Why Co-Op Senior Housing Is Ready for Primetime

Cooperative housing remains a niche within senior living, but the model is slowly growing. It has become a competitive option in some markets, and may gain further traction by addressing several pressures facing the industry.

For example, co-op housing can be leveraged to meet the growing demand for middle-market senior housing. In addition, there are various types of co-ops, making it a flexible choice for developers who want to tap into the senior marketplace. Already, some established companies in the independent living and assisted living sectors have branched out into co-ops.

But cooperative senior housing also may require developers to focus on the overall wellbeing of residents over profit and loss statements, CSI Support & Development General Manager Nancy Evans told Senior Housing News. Warren, Michigan-based CSI owns 58 senior apartment cooperatives in California, Maryland, Massachusetts and Michigan.


“We’re not in this business to make money for our owners and shareholders. We want to enhance the lives of our members,” Evans said.

Brimming with potential

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 over 10,500 residents, Senior Cooperative Foundation Board Chairman Dennis Wilson told SHN. The Shoreview, Minnesota-based group advocates for senior co-ops across the country.


But providers have taken notice, especially in the Midwest, where co-ops are flourishing.

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 also opened Zvago co-ops in St. Anthony Park and Apple Valley, construction on a fourth co-op in Duluth is almost complete, and a fifth co-op in Stillwater is planned.

Another Gopher State 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.

Real Estate Equities Development did not respond to requests for comment, and Ecumen declined to comment to SHN for this story, citing the competitive environment in its markets.

Senior cooperative development has long been driven by favorable financing in the state with ample supply. Senior Housing Cooperative Board Chairman Dennis Johnson told SHN in 2013 that senior co-ops are are “master mortgages” insured by Minnesota’s Department of Housing and Urban Development (HUD) under Section 213 of the National Housing Act.

After a HUD restructuring three years ago, the Minneapolis office now processes all co-op financing applications in the U.S.

But Minnesota is not the only co-op hotbed. The majority of Village Cooperative’s pipeline is in Iowa and Colorado, with a total of 14 developments completed or under construction.

The two states have growing senior populations. Over 514,000 Iowans are 65 and older, a segment expected to increase to over 677,000 by 2050, according to the Iowa Department of Aging. Colorado’s 65-and-older population is expected to top 1.27 million by 2030, and the state was ranked the best state in the U.S. for aging by U.S. News and World Report.

Market-rate alternatives

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. 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, Evans told SHN.

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, Lutz, Bobo & Telfair Partner Scott Gordon told SHN. Gordon specializes in real estate and mobile home park law for the Sarasota, Florida-based firm.

There is some reason to believe that if demand surges for senior co-ops, investors may see a more lucrative opportunity — at least, if the example of co-op mobile home parks is an indication.

For decades, retirees buying mobile homes banded together to create ownership cooperatives before private investors and REITs made the product a tradable, institutional-grade investment class.

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. Gordon noted that the monthly assessments may be substantially lower than the rent a shareholder can charge a lessee.

“I know of some communities where maintenance fees have been flat for decades,” he said.

Twists on the model

Unlike traditional housing cooperatives where residents buy an equity share in the property, entitling them to a living unit and access to shared amenities, CSI’s properties — which mostly consist of affordable senior apartments — operate under a cooperative management system. Members apply for available apartments as they would anywhere else. They also pay a $100 entry fee to join the cooperative, which is then used in lieu of a security deposit.

The membership gives them voting rights in how a building is managed, as well as the opportunity to participate in the management of the building. Instead of property managers, CSI has liaisons responsible for up to three communities at a time, who advise and teach co-op members how to self-manage their buildings.

Each CSI co-op has an executive board and a floor leader to represent residents on decisions ranging from dining options and groundskeeping to building maintenance and activities programming. These are all elected positions with one-year terms, and a two-term limit.

The term limits are by design, Evans told SHN.

“This creates more turnover in [elected] positions and creates opportunities for other members to step into management roles,” she said.

CSI’s cooperatives are all affordable communities, built and financed through low-income housing tax credits (LIHTC) and HUD Section 202 and 232 financing. This allows CSI to subsidize rents, usually at 30% of a resident’s earnings.

Another alternative to cooperative homeownership is co-housing. One example is Garden Spot Community Village Cooperative Living House in New Holland, Pennsylvania, which was the “Best Affordable Housing Design” winner of the 2018 SHN Architecture & Design Awards. It remains a co-op in the sense that residents live communally, Garden Spot Village CEO Steve Lindsey told SHN.

All of these co-op models offer opportunities for residents to meet new friends, find new ways to volunteer and be active, and enrich their quality of life. Up to 50% of CSI’s cooperative residents do some sort of volunteering, which has surprised many, Evans noted.

“I’ve had many of our residents tell me they came to [CSI’s communities] to wind down their lives. Instead, they’ve found new purpose,” she said.

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