Senior Housing Cooperatives: How They Work and How to Find One

A senior housing cooperative is a housing cooperative whose members are older adults: residents buy a membership (shares) in the corporation that owns the building, receive the right to live in one apartment, and pay a monthly charge toward the building's costs. The University of Wisconsin Center for Cooperatives describes a senior housing cooperative as one with design and service features appropriate to senior residents. Many are restricted by age, and federal law has specific rules for when a building may do that.

This guide covers the three questions buyers ask first. What are the age rules and where do they come from? What does it cost, and what do you actually own? And where do you start looking? It sits inside the wider housing cooperatives topic, so read that page first if the basic share-and-lease structure is new to you.

What a senior co-op is

The structure matches any other housing co-op. A corporation owns the building and land. Each resident buys a share in that corporation, and the share comes with an exclusive right to occupy a particular unit under a proprietary lease or occupancy agreement. The University of Wisconsin Center for Cooperatives puts it this way: members each own a cooperative share, and together they own 100 percent of the cooperative, which owns the building, land and common areas. Members set the bylaws and elect a board of directors from among themselves.

What makes it a senior co-op is the audience and the setting. The building is usually designed for older residents, with features such as accessible layouts, and the bylaws or occupancy documents limit membership by age. Some include shared dining, activity rooms or transport; others are plain apartment buildings with an age rule. Because every co-op writes its own documents, two senior co-ops can differ a great deal in what they offer and what they charge.

A senior co-op is different from three things it is sometimes confused with:

Type	What you hold	Who owns the building
Senior housing cooperative	Shares plus a right to occupy a unit	The resident-owned cooperative
Senior rental community	A lease	A landlord or operator
Senior condominium	A deed to your unit	Each owner owns a unit; common areas are shared

For the structural differences between a co-op and a condo, see housing cooperative vs condo. For the wording of the lease itself, see what is a co-op apartment.

The age rules and the federal exemption

The Fair Housing Act generally bars discrimination in the sale and rental of housing because of race, color, religion, sex, familial status, national origin or disability. Familial status means households with children under 18. Age limits that keep children out would normally be a problem under the familial status rule, so the Act contains an exemption for "housing for older persons."

The text is in 42 U.S.C. 3607(b). Subsection (b)(1) says that nothing in the subchapter regarding familial status applies with respect to housing for older persons. Subsection (b)(2) then defines housing for older persons as housing that is one of three things:

Provided under a State or Federal program that the Secretary determines is specifically designed and operated to assist elderly persons (as defined in the State or Federal program).
Intended for, and solely occupied by, persons 62 years of age or older.
Intended and operated for occupancy by persons 55 years of age or older, and meeting three conditions: at least 80 percent of the occupied units are occupied by at least one person who is 55 or older; the housing facility or community publishes and adheres to policies and procedures that demonstrate that intent; and it complies with HUD rules for verification of occupancy, through reliable surveys and affidavits.

In plain terms, a "62 and older" building is a strict rule, while a "55 and older" building is allowed to have some younger occupants as long as the 80 percent test and the other conditions are met.

What HUD's regulations add

HUD's rules for this exemption are in 24 CFR Part 100, Subpart E, and they name cooperatives directly. Section 100.304(b) defines a "housing facility or community" as any dwelling or group of dwelling units governed by a common set of rules, regulations or restrictions, and lists a cooperative among its examples (along with a condominium association, a homeowners' association and a manufactured housing community). It adds that a portion or portions of a single building do not constitute a housing facility or community.

Other points from the same subpart:

Under section 100.303, a 62-and-over building stays within the exemption even if some residents who were there on September 13, 1988 were under 62, provided all new occupants are 62 or older, and it may have units occupied by employees under 62 who perform substantial duties directly related to management or maintenance.
Under section 100.305, the 80 percent test counts occupied units, and units occupied by employees performing management or maintenance duties, or by people needed to provide a reasonable accommodation to disabled residents, do not defeat the exemption.
Under section 100.306, the community must publish and follow its age policy. HUD's rule lists factors it looks at, including how the community is described to prospective residents, its advertising, lease provisions, written rules and covenants, and public posting in common areas. It also says phrases such as "adult living" or "adult community" in an advertisement are not consistent with an intent to operate as 55-and-over housing.
Under section 100.307, the community must be able to produce verification of compliance through reliable surveys and affidavits, and it must update its occupancy information at least once every two years.

Two practical points follow for a buyer. First, an age rule is written into the documents and policies, so read them. Second, the exemption covers familial status only. It does not remove a co-op's duty to follow the Act's other protections, and a board may not turn down an applicant because of race, color, religion, sex, national origin or disability. See co-op board approval process for how fair housing law applies to buyer review.

