A History of Housing Cooperatives

Cooperatives have long been recognized as a means of providing affordable housing. Since they are owned by their residents, cooperatives offer continuing economic incentives and social opportunities for residents who are interested in controlling their social environment and improving the quality of their lives.

While the history of housing cooperatives dates back to the beginning of time, the greatest legal and organizational progress has been made in the last two centuries. Records of shared-ownership housing have been recorded throughout history since the days of Babylon, where documents describe two owners sharing separate floors of a house; to ancient Rome where the Digest of Justinian refers to separate ownership of a house but shared ownership of a common roof. Compare that to today’s high-end luxury cooperatives, and one can see how far the development of housing cooperatives has come.

Europe’s Historical Role in Housing Cooperatives

The cooperative housing movement began in Europe in the 19th century, primarily in Great Britain and France, as a means to provide affordable housing for persons whose other choice might be rental of a tenement flat from a landlord that controlled the premises much like a king controls his kingdom. Cooperatives also provided a solution to housing shortages that arose when industrial development attracted people into the cities and targeted as working class families who could not afford to purchase a home. They offered sound shelter at affordable prices relying on self-help efforts of members to reduce costs.

The cooperative as a modern business structure originated in Britain during the 19th century. The Industrial Revolution had a profound effect on the way business was organized and on the working conditions and economic situations of many people. In response to the depressed economic conditions brought forth by industrialization, some people began to form cooperative businesses to meet their needs. By pooling their money, people were able to buy food in large quantities at a volume discount, allowing them to buy higher quality food than they could afford on their own.

The first documented consumer cooperative was founded in 1769, in a barely furnished cottage in Fenwick, East Ayrshire. It was here where local weavers first brought a sack of oatmeal into John Walker’s whitewashed front room and began selling the contents at a discount. Thus the first cooperative was formed; the Fenwick Weavers’ Society.

Robert Owen, a Welshman, is considered the father of the cooperative movement. A successful businessman who made his fortune in the cotton trade, Owen believed in putting his workers in a good environment with access to education for themselves and their children. These ideas were put into effect successfully in the cotton mills of Scotland. It was here that the first cooperative store was opened.

In the early stages of the cooperative movement, a group of 10 weavers and 20 others opened a cooperative store in England at 31 Toad Lane on December 21, 1844 with a very meager selection of butter, sugar, flour, oatmeal and a few candles. Within three months, the “Pioneers” expanded their selection to include tea and tobacco, and they were soon known for providing high quality, unadulterated goods. This was the first successful cooperative in documented history, and the Pioneers created a list of principles to guide their mission. These values were so successful that coops today still follow these same Rochdale Principles.

Rochdale Principles: Original Version, 1844

1. Open membership
2. Democratic control
3. Distribution of surplus in proportion to trade
4. Payment of limited interest on capital
5. Political and religious neutrality
6. Cash trading (no credit extended)
7. Promotion of education

In 1863, twenty years after the Rochdale Pioneers opened their cooperative, the North of England Cooperative Society was launched by 300 individual co-ops across Northern England. By 1872, it had become known as the Cooperative Wholesale Society (CWS). Through the twentieth century, smaller societies merged with CWS. CWS is the oldest and largest consumer cooperative, with over 6 million members, and will celebrate its 150th birthday in 2013.

In 1895, the International Cooperative Alliance (ICA) was established. Today over 200 national cooperative organizations representing 92 nations belong to ICA, the most recognized organization of all national cooperative movements. The aim of this prestigious organization is to promote cooperative development and trade worldwide and boasts an individual membership of more than 750 million people.

The Cooperative Movement: Early Years

In 1909, the first known cooperative housing community was built outside New York City on East Cedar Street at Lake Shore Drive in Chicago. It took another fifteen years for cooperative housing to take hold in Chicago. The first true cooperative development was started in 1918 by a group of Finnish artisans – the Finnish Home Building Association in Brooklyn, New York.

The first recorded cooperative type housing community appeared in New York in 1876 with construction of the Randolph on West Eighteenth Street. Interestingly enough, this community was not formed as affordable housing units but were luxury “home clubs” for upper class society. These Housing Clubs were unique to New York City for the rest of the century.

The early cooperative dwellings were marketed towards citizens in high income brackets who wanted the advantages and economies of individual home ownership without all of the responsibilities. They were generally duplexes, reproducing as closely as possible the atmosphere of a private house. The apartments offered freedom from servants and maintenance workers, the ability to go away and return to apartments ready for occupation, to redecorate at will, move more easily, and save money in household expenses. In an era where spacious, individually owned brownstones maintained by a landlord were considered undesirable and even scandalous, these advantages were considerable.

