202025.&text=Budget%202022%20and%20the%202023,expand%20co%2Dop%20rental%20housing.
[2] This is true generally of what we call “non-profit housing co-operatives” but there are some forms of “equity co-operative” or “Non-profit home ownership” cooperatives in which members receive a mortgageable interest in the real estate. Whereas non-profit housing co-operatives bear some similarities to rental housing, equity co-ops can bear similarities to freehold or leasehold condominiums. Equity co-ops are not always formed under the co-op statutes; in BC, the earliest housing co-ops were formed using the corporate statutes. Further commentary on these alternate forms of cooperatives is beyond the scope of this article.
