Co-operative Housing- A an Option for Creating Large Housing Stock

Co-operative Housing- As an ?Option for Creating Large Housing Stock

·??????Jit Kumar Gupta

·??????[email protected]

Cooperative, as a concept, system, mechanism and approach, for achieving the objective of?planning, designing, constructing and managing any assets, infrastructure, services including providing shelter for the community, in the most cost- effective, efficient and productive manner,?has been valued as one of the best options, both globally and locally. Co-operative, as a concept and system ,is based on the premise of involving and using the available resources of the?beneficiaries in the defined project by bringing them on board. Co-operative approach has been valued for creating ?individual and joint ownership for the beneficiaries.

In the context of?housing, ?“Housing Cooperatives” (or “co-op”) involve creating housing units that are owned and controlled jointly by a group of individuals who have equal shares, membership, and/or occupancy rights to the housing thus provided.?Normally speaking, a ?housing co-operative ?does not work?with a profit motive and?does not involve any element of?profit, making such co-ops?essentially ?a non-profit venture. It works only in the direction ?and purpose of?optimizing the interest and living of all the beneficiaries/members. All housing co-operatives are mandated?to have a governing structure comprising of office bearers/ managing committee,?duly elected by all the beneficiaries/members, on the annual basis. Every member gets the right to ?vote in approving annual budgets, electing ?representatives for managing and setting policies for the co-op’s overall direction. In the co-operative system of housing each co-op member?actually owns his/her unit, as ?share of the co-operative ?society.

Governing Principles;

As per studies carried out and analysis made, housing ?co-operatives are known to?operate and function, based on seven ?distinct ?principles?which remain ?guiding mechanism ??in the entire process?of ?creation, functioning,?governance and operations of such co-ops. These fundamental principles involve and revolve around;

·??????Self-help- ?contributing and pooling, willingly and voluntarily ,resources available with all the members on proportionate basis to achieve the goal of creating appropriate shelter.

·???????Self-responsibility- each members mandated to behave responsibly and pro-actively, in the functioning and operation of the co-operative society to create shelter.

·???????Democracy- All operation/decision taken regarding planning, designing, construction, operation, maintenance and management of shelter and common services/amenities, by involving all the?members

·???????Equality- All members?treated?equally without any discrimination?based on?caste/ creed/ economic and social status/religion etc.

·??????Equity-Besides equality, equity remains ?the mandating principles for involving members.

·???????Solidarity- All members are to work and operate jointly and collectively to support each other ?as a group, for promoting mutual?welfare and achieving large objectives of the society.

In the co-operative system membership is?secured?by ??purchase of the share in the cooperative. Each?shareholder or member?in the housing cooperative is granted the right to own a house?of the size and value, depending upon the number of ?types of shares ?purchased and the option exercised. Numerous forms of?Housing co-ops ?have come into operation, ranging from small sized building- having limited number of housing units?to large sized co-operatives having large number of apartments running into hundreds/thousands. Co-operatives have been found to be working on creating different typologies of housing ranging from plotted development to flatted development. Large sized farm houses have also been created by certain housing co-operatives. Some co-ops ?have also been focusing on rental whereas others are member-owned, known as equity co-ops. Numerous typologies and ?variants ?in the co-operative housing model is the indication of adaptability and flexibility, co-operative ?model ?provides, considering the different contexts , circumstances and the choice of members. Despite variations in the?models, form and typologies, the genesis of the co-operative model?revolves around the fact/objective, that they remain focused on?promoting the welfare and?meeting the common economic, social, and cultural needs of their members. As a member of a co-op, all stakeholders are the owners of the house provided by the co-op, which can be ?rented?out ???or used exclusively by the member for its habitation. The housing co-operatives are ?invariably member based, with membership granted by way of a share purchase in the cooperative. Each?shareholder in the co-operative housing?remains the legal entity, having legal right , of being granted the right to ??allot and occupy a housing unit ,including specifying a nominee to whom the share will devolve after the demise of the member. Primary and basic advantage of the housing cooperative remains the pooling of the members' resources so that their buying power is leveraged besides lowering the cost per member, in making provision of all the services and products associated with home ownership.