By 1925, housing cooperatives had been constructed in sixteen cities in the United States. Most of these cooperatives were high-income cooperatives. About half of the cooperatives in the United States were found in New York City, but they were also prevalent in such cities as Chicago, Detroit, Buffalo, San Francisco, and Philadelphia.

Housing cooperatives enjoyed high occupancy and little turnover during the post-war period. Most cooperatives were still luxury cooperatives between 1920 and 1930. Prior to the days of “fair housing laws” it was not uncommon for cooperatives to reject membership to persons who were perceived not of the right racial, ethnic, or religious background.

The first relatively large scale affordable housing cooperatives were made possible by the New York State Limited Dividend Housing Companies Act of 1927. This act provided corporations with significant property tax exemptions for 50 years, and authorized use of the right of eminent domain. This allowed companies to acquire appropriate sites for investors building apartments for middle-income families. The results were impressive, as thirteen housing cooperatives were built under this Act in New York City.

One of the first housing cooperatives was developed by Abraham Kazan and sponsored by the Amalgamated Clothing Workers Union. It was financed by a combination of capital from the Union pension fund and conventional loans. Originally the co-op started with 300 units, and grew to 1,400 units. This and a second co-op developed by Kazan in 1930 were primarily for union members, but they were also open to the general public. While these co-ops had restrictions on the income of initial occupants, there were no formal restrictions to sustain affordability. However, because of their neighborhood location, unit sizes, and the effects of a union sponsored history, these co-ops remain as moderate income dwellings.

The Great Depression

The 1929 Stock Market crash almost brought the cooperative movement to a standstill. The luxury cooperatives were hit especially hard. During the Great Depression of the 1930s, most of the high-income housing cooperatives failed. This was partly due to excessive mortgaging and promoter profits, as well as high vacancy rates in these expensive apartments.
By 1934, over 75 percent of cooperatives in New York and Chicago had gone bankrupt. It appeared that only two of New York’s higher-income co-ops survived the Depression. Generally, the more affordable lower income cooperatives survived the Depression, including all thirteen of the cooperatives created under the previously discussed 1927 New York State Act. The failures during this financial recession pointed out a significant weakness in the cooperative ownership model. When members are unable or unwilling to make their monthly payments, the cooperative is unable to meet its financial obligations. Conversely, during the Depression, college students also started housing cooperatives to live in while going to school. These were large houses of 20 or so rooms, and stood in stark contrast to the high-end luxury apartments.

Post-World War II

World War II changed the United States with its high demand for war materials and jobs, and the economy was booming. One major change that took place after the war was the enactment of “Section 216 of the IRS code” in 1942. This act allowed income tax deductions for mortgage interest and property taxes for cooperative members. This enactment of Section 216 put cooperative home ownership on a par with other forms of home ownership by providing equal treatment under the IRS Code.

The Lanham Act of 1949 gave priority for disposition of publicly held housing for conversion to affordable housing. These cooperatives were sponsored by the tenants. Many new cooperatives were formed such as Greenbelt Homes (1,500 units in Greenbelt, Maryland); Armistead Gardens (1,600 public housing units in Baltimore, Maryland); Pennypack Woods (1,000 in Philadelphia, Pennsylvania); and Success Village (924 public housing units in Bridgeport, Connecticut).

Rent controls combined with tax law changes, which allowed for the deduction of both co-op mortgage interest and property tax payments by individual co-op members, induced a resurgence of upper/middle-income co-ops in New York City during World War II. The first major inducement for the development of new co-ops for moderate and low income families in New York came with the leadership of the union movement after the war. The years between 1945 and 1950 saw another increase in cooperative development, although investors were reluctant to commit capital. This reluctance was not resolved until mortgage insurance was enacted, resulting in an influx of private capital to cooperatives.

The National Housing Act of 1950 authorized the Federal Housing Administration (FHA) to insure blanket mortgages held on cooperatives and rental communities. This in turn helped attract more private capital for housing. Section 213 was added to the 1950 Act to include middle-income cooperatives. The Act provides 40-year FHA government insurance on cooperative blanket mortgages. This legislation ultimately stimulated the creation of about 45,000 cooperative units known as “213 Cooperatives”. This act was highly successful, as the cooperatives formed and financed under the 213 program have one of the lowest rates of default of any HUD (FHA) mortgage insurance programs.


