Most homebuyers in the Chicago area are familiar with the condominium form of ownership. However, fewer are aware of its close relation, cooperative housing. While coops have never been a large part of Chicago 's housing scene, they should not be overlooked as a viable form of homeownership. Cooperatives first appeared after World War I, when housing shortages, coupled with the rising cost of living, offered city dwellers an alternative to unaffordable single-family homes and escalating rents. Coop purchasers buy shares in the cooperative corporation, which in turn owns the building in which individual apartments are located. In return for the right to own shares in this corporation, buyers sign a proprietary lease, which evidences the buyer's right to live in a given apartment, and the buyer's obligation to shoulder that share of the corporation's cost of operation, taxes, utilities, and all incidents of expense for the cooperative association. It is important to remember that cooperative apartment owners do not own real estate, but rather shares in a corporation that owns the subject property, and building, which comprise the cooperative real estate. Rather than obtaining a mortgage on a cooperative apartment, therefore, a coop buyer had to procure a loan to finance the corporation shares. Because the nature of this loan is legally a loan to buy personal property (a chattel mortgage) rather than a mortgage on real estate, coops have traditionally been harder to finance. The fact that many apartments were not easily financed added to the perception that coops were a form of ownership limited to the wealthy - in fact, some cooperative buildings prohibited share loans. However, this lack of funds has eased greatly in recent years. Because the cooperative shareholder is undertaking a personal financial obligation with respect to the corporation, coop admissions policies often permit wide-ranging inquiry into the fiscal viability of prospective tenants. Although they are not permitted to violate the federal Fair Housing Act, they are allowed to discriminate on the basis of tenants' personal financial status. As a result, admissions processes may include very personal questions, which applicants may not be willing to answer. It would be wrong to assume that all cooperatives are for the wealthy. Many coops are of the market-rate variety, the shares for which can be bought and sold at whatever price the market will bear. There are also limited-equity cooperatives, in which shareholders are restricted from realizing more than a given threshold of equity upon share sale. This occurs often when the cooperative benefits from features, such as real estate tax freezes, special interest rate mortgages, or government grants to the corporation, intended to keep the coop "affordable" for present and future tenants. This last form of ownership has been demonstrated in the Chicago area, where some public housing has been rehabilitated and promoted as cooperatives. |