Status of Housing Co-operative;

Having creation and?genesis based on the prevalent law regulating the formulation, functioning, structure, operation, finance, duties and responsibilities, all Housing co-operatives remain?legal entities. Having recognition by ?the law of land, ?all housing co-ops become legal entities which give them right and authority to contract and enter into agreements, with other companies/individuals/service providers, to hire do or undertake any activities/render services to provide/maintain desired level of?services including planning, deigning, construction, operation and?maintenance?of?buildings and services, within the area owned by the co-ops. All housing co-operatives are?competent and eligible to?hire manpower, to manage or ?to deal with specific issues/services that society may define?by any resolution including landscaping, cleaning, house -keeping, security, plumbing, ?maintenance of electrical, mechanical services etc.

Ownership;

Membership in each co-operative ?remains vested with all the ?residents/resident household. Members with occupancy rights remain free to own/ transfer ??the share/house, subject to conditions defined by the society/ law in operation. ?Housing cooperative, having the right?and title ?to all the property and housing structures belonging to co-op,??also undertakes and bears the responsibility of the ?cost of maintaining, repairing and replacing them. This relieves the member from the?burden of taking such work on individual basis. However, members?of co-operatives are required to pay a monthly charge, as?defined by the society, to meet the expenses incurred on such maintenance and upkeep. In that sense, the housing cooperative acts notionally as a landlord in a rental setting, for maintaining all the services. However, critical factor?governing the operation of?cooperative living, ?is that ?it invariably remains?non-profit, unlike the landlord in rental housing, with all work?done ?and services rendered, on actual cost basis, with no profit motive involved.

In the planning , management and decision making, each?shareholder?individually carries only one vote. All co-operatives are?made to run on a democratic system ?by conducting an election among shareholders to determine who will represent them on?the governing body of the co-operative. Elected office bearers are then given ?mandate and made responsible for ?running all the day- to- day operations and take appropriate decision ?including the financial requirements and sustainability of the co-operative, based on the rule that a majority vote?is necessary to make business decisions.

Management; In housing co-ops, members of a co-op typically elect ?management committee comprising of the office bearers and members of the executive, as defined the law,?from amongst the shareholders?usually in the? general ?body meeting held annually. All office bearers have tenure of?one year with a right to get elected again. In smaller co-ops, all members sit on the board to take decisions regarding its operation and management.

Finance;

A housing cooperative is normally?de facto?non-profit making?organization , accordingly, ?for meeting its operational and maintenance cost, most of its income comes from??contribution made by its ?shareholders/residents. Co-op are ?also authorized to ?receive donations from members and from other donors.?Considering the non-profit making nature of the co-ops, there always exists little incentive for making surplus, except for ?meeting the expenses for the operational requirements such as setting aside funds for replacement of assets or making a capital expenditure?for creating an asset in the society. In the lifecycle of buildings, the replacement of assets (capital repairs) requires significant funds which are obtained through contribution of members, as may be approved by them. However, all co-ops are required to keep its funds in a ?bank account?opened in?a schedule bank and?maintain proper record of their income and expenditure, which is required to audited by an independent auditor with annual report submitted to competent authorities. Members competent to handle and manage the accounts are specified in the statute/rules governing the operations of the ?co-op account.

Rating of Housing Co-ops

Research on Housing Co-operatives; from Toronto, Canada has ?found that housing cooperatives have been rated by its residents , as provider of highest ?quality of life and ?having highest housing satisfaction as compared to any housing organization in the city.?Other research among older residents from the United States found that those living in housing cooperatives felt much safer, independent, satisfied with life, had more friends, had more privacy, were healthier and had things repaired faster.?Australian researchers found that cooperative housing built stronger social networks and support, as well as better relationships with neighbors when compared to other forms of housing. Co-op housing cost 14% less for residents and had lower rates of debt and vacancy. Other researchers have found that housing cooperatives tended to have higher rates of building quality, building safety, feelings of security among residents, lower crime rates, stable access to housing and significantly lower costs compared to conventional housing. (Wikipedia)

Germany

During the course of ??Industrialization?in the 19th century, numerous housing cooperatives ?were founded in Germany. Currently there are over 2,000 housing co-operatives with over two million apartments and over three million members in Germany. The public housing cooperatives are organized under the?GdW Bundesverband deutscher Wohnungs-und Immobilienunternehmen?(The Federal association of German housing and real estate enterprise registered associations). (Wikipedia)

