Cohousing research notes

Potentially applicable Ontario property codes:

307:  “Community lifestyle (not a mobile home park); Typically, a gated community. The site is typically under single ownership. Typically, people own the structure.”

340: “Multi-residential, with 7 or more self-contained units (excludes row-housing)”

373:  “Cooperative housing – equity – Equity Co-op corporations are owned by shareholders. The owners of shares do not receive title to a unit in the building, but acquire the exclusive use of a unit and are able to participate in the building’s management.”

375: “Co-ownership – percentage interest/share in the co-operative housing.”

Ontario booklet on tools for affordable housing, including backyard “garden suites” — says CMHC provides funding for various kinds of affordable housing projects and the province is interested in helping increase the amount of such housing through incentives, partnerships

Ontario Co-op Act:

The landlord-tenant act doesn’t apply to co-ops — the provincial Co-op Act does — lays out rules for membership requirements, ability to eject members under certain rules etc. Must have by-laws, one member and one vote, annual general meeting etc.

Legal site on co-ops:

“The Financial Services Commission of Ontario (FSCO) is the government office that registers organizations conducting business as a co-operative. In most cases, if the co-op is planning to sell shares to more than 35 people, or if the sale of additional shares increases the number of shareholders in the co-op to more than 35, the co-op must file an offering statement.”

“Since the units are not owned by the individual tenant-shareholders, mortgage financing is initially secured for the building as a whole, and is often referred to as a “blanket mortgage.” In this situation, the corporation is usually the mortgagor. Each tenant-shareholder contributes toward the blanket mortgage, and if one tenant-shareholder is in default, the others must increase their payments to meet the deficiency or risk a foreclosure.”

“If an individual wants to sell his or her shares in a co-operative, it is much different from a condominium owner selling his or her unit. In a co-operative the new purchaser will have to be approved by the board of directors of the corporation before acquiring shares in the corporation. With the sale of a condominium, the unit owner is generally free to sell his or her unit to a prospective purchaser without consulting fellow owners or the corporation.”

“An alternative to co-operatives and condominiums is co-ownerships. Instead of shares in a corporation that owns the building, purchasers buy a percentage of the building’s real property, or “title”, becoming an “owner in common” with every other purchaser. This also comes with the right to occupy a specific unit. Like the co-operative, the co-ownership involves only one mortgage and one tax bill for the entire property, with each person being responsible for his or her proportionate share of the costs.”

Co-operative Housing Federation:

Story on “inclusionary zoning”

“On December 6, 2016, the Ontario legislature passed the Promoting Affordable Housing Act, 2016, expanding the powers of Ontario municipalities to implement “inclusionary zoning,” a requirement for developers to build affordable units when constructing new housing.”

Co-housing study and guide to issues:

In 1993 study, “All groups expressed interest in some form of equity co-ownership because they recognized its necessity for securing financing. For the same reason, no group was considering co-operative housing, other than full equity.”

Community land trusts are typically non-profit organizations that are set up and maintained to act as stewards of land they own on behalf of the community. A land trust can ensure the long-term use of land; protect the common investment in perpetuity; and promote resident control and ownership of housing.”

“A co-housing group could set up a land trust that would own a parcel of land, leasing plots to individual group members. Individual members could maintain ownership of “improvements” they make to the property, such as housing and other buildings; while the land trust could maintain ownership of common improvements used by all members of the group, such as a daycare facility or dining hall. A community land trust may provide access to land that might not otherwise be available to a co-housing group.”

“The land trust may also be able to make land available at a reduced rate, thereby increasing the affordability of the housing built on it. In addition, the land trust organization can develop policies to control resale and resident turnover, as well as land-use planning and modification, to ensure that the goals of the cohousing group are met.”

Says two big issues for some municipalities are density (if they want to protect rural land) and rules around how much land must exist around a house that uses a well or septic system; some had trouble because they wanted too many homes to share a single system or well. In Halton they managed to work it out by maintaining the required acreage over the whole property as opposed to individually.

Peterborough County official plan:

“To ensure opportunities for a range of housing options and support services for seniors and people with special needs throughout Peterborough County; to ensure adequate land is designated by local municipalities to accommodate anticipated growth for future residential development over a ten year period.”

