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I would say there are a few problems.

First, there is overregulation. In general, cooperatives face a significant number of regulations and restrictions that prevent them from operating efficiently. I already mentioned NIMBY activism as one example.

For example, the 2015 Investment Compact in Italy forced large cooperative banks (those with more than €8 billion in assets) to convert into public companies (SpA). The principle of “one member, one vote” was replaced by share-based voting, reducing cooperative governance. In 2016, additional reforms required small cooperative credit banks (BCCs) to join larger banking groups or face liquidation, reducing their autonomy.

Second, cooperatives often redistribute economic and monopoly rents to workers or customers. While this lowers prices and increase of benefits members in the short term, it also reduces the amount of money available for reinvestment and investors attraction.

Third, there is capital concentration. In Germany, the barrier to entry for housing cooperatives is approximately €1,000. Wealth inequality allows large capital holders to accumulate housing assets and benefit from economies of scale and risk diversification, making the market structure more rigid. Stakeholder-owned housing models generally produce greater net value for residents than investor-owned models, but investors still control most investment and housing development.

Finally, there is the agglomeration effect. The efficiency of cooperatives increases as the number of cooperatives in a particular location grows. This happens because they develop mutual support networks, specialized institutions, and legal structures that benefit the entire cooperative sector. However, because the cooperative sector remains relatively small in most places, cooperatives cannot fully benefit from these agglomeration effects.

The most effective approach would be to remove taxes and regulations on cooperatives while also reducing restrictions on their investment strategies. The Marcora Law provides a good example of a complementary policy. Implemented in Italy in 1985, its main purpose is to allow workers to buy failing companies and convert them into worker cooperatives. Under the law, the government provides workers with low-interest loans to help restore and operate these businesses. Additionally, introducing education about cooperatives and their functions in schools would be beneficial.