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India

In Indian system of?Housing Co-operatives, most 'flats' are owned outright by members i.e. the title to each individual flat is ?given to the members?by the society. Dwelling units given to members remain vested with such member , who are given the exclusive right to use it for its own purpose or rent it out. There is usually a governing body/society/association to administer maintenance and other building needs. Specified payment is made on the monthly basis by the members for maintenance /upkeep of common services to be provided by the society. ?These ?housing co-ops in India, are comparable to the American Condominium. ?Certain buildings are organized as "Cooperative Housing Societies" where one actually owns a share in the Cooperative rather than the flat itself. Most states have separate laws governing Cooperative Housing Societies. (Wikipedia)

Housing Co-operatives in Chandigarh;

In Chandigarh Registrar, Cooperative Societies, UT has been authorized to register, guide, monitor and regulate ?various types of Cooperative Societies under the provisions of the Punjab Cooperative Societies Act, 1961 and the Punjab Cooperative Societies Rules, 1963 The main activities of the Cooperative Department are to take all possible steps to bring socio-economic development among the people of the Chandigarh with the help of formation of different kinds of Cooperative Societies. The Chandigarh Administration allotted land to Cooperative House Building Societies in three ?distinct phases in the past,?comprising of developed?individual plots to individual members of the co-op societies initially ??and ?then allotting developed land?on chunk basis?subsequently to?the?society to construct flats, on the prescribed norms , as under;

i. In the year 1984- in first phase, independent plots were allotted to 17 Cooperative House Building Societies in Sector 42, 44 and 46.

ii. In the year 1994 - in second phase, flats were allotted to 58 Cooperative House Building Societies in Sectors 48, 49, 50 and 51.

iii. In the year 2002- flats were allotted to 56 Cooperative House Building Societies in Sectors 48, 49, 50 and 51.?

·???????In addition to the above, there are also 116 non- allottee Cooperative House Building Societies having sufficient number of members registered , who are yet to be allotted land by the Chandigarh Administration. ?However, at present, only limited number of ?these societies are functional.( Chandigarh Co-op deptt. website)

Advantages

?Looking, analyzing and evaluating, critically and objectively, the?role and importance?of?operation of ?co-op housing , it can be said that co-operative housing offer distinct advantages in creating shelter by bringing them on board/ active involvement of beneficiaries by pooling their resources. In larger cities, including Delhi, Mumbai, Chennai, Chandigarh etc., it has been seen that co-operative approach has ?been well accepted?in creating large stock of ?HIG/MIG housing in the city besides accelerated?the pace of?development of the sectors where land was allotted to these societies. However, the scheme has not made any impact in creating affordable category of housing for the EWS/LIG categories. Distinct advantages offered by housing co-op system ?include;

• Affordability; In co-op housing, buyers purchasing shares of a cooperatively owned building find?housing provided by such co-ops remains much more affordable than purchasing a home or renting an apartment in the ?open market.
• Less maintenance; A co-op can also be a great option for people who want a say in how their property is run, but do not want the high maintenance required in owning a home. Maintenance?cost of houses?within co-ops remains highly affordable and lower as compared to housing outside.
• Creating vibrant Communities;? Most people who rent apartments do not stay in their building long-term. However, people do tend to stay long-term in co-op housing creating high degree of social interaction and community connectivity. Co-ops often provide higher order of social “connectivity” than large condo buildings, which can be helpful in big cities, where it’s harder to get to know good neighbors. Housing co-op members have greater control over their living environment. This form of housing also fosters a strong sense of pride and community. Higher member satisfaction also means members tend to stay long-term, which leads to?creating more stable community
• Safety; Housing Co-operatives are known for their distinct advantage of providing high degree of safety and security as compared to plotted development.
• Optimum utilization of land;?Co-operative system ensures that all apartments will be built simultaneously for the use of its members in one go, who made contribution for such flats, leading to optimum utilization of the land allotted.

·??????Cost – Effective Option; Since housing co-operatives operate on a not-for-profit basis, housing remains affordable for future generations. Co-ops offer a less expensive housing option. They are usually cheaper, per square foot than individual plots in the same area, with the added benefit of lower closing costs. In some countries, housing co-ops provide subsidized rent, supporting members with lower incomes.

·??????Yielding Dividend; A future sale of a unit ?in a co-op can result in significant financial gains to the owner. This generally holds good for a long-term investment in a high-cost housing market.