A Dream for Co-Housing in Peterborough, 2015 — Linda Viscardis, whose daughter is disabled, and architect Scott Donovan


“Ownership is freehold and each co-owner is registered on title/deed as a Tenant in Common. Our homes are private and controlled by the co-owners of the property. You can live in a co-owned home because you own an undivided interest in the property or in some cases we may have a suite to rent depending on the home and the situation.”

“All co-owners have a freehold interest. That interest is registered on the title/deed and together they share the home and all the operating expenses of the home. Each percentage interest is individually mortgage-able and sell-able. So the security of knowing that you can sell your interest is as simple as calling your real estate agent.”

“Co-ownership refers to the agreement that governs the home it is like a condo agreement. The co-ownership agreement in a co-housing shared home governs the rules and regulations of the home and how to get in safely, stay in, and get your investment back out when you want or need to leave the shared home.”

“Cohousing refers to the creation of a community, one property, 20-50 single residential dwelling units sharing common roads, walkways, parking, park areas, and common buildings. The ownership component is usually a condo management company.”

Port Perry – re: Zoning:

“The OHRC provided guidance to the Township of Scugog about human rights principles relating to housing, as they considered amendments to their Zoning Bylaw relating to co-owned housing geared toward older Ontarians and people with disabilities. Following input from the community and the OHRC, the Township’s decision was to not create a special category, but treat the housing the same as any other residential housing. Mayor Mercier and Council in Port Perry reversed their original intent to pass a bylaw that controlled and regulated the use of shared housing.”

Rare Birds — co-housing in Kamloops (6 people, one house)

We looked at all the models for ownership and title, and we ended up with an equity co-op. We created the entity and by-laws first. We’re all one-sixth owners. Everyone has one share which is one-sixth the value of construction. We will assess later whether to peg the share value to the market value of the house, but we haven’t figured out the method to do that yet. We’re overbuilt for a single family home, so going by “best use,” you would probably have to evaluate us as a care home. You surrender your share back to co-op if you leave and we have 12 months to pay shareholder.

Canada Mortgage and Housing Corp.: Equity Co-ops

The shared equity strategy includes equity co-operatives, which are associations of shareholders or members incorporated under the relevant provincial legislation. A co-operative holds title to the land and building(s). Through their equity participation, the members own shares in the co-operative, which entitles them to occupy a unit. Equity co-operatives combine various aspects of co-operative and individual ownership. The term covers a variety of options, but generally they include these main characteristics:

  • members provide development capital,
  • they share ownership of the project,
  • they usually manage the project themselves,
  • they control who can join the co-operative, and
  • they operate on non-profit principles.

Like other shared equity projects, most equity co-operatives built recently allow the members to take out a more significant part of the increased value but limit the share to an amount that reflects the original affordability of the unit. For example, if the units were initially valued at 85 per cent of the market value for comparable units, then the members are often allowed to sell their shares for 85 per cent of the enhanced market value. This gives members the opportunity to benefit from property appreciation, while allowing the co-operative to maintain a comparable level of affordability.

One of the main barriers to the wider use of equity co-operatives is the financing of the units on an individual basis. Because most provinces do not have legislation that allows for the individual units to be titled, co-operative members are generally unable to raise conventional financing toward securing their own unit. Although members own shares in the co-operative that holds title to the property, those shares cannot be used as a security for a mortgage.

This barrier may be overcome if members pay cash for their units or if the equity co-operative arranges a blanket mortgage and charges individual members for their share of the mortgage. Some provinces have dealt with this problem through legislation that permits the units to be individually titled through strata titles, which identifies a residential unit in three dimensions and is similar to titles used in condominium ownership.

Co-op Canada Association submission to the CMHC:

In equity co‐ops, members purchase shares that are equal to the value of the home they will occupy. This value can vary, from a full, market‐driven price (as with the high‐end co‐ops of New York City) to an amount that is related to the development cost, in what are called limited equity housing co‐ ops. In these co‐ops there are restrictions on the resale price when members want to sell.  The price may be limited to a percentage of appraised market value; or it may be based on the original share purchase price to which an inflation factor is added. Both measures are designed to preserve a measure of affordability to successive owners.   When the members leave an equity co‐op, they do not put their home on the open real‐estate market.   They sell their shares back to the co‐operative, whether for full market value or on a limited equity basis, and the co‐operative finds new members to purchase the shares.