Age rules that are not the federal ones

A building's own bylaws can set an age rule that differs from the federal tests, for example by requiring that every member be 55 or older, or that at least one member of the household be a certain age. State law may also apply. New York's Human Rights Law, for example, exempts from its familial status and age provisions the restriction of sale, rental or lease of housing accommodations exclusively to persons 62 or older and the spouse of any such person, or housing intended and operated for occupancy by at least one person 55 or older per unit, and it says the federal 807(b)(2)(C) rule applies to the 55 test. Ask the co-op which rule it operates under and where that rule is written down.

Federal senior housing programs and co-ops

Some senior housing is built with federal help. The best known program is Section 202, Supportive Housing for the Elderly, set out in 12 U.S.C. 1701q. The statute says its purpose is to enable elderly persons to live with dignity and independence by expanding the supply of supportive housing designed to accommodate their special needs and providing a range of services tailored to them.

What the statute says that matters to a co-op reader:

The Secretary of HUD is authorized to provide assistance to "private nonprofit organizations and consumer cooperatives" to expand the supply of supportive housing for the elderly, as capital advances and contracts for project rental assistance.
A capital advance bears no interest and its repayment is not required so long as the housing remains available for very low-income elderly persons in accordance with the section.
For this section, an "elderly person" means a household composed of one or more persons at least one of whom is 62 or older at the time of initial occupancy.
Rent for a very low-income person in an assisted unit is set as a share of the person's income, with the statute naming the highest of three amounts, including 30 percent of adjusted monthly income.

The statute therefore lets a consumer cooperative be the developer that receives the assistance. It does not tell you whether a particular building uses it, whether units are sold as shares or rented, or what an occupant would pay. A building that was developed this way will carry program rules in its documents, and those rules (income limits, resale limits, rent or charge formulas) can differ sharply from a market-rate senior co-op. If a building says it was built with federal assistance, ask for the program rules in writing and read them before you apply.

What it costs

A senior co-op has two cost layers, the same as any housing cooperative: a purchase price for your membership and a monthly charge.

The share price. This is what you pay to join and receive the right to occupy your unit. How it is set depends on the type of co-op. The University of Wisconsin Center for Cooperatives distinguishes a market-rate cooperative, which sells shares at full market value and permits a market rate of return on resale, from a limited-equity cooperative, which limits the return allowed when shares are sold through a formula in the bylaws. Both types exist among senior co-ops. No single price applies. Ask the co-op for the current share price of the unit you are considering and for the resale formula, if there is one.

The monthly charge. Often called carrying charges or the monthly assessment, this is the member's pro-rata share of the cooperative's budgeted costs. The University of Wisconsin Center for Cooperatives lists the kinds of costs that can be included: taxes, mortgage payments, repairs and maintenance. Where utilities are not part of the cooperative's budget, the member pays them directly. A member who took out a share loan makes loan payments to the lender separately. See co-op share loans for how that financing works and why not every lender offers it.

Senior co-ops that offer extras, such as meals or housekeeping, may fold the cost into the monthly charge or bill it separately. Ask which services are included, which are optional, and how a change in the service budget would be decided.

What the documents must show you: a Minnesota example

State law decides what a senior co-op must disclose, and Minnesota's is a useful example of what to ask for anywhere. Minnesota Statutes section 308C.612 sets out the offering documents for a senior housing cooperative organized under its Cooperative Housing Act. Each person subscribing for a membership must receive an occupancy agreement or proprietary lease, the articles, the bylaws and an annualized budget. A first-time buyer also receives an information bulletin and subscription agreement; a later buyer receives a resale disclosure statement and a membership purchase and sale agreement.

The resale disclosure certificate in that section must include the monthly assessment for the unit, other fees and charges such as late charges, extraordinary expenditures approved but not yet assessed for the current and two following fiscal years, the balances of the replacement reserve and general operating reserve, the cooperative's latest financial statements, any unsatisfied judgments, and a statement about pending lawsuits. The section also gives a purchaser ten days after receiving the documents to cancel a resale purchase agreement without penalty, with a full refund of payments, unless the purchase has already closed.

Other states set their own rules, and many set none specific to senior co-ops. The Minnesota list is still a good checklist for any building: the reserve balances, the budget, the pending expenditures and the lawsuits are what tell you whether the monthly charge is likely to rise.

Pros and cons

Possible advantage	Possible drawback
Neighbors of a similar age, in a building designed around them	Age rules limit who can live with you or inherit the unit
Members vote and elect the board that runs the building	Members share responsibility; a poorly run board affects everyone
Monthly charge is shared among members at cost	The charge can rise if costs or reserve needs rise
Possible tax deductions for your share of mortgage interest and real estate taxes, if the co-op qualifies	Resale may be slower or limited by formula or age rule

Some points deserve more detail.

Control and responsibility. A cooperative is run by its members. That gives residents a real say, and it also means someone has to serve on the board, read the financials and make decisions about repairs and reserves. Ask how many members serve and how decisions are made. Ask whether the cooperative uses a professional manager.

