A frequent question that we often receive from purchasers considering their housing options is – What is the difference between a condo and a coop?
While condo and coop buildings look the same from the outside and are both forms of homeownership, they are different in a few key ways. Lets talk about the specifics of each housing type:
A housing cooperative is a form of ownership in which a person purchases shares in a cooperative corporation that was formed for the purpose of providing its members a place to live. The owners of these shares then own the corporation. There can be different technical terms for the instrument of ownership, but what is conveyed is the use of a specified unit as well as the right to sell subject to coop approval.
The DC Cooperative Housing Coalition lists the following benefits of cooperative ownership compared to condominium ownership:
1. Lower real estate taxes (especially true for older complexes). Cooperatives are assessed on a smaller percentage of its appraised value– legislation the DCCHC was able to get passed in the City Council in the late 1980s. A unit in a condominium pays substantially more in taxes than does a comparable cooperative unit.
2. The ability to obtain a master, blanket mortgage to make major repairs and upgrades. Condominiums typically must apply special assessments for major work requiring owners to find their own method to pay the assessment. For those who are eligible, co-op owners can deduct the interest of their share of the blanket mortgage while only those condo owners who can refinance their units can; otherwise, the condo owner may have to take out a personal loan that typically is not tax-deductible.
3. Ability to control/limit rentals. Over time, many condos shift from majority owner-occupied units to majority renter-occupied as owners convert their units to investment rentals; owners of investment units may not necessarily have the same interest in upgrading the condominium. Because of increased investment property, values may become stagnant and obtaining federally insured mortgages becomes more difficult or impossible. Co-ops are intended to be majority owner-occupied properties in which owners may be more inclined to invest in improvements.
4. Ability to interview prospective owners/residents and to underscore house rules.Condos typically do not interview prospective owners and renters and may not even be aware of who is moving in. Most co-ops have an interview process during which expectations can be set, questions raised and answered and a greater sense of involvement and community established.
5. Ownership is not public knowledge. For many would-be co-op owners, personal privacy is paramount for security or other legitimate reasons. Many cooperatives are home to high-profile people including businessmen, federal appointees and Members of Congress and their staff. Since there is no public record of ownership for cooperatives, these individuals enjoy a greater level of privacy. For many District cooperatives, this is seen as a major plus to their exclusivity, reputation and resales.
Limited equity coops are a specific type of coop typically created with the use of public funds with the long term goal of remaining affordable. Limited equity coops in Washington DC typically have restrictions on the price and resale value as well as income restrictions on who may purchase. This type of cooperative can provide housing options well below standard market rates, a list of DC limited equity coops published by the DC coop network can be found here.
The condominium form of ownership is much more similar to that of a traditional single family residence. When buying a condominium the purchaser is given an actual deed to the property they are purchasing and then owns the entire unit as well as a percentage of the common areas.
Condo owners pay a monthly fee to cover their portion of the common building and management expenses however they receive a separate tax bill. Utility charges may or may not be included in the monthly fee depending on how the utilities in the building are metered. Condo owners are responsible for their unit maintenance expenses however typically exterior and common area maintenance is included in the condo fee.
Purchasing a condominium can come with less restrictions than a coop because board or association approval is not part of the purchase process. Additionally, there are a greater number of financing options available with lower down payment amounts possible depending on the specifics of the building and association. Condominium associations have governing documents including bylaws and rules and regulations that outline owners responsibilities, the condominium board can hold hearings to amend these documents with approval from a certain percentage of owners.
For the short version, here is a table comparing both options published by ULS, a DC housing resource non-profit.
Which is better?
Overall there are pros and cons to both types of ownership and it may be useful to explore both options carefully as one may be a better fit for your housing objectives than the other.
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