On today’s show we’re talking about a niche within senior living, and that is coop housing. It’s a small and slowly growing segment. For some, it has become a competitive option in some markets, and may gain further traction by addressing several pressures facing the industry.

Co-ops account for a fraction of senior housing inventory, but there are signs that they are growing in popularity.

The number of senior co-ops has grown from 103 in 2013 to 125 in 2019 totaling 7,700 units and about 10,500 residents nationwide. So their penetration of the market is still quite small.

But first, let’s define what coop housing is in the context of senior housing.

Buying into a cooperative is a cost-effective way to enter senior housing, and can be an alternative to independent living and active adult communities. In coop housing, residents purchase “shares” in a corporation that owns the building. These shares entitle stakeholders to lease a specific unit within a building and utilize common areas. Additionally, there is a monthly charge for assessments, maintenance and repairs.

Co-op living also gives residents a stake in how a community is managed, similar to a traditional homeowners association. Each co-operative has an elected executive board and members have a vote in how buildings are managed and operated.

Co-op shares appreciate in value incrementally — usually 1% to 2% annually. This maintains affordability and marketability for new residents, and because members are responsible for the monthly fees on empty units until they are occupied.

Due to the financial structure of co-ops, they tend to be overlooked by profit-driven investors, but they do offer consumers a more affordable living option.

Members looking to exit a co-op can see a small return on their investment, or they can hold on to their shares and rent out their unit to another tenant.

Residents who buy into a community can pay anywhere from 20% to 95% of their 40-year mortgage upfront. Now a 40 year financing can mean low monthly payments, and is a reflection of the kind of favourable financing that is possible in this asset class. There are also monthly fees to cover building maintenance and basic operations. The payment plans are designed to be flexible for seniors with more equity or higher personal income.

Where are they?

Minnesota, where the first senior co-op opened in 1978, is home to 82 communities, and the Twin Cities area is a competitive market. Ebenezer, the largest senior housing provider in the state, manages 38 co-ops, most of them under the Applewood Pointe and Realife Cooperative brands.

Last year, Ecumen launched a senior cooperative brand, Zvago, with the opening of a $20 million, 54-unit community in Minnetonka, Minnesota. Ecumen has also opened 5 more Zvago co-ops.

At Zvago, buy-in payments can range from more than $31,000 to nearly $500,000. Monthly fees can range from more than $500 to almost $3,300.

Another developer — Real Estate Equities Development of Eagan, Minnesota — focuses on building and managing senior co-ops under the Village Cooperative brand, and has a pipeline of 34 cooperatives completed or under construction in Colorado, Iowa, Kansas, Minnesota, Missouri, South Dakota, Wisconsin and Washington.