Assignment Submission

Planning and Management of World Cities

Reaction Paper on Cooperative Housing

By-

Ayush Singh

0333/56
 Statement of Authenticity

This work has not previously been submitted for a degree or diploma in any university. To

the best of my knowledge and belief, the thesis contains no material previously published or

written by another person except where due reference is made in the thesis itself.
 Cooperative Housing: Potential Advantages and

Challenges Ahead

Abstract

The article focuses on enumerating the important features and functioning of housing

cooperative societies. With increasing rental pressures on middle to low income households

in the urban centres to move outwards, cooperative housing seeks to provide a promise of

affordable and quality housing alternatives. This model of housing has been in practice for

quite a while now and has shown remarkable upsides when implemented correctly. However,

we find that capitalist pressures and corruption put forward significant challenges due to

which it has not been able to take a prominent position in the housing market.

Cooperative Housing

The National Cooperative Housing Federation of India (NCHFI) defines a housing

cooperative as “A legally incorporated group of persons, generally of limited means, pursuing

the same cause of meeting the common need of housing or its improvement based on mutual

assistance. In such a cooperative, the membership is voluntary and control is democratic, and

members make an approximately equal contribution to the capital required.” The crux of this

ownership and management model is to provide the members with a mechanism for

democratic control over the inclusive residential arrangement as an alternative to the

traditional or classic model of primary ownership of residential property. The way in which it

works can be understood with the analogy of shareholding in a corporation - the cooperative

acts as a corporation while the relative size of the property a person occupies denotes their

shareholding in the cooperative. Each person instead of being a primary owner of the

property is a shareholder of the cooperative and may or may not be allowed to market his/her
shares as per the norms of the particular cooperative. Most of the decisions regarding the

norms and procedures are decided by an elected cooperative board.

Lang & Novy (2014) identify the three key propositions of a cooperative housing model as:

(1) Providing affordable housing as an alternative to state funded schemes

(2) Creation of societies built on the notions of Gemeinschaft amongst the members

(3) Promoting participatory planning as the means of improving quality of residence

A housing cooperative differs from the ‘cohousing’ model in multiple ways. In a cohousing

model, the ownership is generally of conventional/condominium type in contrast to the

cooperatives. The primary objective of cohousing has been to create sustainable, attractive

and friendly neighbourhoods, whereas when it comes to cooperative housing, the idea of

creating affordable housing solutions always takes the forefront.

Types

Ganapati (2010) lists down the four types of cooperative housing arrangements as Tenure,

Rental, Finance and Building. These are discussed as below:

1. Tenure Cooperative: In this type of arrangement, the member possesses equity

shares in the cooperative while the society owns the land as well as the housing

complex.

2. Rental Cooperative: Here again, the ownership of housing is with the society but the

members have to pay a rent/lease amount periodically.

3. Finance Cooperative: ​Also known as House Mortgage Societies, this type of

arrangement involves cooperatives providing credit to the members for construction,

maintenance or repairs of their individual properties.

 4. Building Cooperative: ​Also known as House Construction Societies, these

cooperatives take charge of the construction of the houses and the total construction

expenditure is recovered in the form of lease/loan payments.

Functioning of Cooperative Housing

It follows a membership based model wherein each member purchases a share of the

cooperative. This would fetch them the right to occupy one unit of the property. Since the

overall resources are pooled together, the per capita cost goes down. They follow the

rationale of one member one vote to maintain the democratic credo and are truly non-profit

by nature.

Legalities: Prior to the registration, the members have to put forward a business plan and

declaration to promote the collective economic interest of the members. As for the external

agents, the cooperative will function just as any other corporation. The eligibility for the

membership is primarily conditioned to the “bye-laws” of the particular society apart from

certain basic checks enforced by the state.

Member Rights: The ownership of property is of the temporary shareholder nature and

hence cooperative housing does not gain much from any price appreciation. However, the

maintenance, repairs and other facilities are borne by the cooperative and not the individual

residents/members. Each member gets equal voting rights in the meetings.

Membership can be easily and inexpensively transferable since it would involve just the stock

certificate exchange/sale hence it is significantly hassle free as compared to the conventional

transfer of land/house titles.

Management: ​The management is taken care of by a board of directors which is elected by

the members of the cooperative from amongst themselves. The tenure for the board is subject
to the bye-laws of the concerned society. The board of directors is responsible for legislating

and enforcing the norms for the benefit of the shareholders.

Financing: Since the cooperatives are meant to be non-profit bodies, the funds earned

through the rent payments are primarily used towards maintenance activities. The surplus

retained is used to create a corpus for further development or asset acquisition.

