I analyze the institutional potential of housing cooperatives to fulfill housing objectives of low-income households, using three Indian cities (Mumbai, Chennai, and New Delhi) as empirical basis. I propose that there are two dimensions affecting the potential: (i) internal organizational features of the cooperative and (ii) external institutional context. At the organizational level, although cooperatives have certain inherent benefits for low-income households, they face collective action problems that need to be overcome. Potential benefits vary with the form of cooperatives. At the institutional level, evolution of cooperatives is set in both the local housing market and the local institutional framework. The institutional framework could help or hinder in realizing the potential benefits in a given housing market by lowering or raising transaction costs of formation and functioning of cooperatives. In India, the national institutional context promoted cooperatives as a means for low-income households. However, these households have benefited to different degrees in the three cities. While cooperatives have been most effective in Mumbai, they have been less effective in Chennai and New Delhi. The comparative examination holds three lessons for housing policy. The first lesson is that both local housing market and institutional framework have influenced the form and functioning of housing cooperatives. The second lesson is that minimal state controls aid cooperatives to perform multifarious functions. The third lesson is that development of an institutional structure supporting cooperatives lowers the transaction costs of their formation and functioning, which is to the benefit of low-income households.