A 'third Way' Between Buying or Renting? Swiss Co-Ops Say They've Found It

> ... new residents buy shares to gain admission to the building ... > When a resident moves out, their shares are returned at face value. There is no capital gain.

That sounds a lot like renting but with a deposit. This article is annoying, because renting isn't fundamentally different because its a non-profit renting out the units.

Edit: just read a bit further, and it says:

> The couple needed to buy shares for around 25,000 francs ($31,000) ...

That's a lot of money, and this explains why it's possible to offer such a lower rent.

> ... the rent: 2,400 francs... We realized that a commercial apartment of the same size would be around 1,000 francs more expensive

The co-op could rent out the apartment without the large deposit for 1,000 francs more, so if you look at the deposit as a loan, this means that the co-op is paying about 1,000 / 25,000 = 4% interest on the deposit.

If we look at the past performance of a European stock index (I arbitrarily chose STOXX Europe 600) we can see that the annualized return over the last 20 years was ~3.5%. The anualized return for your money converting to USD and buying S&P 500 20 years ago, then converting back to EUR is ~6.4%. Because your "investment" into a co-op isn't diversified, it is conceivable that these co-ops are riskier than investing in an index.

So it's not clear that this is actually a good deal for the renters.

> The city of Lausanne gave the co-op a 90-year lease that was cheaper than other housing projects, and bought shares in the co-op for lower-income residents. Natacha Litzistorf, the city councilwoman in Lausanne in charge of housing, architecture and the environment, said cooperative housing can help forestall the extreme segregation of rich and poor and help a city live “at peace with itself.”

The capital requirement is fulfilled by the government for poorer renters. This fact, together with "gave a 90-year lease that was cheaper than other housing projects" makes this work like a rent subsidization scheme.

The model doesn't make sense the way they presented it.

If you simply return the money that would have gone towards paying off the building, then how does the cooperative grow and acquire more properties?

If the cooperative acquires new properties via loans to rent out, then the cooperative has committed itself to the mortgage, but the tenant has not. Not just that, but the cooperative has to return almost the entire principal, meaning that it would have to sell the property to clear the debt the moment a tenant leaves.

I'm not saying this model can't work. It could work under two restrictions:

1. If you want to move out, you must find a tenant to succeed you. If you want to cash out, you can sell your shares to the new tenant at a discount.

2. You can only use your shares for renting another property or transfer your shares to a different housing cooperative.

With these two rules the cooperatives won't be stuck with stranded real estate and the cooperative network grows over time.

Somebody won't pay their rent, what does Swiss coop do? Since they can't be kicked out. How to deal with teenager with a drum set? Or selling drugs?

Article says when you leave you sell shares for purcahse price + inflation That's no different from a US Government inflation-protected bond. You are simply storing your money rather than profiting from it.

But where does Coop get the money to pay everybody back if several decide to leave at once? Say, fed up with having to pay extra because their neighbor the drug dealer won't pay rent.

This is one more step towards the commodification of the public good we know as legible contracts. I can't believe I might see Economics 2.0 in my lifetime.

It's also common in Vienna, where most of the lettings are non for profit or straight up state run. Very good imo.

How is this different from a nonprofit club that owns land/facilities?

I'm not saying this can or can't work but this isn't a new funding model.