Benefits of Cooperative Housing

There are several benefits to this approach:

1. In the absence of a state-led affordable housing policy, cooperatives play a crucial

role in keeping the economic exploitation of some due to price appreciation in check

(Coimbra & Almeida, 2013)

2. Cooperative housing allows for stakeholder/member involvement right from the

planning stages of property development. This helps in creation of well thought out

neighborhoods with consideration to the interest of the people residing there

3. High level of touch points for members through voting and active participation fosters

a sense of collective responsibility that also ensures timely payment of loan/rental

obligations

4. Development of strong social bonds and shared identity amongst the members of

different socio-economic groups thereby improving the quality of living (Lang &

Roessl, 2011)

5. Cooperatives are seen to have shown greater inclination towards adopting

environmental friendly energy resources promoting the idea of sustainable housing.

The Bau- und Wohngenossenschaft - Kraftwerk 1 project by Stücheli Architekten in

Zurich is one such initiative that has won accolades for its use of solar energy

6. The transfer of membership is much simple, effective and more cost efficient than that

of a traditional property title transfer

 7. Many cooperatives are also practicing some or the other form of economic activity

such as manufacturing, trade, agriculture etc.

8. In many cases, the elderly who do not have a caretaker are seen to prefer cooperative

models since it ensures that they would be around people of different ages and social

groups

Challenges

The key challenges to this housing approach are:

1. Corruption: The existence of corrupt committee members can not be denied and

these can easily skew the benefits for their personal gains. Corruption at the board

level could lead to fraudulent expenditures, irrational rents/bills to other members,

embezzlement of funds etc.

2. Annual Meetings: The annual meetings of the cooperative members work with the

democratic notion of voting which in principle ensures that everyone gets a say but in

reality, influencers and interest groups use this as a mechanism to push forward their

intentions on account of having a majority despite not having a consensus.

3. Awareness: Not everyone who gets to exercise their opinion/vote is aware or

educated enough to take an informed decision. This can lead to inefficient or

short-sighted decision making.

4. Irregular/Unfair Elections: This is a case quite prevalent with Indian societies

(Dastane & Thakkar, 2015). The incumbent board of directors often pushes for delay

or gap in conducting fresh elections. They might even resort to bribe or force other

members to retain their position of power.

 5. Encroachment: There have been a lot of incidences of encroachment of cooperative

property by some members themselves. This happens particularly for the common

spaces in close proximity to the apartments.

6. Parking: The parking space issue continues to be one of the most contentious one

within the housing facilities. The allotment of parking spaces to residents and

provisions regarding parking for guests are the most frequent and debated topics in

the management committee (Khergamkar, 2019).

7. Due Diligence: Negligence and lack of proper due diligence in selecting the builder

for the project might lead to long lasting legal battles for the management committee.

This could lead to project delays, non-completion, planning disagreements or

profiteering.

8. Financing Difficulties: The regulations around securing finances for purchase/lease

of apartments are complicated which is a significant demotivator for cooperative

models as compared to condominium financing.

Conclusion

Cooperative societies, despite having a host of advantages for middle to low income groups

still are not the most popular housing alternative due to their own set of challenges that need

to be addressed. Though the model promises to deliver an all-inclusive democratic setup

catering to the economic and social needs of the community, the actual experiences have

been plagued by instances of corrupt practices. Even the day to day affairs like parking issues

and encroachment by community members become a challenge for the managing committee.

Without solving these issues first, the model cannot deliver on its utopian vision.
References

1. National Cooperative Housing Federation of India (NCHF). FAQ.

http://www.nchfindia.net/faq.html

2. Lang, R., & Novy, A. (2014). Cooperative housing and social cohesion: The role of

linking social capital. European Planning Studies, 22(8), 1744-1764.

3. Ganapati, S. (2010). Enabling housing cooperatives: Policy lessons from Sweden,

India and the United States. International Journal of Urban and Regional Research,

34(2), 365-380.

4. Coimbra, J., & Almeida, M. (2013). Challenges and benefits of building sustainable

cooperative housing. Building and Environment, 62, 9-17.

5. Lang, R., & Roessl, D. (2011). The role of social capital in the development of

community-based co-operatives. In New developments in the theory of networks (pp.

353-370). Physica, Heidelberg.

6. Dastane, S. R., & Thakkar, S. (2015). Analysis of strengths and weaknesses of

cooperatives-with special reference to the development of cooperative movement in

maharashtra, india. Journal of Commerce and Management Thought, 6(1), 88-99.

7. Gajanan Khergamar (2019). Cooperative Housing Societies and issues plaguing them.

https://thedraftworld.blogspot.com/2019/12/common-issues-affecting-societies.html