If you're hunting for a place to live in the city, you may be stumped between two options: a condominium (condo) or a housing co-operative (co-op). While the two are comparable, they are not exactly the same, and you should know the key differences between each one before making a decision.
In New York City, co-ops are pretty much everywhere. As per the U.S. Census Bureau, there were a total of 328,529 co-op buildings in the city in 2017, as opposed to the to 115,844 condominium units. It wasn't until the 1960s when FHA established provisions for their financing that condos became widespread.
To sort out the confusion between co-ops and condos, below is a handy cheat sheet that distinguishes the differences to help you to make an informed decision.
What is a co-op?
In a housing co-operative (co-op), the owners have a lot of power due to the fact that they collectively own shares in the company that owns the building. There's a special lease that allows the owner to reside in a unit within the building. While the co-owner is also a shareholder, they still don't own the unit. Technically, when you decide to live in a co-op, you're only paying for the right to reside there and become a shareholder. Following that logic, the bigger or the more expensive the unit is, the more shares you own.
Pros and cons of living in a co-op
Co-ops tend to be cheaper than condos because they're extra restrictive when it comes to who can live in the building or who gets to own shares. Co-op boards go through a stringent vetting process before they approve or deny each purchase.
Even if co-ops are cheaper, they also tend to have higher fees because they combine expenses into a single bill, including gas, water, and property tax. In a condo, you just have to pay for routine maintenance.
What is a condominium?
On the other hand, condominiums are similar to "real properties" in the sense that each unit has its corresponding deed and tax bill. When you purchase one, it's yours and yours alone. Condos get conflated with co-ops because you also have to spring for building operating costs and management fees. But these fees come in the form of dues to a homeowners association (HOA) and are shared with other condo owners or residents.
Pros and cons of living in a condo
As opposed to owning mere shares, you get to own the condo should you decide to purchase one. You will not be subject to approval or a rigorous vetting process if you buy a unit. Think of it as just like owning a real estate.
Condos are much more expensive than co-ops because of the flexibility they provide. They are also in limited supply as compared to cooperatives that take up about 50 percent of New York City's housing inventory. And if you decide to take out a loan to purchase a condo, you also have to deal with a mortgage recording tax, which is not a requirement in a co-op.
Those who value freedom and flexibility might find it better to reside in a condo. But those who want stability might be inclined to live in a co-op.
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