Co-op history in Canada:

CMHC used to finance co-ops in the 1960s and 1970s, providing 100% of the financing at fixed rates, provided 10% to 20% of the units were set aside for low-income housing. But the government stopped financing co-ops in the 1990s.

Vicki Borenstein, real estate lawyer:

The good news is that several reputable trust companies and credit unions will provide mortgages for co-ownerships, and at interest rates often better than those offered by the banks. DUCA, Equitable, Alterna, Italian Credit Union and the Toronto Star Credit Union have the biggest share of the co-ownership mortgage market in Toronto.

Different forms of ownership:

Tenants-in-common: If you take title to property as a TIC, you and your co-owner(s) will want to draft a written agreement covering each owner’s rights and responsibilities. For a multi-unit property, the TIC agreement gives each owner rights to and responsibility for one unit, which creates a feeling of separate ownership. Owners of TICs usually finance their property with a single mortgage secured by the whole property. This arrangement creates some hurdles, however: All owners must qualify together for the loan, for example, and all owners are at risk if one gets behind on the mortgage. It is for this reason that TIC agreements typically go into great detail on how co-owners divvy up financial obligations.  Although the single-mortgage approach is still used for sharing a single-family home, a few lenders now offer fractional mortgages for TIC properties that are easier to divide into separate units. For a fractional mortgage, each owner signs a separate promissory note and deed of trust. Each must qualify for the loan separately and can select different loan terms. Each fractional mortgage is secured only by that owner’s interest in the property.

Ownership by an Entity: In some cohousing communities, residents own shares or a membership in a corporation or LLC, which, in turn, owns the entire property, including the individual units.  Under many states’ legal definitions, this arrangement for holding title may be considered a “housing cooperative” or “stock cooperative.”

The use of the word “cooperative” here does not necessarily imply or require that a cooperative corporation be the entity of choice, nor that the entity operate “on a cooperative basis” under Subchapter T of the Internal Revenue Code, nor that the cooperative be managed democratically, nor that the cooperative follow the Rochedale Principles for cooperatives. The moral to the story is: the word “cooperative” has way too many meanings, and it’s no wonder that it’s hard to get a straight answer about what a cooperative is.

Typically, a resident buys into a community by purchasing shares and signing a “proprietary lease” that entitles the resident to occupy a particular residential unit. Unlike typical leases, a proprietary lease generally has no fixed term. It lasts as long as the resident is an owner in the entity and doesn’t violate important lease terms. The entity typically holds a single blanket mortgage on the property, and resident shareholders sometimes take out loans to finance their purchase of shares in the entity. In addition, residents pay regular fees to cover property taxes, management expenses, mortgage payments on the building, and so on.

Life Lease as an ownership model

The phrase “life lease” means that once an initial lump sum is paid out as a deposit, there is very little change in rates, and the purchaser occupies the home for life, with subsequent monthly payments covering management fees, maintenance and other operating expenses. In essence, this is distinct from term leases, such as one year agreements, etc.

— The majority of life-lease communities are developed and owned by non-profit organizations, charitable groups, service clubs or religious institutions.

— When a resident leaves or passes away, the lease usually can be sold to someone on the sponsor’s waiting list or on the open market, or transferred back to the development’s sponsoring organization. Some life-lease agreements permit the interest to be passed to the resident’s family through their will. The estate can then decide whether to sell this interest or retain it for their retirement.

— Most Ontario projects operate under a “market value” life-lease model that means the seller will earn equity when they transfer their interest, similar to selling a private home.

— Other life-lease models, such as fixed value or declining value, vary depending on the terms of the initial lump-sum payment and the resident’s entitlement to the increased equity at the end of the lease; lower initial purchase costs sometimes linked with a lower percentage share of the equity when lease is transferred or sold.

— The sponsoring organization typically applies a percentage administration fee on sale and transfers, typically ranging from three to 10 per cent.

— Minimum 25 per cent deposit usually required at start of construction for most projects; money is needed to build the development, so the deposit is not held in trust, as it would be for a condominium

CMHC paper on Life Lease benefits and risks (2007):

There are five basic forms of this model:

Zero-balance — The resident pays an amount upfront designed to prepay rent for his/her expected remaining life. No residual value is repaid to the occupant or their estate at the time of departure or death. Consequently, the purchase price for an interest in this type of life lease is least expensive relative to other forms.