·??????Minimizing?land Speculation; Since in a co-ops system, land is ?allotted and owned jointly in the name of the society ,so no defined?land ?is owned by beneficiaries on individual basis. Accordingly, land allotted to society cannot not be manipulated and speculated by the members individually by selling . Since all members hold share in the co-ops , they can only transfer such shares but not the land allotted to society. This helps in stabilizing the land prices in the urban market besides minimizes the housing cost.

Disadvantages; Despite positivity, co-operative housing also involve ?certain negativities in terms of :

·???????Higher maintenance charges- Co-ops usually assume maintenance responsibilities that fall outside individuals’ units, including property management and maintenance?of green spaces and common amenities/facilities besides taking care of??repairs of electric, and plumbing system?. Even though?falling outside the individual property shareholders are still required?to pay these expenses proportionately, ?as defined by the society. These can be quite high, particularly when the unit/maintenance is expensive. Accordingly, high maintenance cost can add up to make living in such co-op?housing expensive.

• Large Restrictions imposed-- The society is managed by a committee comprising of?limited number of ?elected shareholders , who make decisions. Cooperatives can also come with restrictions for residents. Some co-ops have strict by-laws regarding what their occupants can and can’t do with their unit. The co-op’s management is known to exercise ?significant influence over decision-making leading to creating a restrictive environment.
• Less equity--Because ?of the ?restrictions defined?with regard to?ownership of flats and its use/transfer, such housing find less favour, commanding less premium in the housing market. Its value ?remains discounted when compared to the value of the ?private home.
• Mismanagement of funds; Co-operative societies are invariably known for the misuse/abuse of member’s funds, particularly, when construction of the houses is undertaken. In many cases, members involved in the management of construction, are found to connive with the architects/ contractors/ material suppliers, to siphon off the member’s money by inflating the bills and paying higher cost for the material purchased. Many of the?houses also suffer from the poor quality of construction.
• Subjectivity; Since operation and maintenance of the society/infrastructures is vested with few elected members, accordingly most of the decision taken are based on subjectivity rather than objectivity. The decisions remain?centric to a particular group of?members or for promoting self- interests. This?invariably causes?lot of dissensions and distrust?among members.
• High degree of Politics; ??Operation and management of?most of the large societies remain politicized for the reason, ?that?these societies having ?large resources to manage with. Large sized co-operatives have various implications in terms of power and authorities exercised by the management. Accordingly, considering the process of democratic elections of office bearers, these societies suffer from large number of dissensions and conflicts , which defeat the very essence of co-operative living and working.

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Despite limitations defined above, co-op housing remains one of the most effective, efficient, vibrant, socially interactive, cost-effective and beneficiary based option to construct housing in any environment. Since it involves beneficiaries and their resources in creating shelter, it reduces burden on the statutory bodies?mandated?to create shelter. Housing co-ops can also be involved in creating large stock of?rental?housing which can be made available on rental basis to the?residents of the cities/towns. However, looking at the entire context of operation of co-operative housing , it has remained confined to higher income groups having sufficient financial resources. System has not been valued for its potential in providing shelter o the members belonging to lower income pyramid of the society. Government and all parastatal agencies involved in providing/creating shelter in the urban/rural context should adopt/explore the option of creating?housing co-ops for the EWS/LIG categories by involving such stakeholders. In addition, all slum dwellers can be involved in creating shelter by organising them into housing co-op. This would help not only in involving the resources ?available with the beneficiaries but would also ?involve them in managing the planning, designing and construction of their houses, based on their needs and requirements. All parastatal agencies need to incentivize the housing co-ops by earmarking dedicated proportion of developed land for allotment on preferential basis to such co-ops to?construct their houses. This will help in??not only creating large housing stock with the active involvement of the beneficiaries, using resources available with them, besides helping in minimizing the mushroom growth of slums to make cities clean and green, besides achieving the national agenda of making available -housing for all. In addition, co-op?housing societies can be actively involved in?promoting rain-water harvesting/ground water re-charging and generating electricity?within society, from?renewable resources to make them zero-energy and zero- water?entities. This can help in making cities more energy reliant and water- sufficient, achieving the goals mandated in SDG11.However, considering the disadvantages defined above, adequate checks and balances need to be put in place in the?existing regulatory mechanism to ensure that co-op societies are managed in a transparent ,effective?and efficient manner and should?not be guided by certain vested interests. In addition, it also needs to be ensured that co-operative system is not misused and abused, to create multiple housing ownership for the individuals, treating house an investment for speculation.

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