Housing co-operatives - introduction

‘A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise.’ – International Co-operative Alliance

What are housing co-operatives?

Co-operatives are not-for-profit, democratic organisations run by and for their members; a housing co-op is a particular type of co-operative whose object is to provide accommodation for its members. Housing co-operatives are an antidote to the common, but rather antisocial idea that housing is for investment and speculation rather than for fulfilling a basic human need. Other types of co-ops include worker co-ops, consumer co-ops and credit unions. A housing co-op is not the bricks and mortar (or straw bales, cob etc.), it’s the organisation itself, i.e. a housing co-op can be set up before it has a property.

History

There are documents from ancient Babylon and Rome that describe shared ownership of houses, so co-operative housing of some sort has existed for thousands of years. In 1844 in England, the Rochdale Pioneers founded a consumer co-op that formed the basis of the modern co-operative movement. For more on the history of the co-operative movement, see here. The Rochdale pioneers started to provide co-operative housing in the 1860s, and the first housing co-ops independent of the consumer/retail co-op sector appeared in Germany in the 1880s – established by the Bismarck government to improve conditions for workers, in an attempt to prevent revolution. The concept has become global, with very strong housing co-op sectors in Scandinavia and Canada. The largest single housing co-op project in the world (housing 250,000 people) is in Turkey.

The Rochdale Pioneers produced a set of co-operative principles that have been amended over time, and now form the basis of the International Co-operative Alliance’s ‘Statement of Co-operative Identity‘. The seven principles are:

• voluntary and open membership

• democratic member control

• member economic participation

• autonomy and independence

• education, training and information

• co-operation among co-operatives

• concern for community

Types of housing co-op

A housing co-op can involve people living together in one large property or in separate flats or houses. The co-op can be tenant managed (i.e. the co-op could rent a property or properties from a private landlord, local authority or housing association) or tenant owned, where the co-op owns the property itself.

A ‘fully-mutual’ co-op is where all tenants are members and all members are tenants. Non-fully-mutual co-ops can have members / investors who are not tenants. Co-ownership involves members buying a share of the co-op, which increases with the value of the property, and which they sell on to someone else if they leave (in this case, new members would need capital to buy into the co-op, so some people would be excluded). ‘Par value’ means that everyone owns an equal share (usually a nominal £1).

We think that the most democratic and equitable form of housing co-op is fully-mutual, run by a general meeting of all members, par value, and ‘in common ownership’ (can never be sold for the personal gain of the members).

Housing co-ops’ legal structures and some terminology will be different in different countries.

There are other set-ups that are similar to, or could even involve, housing co-ops. Community land trusts can’t be fully mutual, as they have to be open to community members as well as tenants – although they could lease property to a housing co-op. ‘Intentional communities‘ involve people living together communally, and although they don’t need to be registered co-ops, they often are. Co-housing is slightly different in that not all co-housing projects are co-operative, but the big idea of having some personal and some shared space is highly consistent with the co-operative ethos. Mutual home ownership is a new type of housing co-op where a portion of members’ rents goes into a pot to build up equity that members can withdraw when they leave, making it easier to buy another property.

What are the benefits of housing co-operatives?

Control

Members have control over their own housing, with no outside influence, unlike the private rented sector, housing associations or trusts etc. All members have an equal say in all decisions. Co-ops help address the democracy deficit in the housing sector – removing the influence and profits of landlords and reducing the enormous amounts of money and power that banks gain from the constant buying and selling of homes. They are a way of taking control of one of the essentials of life – housing – out of the hands of the corporate sector and into the hands of ordinary people.

Community

Co-ops can provide housing security into the future. They represent one of the few ways to challenge gentrification. Screening and selection of members is good for harmony and longevity. According to a Confederation of Co-operative Housing report, many people who live in housing co-ops wouldn’t want to live in any other type of housing, because of the close-knit community they find there, with lots of human interaction and neighbours to look out for them. This often spills over into the local area, as co-ops are often well-integrated into their communities.

Affordability

Members are able to set their own rents, unlike the private sector and council housing; plus they are immune from ‘right to buy’. Rental income goes towards improving the property or buying more properties, rather than to enrich private landlords. This helps prevent speculation in the housing market – housing becomes a resource for use, not a commercial commodity for profit. The inability of the less well-off to get onto the housing ladder, ever-increasing house prices and ever-rising private rents has meant that the entire housing market has become a means of transferring money from poor to rich. Housing co-ops are a bulwark against this. Foodstuffs can be bought in bulk, which is cheaper. Shared resources can reduce costs, from large things like laundry, kitchen, gym, nursery, garden etc. to small, internally recycled or shared things like books, clothes etc. (this is an environmental benefit too). Also, there are often tax breaks for housing co-ops.

Personal

Mortgages are huge, long-term expenses, and people with mortgages are sometimes trapped in jobs they don’t like because they pay well; housing co-ops can allow people to find work that they enjoy, or have the breathing space to train or to start their own business. Members can learn the skills required for collective self-management, plus there is always company and support, including child-minding, lift-sharing etc. Housing co-ops can be formed by groups of people with similar interests, such as musicians, home educators, gardeners or Buddhists; a group of like-minded people can provide a supportive, understanding home environment.