Starting with the Housing Acts of 1954 and 1959, the federal government began to shift from direct construction of public housing to publicly assisted housing. The National Housing Act of 1959 stimulated the development of low and moderate income communities during the 1960s and 1970s. Sections 221(d)(3), 202, and 236 of the Housing Acts were added to help form cooperatives of affordable guaranteed insured government loans. This approach became the mechanism of choice for the explosion of housing programs in the 1960s.
Early in 1960, the United Housing Foundation and the Foundation for Cooperative Housing joined with the Cooperative League of the USA and other institutions to create the National Association of Housing Cooperatives, in which all established cooperatives are eligible for membership. Many regional associations of cooperatives across the country were formed during this time, such as the Midwest Association of Housing Cooperatives, as well as advocacy organizations that sponsored developing cooperative housing projects in California, Arizona, New Mexico, Oregon, Washington and Hawaii.

Another institution that played a significant role in the history of cooperative housing was organized in 1961. The Association of Middle Income Housing, now named the Metropolitan Mutual Housing Association, concentrated most of its development efforts in New York, and organized the 420-unit Chatham Green cooperative in 1962 in Manhattan. By 1965 the United Housing Foundation and its predecessors had created some 23 cooperative housing projects in New York City, ranging in size from the 124-unit Mutual Housing Association in the Bronx to Rochdale Village in Queens on Long Island, with 5,860 apartments and also its own food stores, nursery schools, a credit union, and a multitude of civic and social organizations.

In one of the most momentous events of the housing cooperative movement, Title VIII of the Federal Civil Rights Act of 1968, was passed. This “Fair Housing Act” prohibited discrimination in housing due to race, color, national origin, or religion, and was signed in the week following the assassination of Dr. Martin Luther King, Jr. This Act was an attempt to achieve a goal of national residential integration. The purpose of Title VIII was to “provide, within constitutional limitations, for fair housing throughout the United States.” In 1974, sex was added and in 1988, familial status and handicaps were added, giving us the Federal Fair Housing Law that we know today.

With another economic recession in 1974, many newly formed cooperatives, under 5 years of age, were defaulted at a high level. At this time HUD made available “Section 8 Subsidies” for members to save the cooperative from defaulting. Under the Section 8 program, individual members paid carrying charges based strictly on income; originally this was 25% of the member’s gross household income. In the 1980’s, this was changed to 30% of household income. Even though it helped many BMIR and 236 cooperatives through the financial difficulties it also had a profound impact on how cooperatives operated. The primary purpose of the program was to accommodate cooperative ownership by bending rules in some cases, as well as changing how cooperatives are managed in others.

The National Housing Act of 1974 introduced sweeping changes in federal affordable housing policy. The trend in this era was a shift away from below market interest rate programs (BMIR) and towards Section 8 rent supplements. The shift also focused on converting existing public housing into housing for the very poor. Through these two decades, co-ops were built with project-based Section 8 funds from the government.

The Modern Cooperative Movement

In the 1990’s the federal government was focused on reducing the huge national debt that was built up during the previous decade. Federal Housing initiatives were couched in tax incentives to the private sector that did not lend well to cooperative development. The National Affordable Housing Act of 1990 produced three programs that provided for the limited creation of housing cooperatives. The HOME program, the Preservation/Prepayment program, and the Homeownership and Opportunity for People Everywhere (HOPE) program were those three programs. These programs supply funds to states and certain local jurisdictions largely to upgrade local public housing programs by expanding tenants’ rights. This was very localized by HUD offices as to use of funds, so the program remains inconsistent across the United States and could benefit by nationwide standardization.

Currently, the cooperative movement is alive and continuing to grow amidst a myriad of economic, political, and social factors. Cooperative organizations are continuing to add members and developments on a continuous basis, and range from low-income, public interest housing to high-end, luxury dwellings. The ICA (International Cooperative Alliance) is an independent, nongovernmental association which represents cooperatives worldwide. It boasts over 223 member organizations from 87 countries, and is headquartered in Switzerland.

In 2000, the National Cooperative Business Association brought co-ops to the cutting edge of technology by successfully lobbying the Internet Corporation for Assigned Names and Numbers to create a new top-level Internet domain—.coop—exclusively for cooperatives. The cooperative registry launched in January 2002 and represented a huge leap for coops to unite and work with each other. Cooperatives have grown from the days of village pueblos and communal living, but the spirit of community and unity are still alive and well.

For more details please feel free to contact an attorney familiar with cooperative housing law.

Works Cited

Sazama, Gerald. “A Brief History of Affordable Housing Cooperatives in the United Stats.” Working paper, University of Connecticut, 1996.

Sazama, Gerald. “Lessons from the History of Affordable Housing Cooperatives in the United States: A Case Study in American Affordable Housing Policy.” The American Journal of Economics and Sociology (2000).

Siegler, Richard and Herbert Levy. “Brief History of Cooperative Housing.” Cooperative Housing Journal (1986): 12-19.

“Significant Dates in Co-Op History.” National Association of Housing Cooperatives. Accessed March 23, 2012. http://www.coophousing.org