How do Co-ops work?

I had a discussion with a friend the other day and can’t shake a lingering question about whether co-ops would provide a (relatively) safe and effective means to unwind the current housing crisis.

1. This post assumes that you agree there is a problem with the current cost of housing and that house purchase cost correlates with rental costs.

2. My understanding is: housing prices = cost of upkeep + current demand + speculation on future demand.

We assume the upkeep is generally fixed in terms of maintenance, property tax, utilities, etc; we know the current demand based on house sales; and nobody can know the future demand as it fluctuates with investor predictions, increases or decreases in net immigration, the desirability of the neighbourhood, etc.

3. Our current model is to amass enough capital to buy a home outright or get within a range that the difference is covered by a private lender with the investment return captured in a 25 or 30 year mortgage.

4. What if: the government acted as a lender instead? In this situation, the government would offer a bond or similar credit by putting up $X to buy or build a neighbourhood, townhouse complex, or condo. That loan would be amortized over a 50 or 100 or Y year period, significantly reducing monthly premiums. The building would be formed as a coop and assume ownership. Coop members would pay the mortgage but wouldn’t end with ownership, just like they currently are in a private landlord system. Following the 100 years, the asset would belong to the coop with restrictions on its ability to sell.

5. Under this model, rents would be drastically lower than the current system because it would remove the speculative portion of the pricing. They would also be pegged to the current home prices and thus not subject to increases that outpace inflation. It has the added benefit that if deployed at scale, the rental market would be substantially undercut reducing the investment incentive to buy houses to lease. This reduced demand would therefore unwind the home price run-ups.

6. InB4 you complain that this would never work because politicians only care about homeowners and the system is rigged and nobody understands your nihilistic tween self. I understand the issue of starting a serious conversation in a place built on chaos.