Declining Balance — The resident pays an amount up front based on life expectancy. The estate is paid a residual value which declines each year to zero at the end of specific
period of time. This type of life lease is slightly more expensive than the zero-balance form.

No Gain — The amount redeemed at the time of sale remains the same as that paid at the time of initial occupancy in nominal terms, though declining in real terms, as there is no provision for annual inflationary increases to be taken into account. This is in essence a zero-interest loan to the sponsor for the time of occupancy of the unit.

Price Index — Redemption value increases based on annual price index factor being applied to the purchase price, for instance, the Consumer Price Index (CPI). This has certain
risks for the sponsor if real estate values are increasing more slowly than general inflation.

Market Value — The life lease interest is redeemed at whatever price the market will bear at the time of sale. Purchasers pay an amount similar to that for a comparable
condominium unit.

Except in Manitoba, the tenure status of residents is a grey area, particularly for market value life leases. The sponsor holds title to the building and is responsible for ensuring it is well-maintained and holds its value. Life lease holders have the right to occupy their unit. However, the life lease holder is also greatly concerned with ensuring the building is well-managed, that there is continuing demand and a waiting list for units and that, ideally, the market value of the life lease interest increases over time (or at least does not diminish). In most complexes, however, the sponsor is the only entity that has any real control over how the building is managed. In most case studies, residents are informed about operating budgets and management decisions but have no input into how these are determined.

CMHC on Shared Equity Models (2016):

Full literature review of shared equity models in Canada and US

In Canada, there are three shared equity models used for seniors housing: life leases, community land trusts, and co-housing.

Life Leases: Life lease housing is generally developed and operated by non-profit organizations and may be more affordable than condominiums in the same area. Seniors pay a lump sum to purchase a ‘life interest’ in a housing project and pay a monthly residency fee. The resident does not own the title to a specific property but can ‘sell’ their interest if they leave, or upon death. Life lease seniors housing may offer additional services such as laundry, housekeeping, meals, help with personal care, and transportation. One of the main advantages is the ability to attract ‘resident’ equity as a source of financing for life lease housing developments which reduces the need for governments to provide capital financing assistance.

Community Land Trusts: A non-profit corporation is established to acquire and hold land, securing affordable access to land and housing. Organizations that sponsor non-profit housing, particularly co-operative housing organizations, develop and manage the housing. Long-term ownership of land is vested in the land trust; the buildings on the site are owned by the sponsor organization. Residents may rent or cooperatively own their units. Housing built on land trusts is expected to be more affordable in the short-term since the capital cost of land is not included. Community land trusts also “lock in affordability” for the longer term because land appreciation does not affect future development or unit resale values.

Co-housing: Co-housing is privately-owned, self-contained housing centered around shared facilities (e.g. kitchen, dining room, or other common rooms) where meals and activities are shared regularly. Co-housing is financed by the purchasers, who participate in the design/development process, and in the management/decision-making once the project is completed. While senior residents provide “co-care” for each other, there may not be on-site services like those provided in seniors’ life lease developments. Since there is currently no separate legislative framework for co-housing, these developments have adopted condominium registration. Owners have title to their unit which they can sell at market value, and they own a shared interest in common facilities. Currently there is no mechanism to limit equity or to ensure on-going affordability, so co-housing does not meet all the criteria for shared equity models.

Life Lease Resource Guide:

Life lease housing is usually developed and operated by nonprofit or charitable organizations. These organizations are called “sponsors.” Some life lease units are houses; others are suites inside an apartment-style building. Life leases are usually priced a bit less than similarly sized condominiums in the area. Like condominium owners, life lease holders continue to pay monthly fees for maintenance and property taxes in addition to the purchase price.

NOTE: When a person buys a life lease, they sign an agreement with the sponsor. The agreement does not give the buyer property. Instead, it gives the buyer the right to occupy the unit until they sell the life lease or pass away. This right is subject to certain terms that are spelled out in the agreement.

In Ontario, almost all projects are what are called “Market Value” leases. This means that if you sell the life lease interest for more than you originally paid for it, you (or your estate) make a profit; if you sell the interest for less, then you (or your estate) would incur a loss. In all other models, the potential for profit or loss is typically taken on by the sponsor. Here, lease holders know when they buy the life lease how much money will be returned to them when they leave. Sponsors specify either an exact amount, or they specify the formula that will be used to calculate the amount.

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