THE NUTS & BOLTS OF CO-OPERATIVE LIVING

It is possible to find good quality, low cost housing in Canada. 

 

MORTGAGE

The Act provides funds to co-operatives to allow them to obtain a mortgage at current rates but to pay only 2% interest on that mortgage. The difference is paid by the Federal Government through the office of Canada Mortgage and Housing Corporation (CMHC).

The amount the Federal Government will pay to the Co-op each year is estimated in advance, and is then adjusted when final costs chow up in the financial statement. Sometimes the estimated is too high and the money is then returned to CMHC. If this money isn’t paid back promptly,

CMHC can suspend or reduce further payments until the books balance again. The 2% mortgage write-down continues for the life of the mortgage; in this case, over a period of 35 years.

In granting the mortgage to the Co-op, the government has imposed a specific condition, that at least 15% of the housing units be occupied by persons who have very little money, and who pay only a percentage of their gross income for housing charges.

If the Co-op fails to provide an average of 15% of its units to low income families, the amount coming from the Federal Government will be discontinued.

The rule of paying only a percentage of one’s gross income for the housing charges applies to persons of ample income as well. There is a maximum and a minimum housing charge set for each unit.

Depending upon the Co-op’s financial health, housing charges may be reduced. The member must prove they need financial assistance. When and if the member’s finances recover, the housing charges will be reviewed. Until such a rate reduction has been granted, the member is still responsible for payment of the housing charges on the due date.

The solution is to avoid a situation where everybody in the Co-op does not have enough money to standard housing costs. In using the rule of percentage of the gross income for housing charge, the Co-op has to pick and choose its members so that the right income mix is always maintained. The guidelines are clear: 15% of the Co-op members must be subsidized, and yet enough revenue must come in each month to pay the mortgage. Even a Co-op can be foreclosed!

 

LEASE

In addition to a mortgage on the building, the Co-op also holds a lease with the City of Vancouver for the land. The lease extends for the period of sixty years.

CO-OP’S BUDGET

The Board of Directors, with the advice of the Finance

Committee, ensures that enough revenue comes in each month to pay the mortgage and related expenses.

Monthly housing charges increase over the years by only as much as is necessary to meet increased costs. Other costs that must be allowed for are the maintenance of units and property. To finance these expenses, the Co-op may ask for an extra payment on the member’s shares.

ADDITIONAL REVENUE

If the Co-op’s Board of Directors feels it necessary, they can ask members to pay a special levy over and above their housing charges. They can ask the members to pay more of a deposit on the value of their shares. All such requests for funds are applied evenly to each unit.