Estate and exit planning. A share in a cooperative is not a deed to real estate. In Minnesota's statute, the purchase agreement must acknowledge that the membership interest is personal property and not an interest in real estate. What happens when a member dies, moves to assisted living or needs to sell is set by the bylaws, the occupancy agreement and state law. Ask in writing how the co-op handles an heir who does not meet the age rule, how long a unit may sit empty while the estate sells it, and whether any resale formula or flip tax applies.

Financing. A buyer without cash for the full share price may use a share loan, but a lender must be willing to lend on that building. Ask the co-op which lenders have financed shares there.

Tax. Section 216 of the Internal Revenue Code allows a deduction to a tenant-stockholder of a cooperative housing corporation for the stockholder's proportionate share of the corporation's real estate taxes and of the interest on its qualifying debt, if the corporation meets the statute's conditions. See pros and cons of co-op living for what the statute and IRS Publication 530 say.

Care needs. A co-op that offers no care services cannot provide them. If you may need care later, ask what services are available on site, what is arranged through outside providers, and whether the cooperative's documents allow a live-in caregiver. This is a question about the documents, so get the answer in writing.

How to find a senior co-op

Start with the organizations below, and check every candidate against its own documents.

Your state's aging or housing agency. Minnesota Aging Pathways, a state of Minnesota resource, lists "cooperative or condominiums" among the housing types it can help you understand, describing them as owned by individuals who are also responsible for their upkeep and charged monthly fees for building interior and exterior maintenance. Look for the equivalent agency in your own state by searching its name with "aging and disability resources".
Your state housing finance agency. Ask whether it keeps a list of senior cooperatives in the state or can point you to a developer or a cooperative development organization.
Cooperative development organizations and university cooperative centers. The University of Wisconsin Center for Cooperatives publishes a general guide to housing co-ops, including senior housing co-ops.
Local searches. Search for "senior cooperative" or "senior co-op" together with a city or county. Verify each result against the co-op's own documents, since a page that says "co-op" may describe a condominium or a rental.
HUD-assisted housing. For a building developed with federal assistance, ask the building for the program documents rather than relying on a listing.

When you reach a building, request these before you visit twice: the bylaws, the occupancy agreement or proprietary lease, the current budget and financial statements, the reserve balances, the age policy, and the last set of board meeting minutes the co-op is willing to share.

Questions to ask before you apply

What age rule does the co-op operate under, and where is it written?
What is the share price for the unit, and is there a resale formula?
What is the current monthly charge, what does it cover, and how has it changed in recent years?
What are the reserve balances and what major repairs are planned?
Does the co-op have a blanket mortgage, and when is it due?
What approval process applies to a new member, and what does it review? See co-op board approval process.
What happens when a member dies, moves out or needs to sell?
Which services are included and which cost extra?
Is there a flip tax or transfer fee?
Does the building carry its own insurance, and what insurance does a member need? See cooperative insurance.

Frequently Asked Questions

What is a senior housing cooperative?

It is a housing cooperative for older adults. Residents buy a membership in the corporation that owns the building, receive the right to live in one unit, and pay a monthly charge toward shared costs. The documents set the age rule.

What age do you have to be to live in a senior co-op?

It depends on the co-op's own rules. Federal law allows housing for older persons that is intended for and solely occupied by people 62 or older, or intended and operated for people 55 or older where at least 80 percent of occupied units have at least one resident who is 55 or older. A co-op may set a stricter rule in its bylaws.

Can a senior co-op keep out families with children?

The Fair Housing Act's familial status rules do not apply to housing for older persons that qualifies under 42 U.S.C. 3607(b). To qualify, the housing must meet one of the three tests in that section and, for the 55-and-over test, publish and follow its age policy and verify occupancy.

Does the age exemption allow other kinds of discrimination?

No. The exemption in the statute is about familial status. The Act's other protections, including race, color, religion, sex, national origin and disability, continue to apply.

How much does it cost to buy into a senior housing co-op?

No single price applies. The share price and monthly charge are set by each co-op, and limited-equity co-ops use a formula in their bylaws to cap resale. Ask the co-op for the current price of the unit and the current monthly charge, and ask what the monthly charge covers.

Is a senior co-op the same as a retirement community?

Not necessarily. A senior co-op is owned by its resident members. A retirement community may be a rental, a condominium or a company-owned campus with a different contract. Read the documents to see what you would own and what you would owe.

What is HUD Section 202?

Section 202 is a federal program under 12 U.S.C. 1701q that provides capital advances and project rental assistance to private nonprofit organizations and consumer cooperatives to expand the supply of supportive housing for the elderly. The statute defines an elderly person for this purpose as a household with at least one person 62 or older at initial occupancy.

Can I deduct co-op costs on my taxes?

Section 216 of the Internal Revenue Code allows a deduction for a tenant-stockholder's proportionate share of a cooperative housing corporation's real estate taxes and qualifying interest, if the corporation meets the statute's conditions. See pros and cons of co-op living. Ask a tax professional about your own return.

What happens to my share when I die?

That is set by the bylaws, the occupancy agreement and state law. Ask the co-op in writing how it handles an heir who does not meet the age rule and how the unit is sold.