What can I do?

Join a housing co-op

Have a look at directories to find housing co-ops near you. Some may have vacancies. The most important thing to find out is whether new members just start paying rent or have to buy in. Visit first, meet people, get a feel for the place. You may not want to join an existing co-op however, and there could be a waiting list. You might prefer to start a co-op with a group of friends.

Start a housing co-op: support organisations

Get a group of people together – work out if you can live together, and what resources you have. Quite a bit of background reading will be required, but there will be co-op development / support organisations in your country that can help you decide on the best type of co-op / legal structure to suit your needs. Find a body to work with – they will be able to help with registering the co-op, and they can also hold your hand through the whole process of finding property, writing a business plan, sorting out finances, tenancy agreements and what options are open to you etc. Often, someone will come to speak with your group. You want your co-op to stay democratic and transparent, and to have worst-case-scenario processes in place (including for evicting uncooperative members).

It’s a good idea (we think) to have something in the rules that prevents members selling the property for personal gain. You don’t want to go through the hard work of setting up something owned collectively, for individuals to make money from it in future; and you certainly don’t want dominant members forcing through de-mutualisation so that they can sell off collective assets for personal gain, for example.

Register and find a property

Your support organisation will organise registration for you, and they will have ‘model rules’ to suit your circumstances, that are acceptable to the registration body. There will be a fee for this. It might be a good idea to use their model rules, as they will have years of experience, and will have thought of lots of things that might go wrong, and have amended their rules accordingly. Read them carefully to see if they will suit your needs well. If not, you might want to find another housing co-op that you aspire to be like, and ask if you can use their rules.

Registration is important because then the organisation rather than individuals owns or rents the property / takes out a mortgage etc. This makes it easy for members to join and leave without being personally entangled in ownership / debt etc. There could also be tax breaks for registered co-ops in your country. Register before you have a property, and then go house-hunting as a co-op in the same way you would as an individual.

Finances

Some lenders will be more aware of co-op structures than others. You may find a lender willing to provide a mortgage or, if some members of your group are selling homes, you may be able to buy your property outright. In this case, members with capital can provide money for ‘loanstock‘ that is paid off – either from rents or from taking out a mortgage at some point in the future; or a property could be bought with a combination of mortgage and loanstock finance. As a registered co-op, you can issue loanstock to members and non-members, but it doesn’t give those members more say (and it doesn’t give non-members any say). Again, your support organisation can help you with all of this.

Starting a housing co-op means paying for property at market rates, which means that initially, rents might be the same as in the private sector. But as the mortgage (and / or loanstock) is paid off, rents will fall relative to mortgage repayments or private rents in the same area.

Internal rules and living together

Work out your ‘internal rules’ – which are not legally-binding, but just about how you want to live as a group, and for the smooth running of the co-op. Examples could be rules about smoking in the house, cleaning communal areas, how to resolve conflicts amongst each other etc. You may think that having formal rules and structure is not very collaborative or spontaneous, but we believe that they are essential for the smooth running of a co-operative. See ‘the Tyranny of Structurelessness‘ for an in-depth explanation.

As well as responsibility, a little toughness is required for enforcing the rules – be they internal rules or ‘external’, legally-binding rules. It’s important not to allow any members to become dominant, by making sure all members are responsible, vigilant and fully part of the decision-making process. One of the main points of co-operatives of all sorts is joint responsibility.

The co-op will need to have business meetings. You choose how often, and whether meetings will involve everybody, or an elected management committee. You also choose how decisions are arrived at – by voting for example, or possibly by consensus. The larger the group, the less likely will be consensus and a general meeting. For smaller groups though, consensus is an excellent way to build cohesion, and allow everyone to feel part of all decisions made. Consensus may take longer than other methods to achieve, but the benefits may make it worthwhile for your group. See here for information about consensus decision-making and conflict resolution, and here for more useful information about co-operative organisation and processes.

Help housing co-ops

You may be in a position to help the housing co-op sector by donating a property or leaving a property in your will. It does happen sometimes! You’d be helping to bring about all the benefits mentioned above.

In the UK

• Most co-ops own their properties, but some manage properties owned by the council or a housing association.

• ‘In common ownership’ derives from the Industrial Common Ownership Act of 1976, and prevents ‘de-mutualisation’ to strip assets for profit; in other words, co-operative properties ‘in common ownership’ can’t be sold for the personal gain of members.

• Housing co-ops used to be Industrial & Provident Societies, registered with the Registrar of Friendly Societies at the Financial Services Authority (FSA). The law changed in 2014 (the Co-operative Society Act), and now new housing co-ops are registered as Co-operative Societies, with the Financial Conduct Authority (FCA), but old ones are still registered under the 1965 Industrial and Provident Societies Act.

• Housing co-ops are exempt from corporation tax from rental income from their members, as long as they are fully mutual, par value and ‘in common ownership’ (see above).

• Unrelated people living together under one roof can be classified by your local authority as a house in multiple occupancy (HMO), which could be subject to regulations requiring expensive additions such as fire doors. Fully-mutual housing co-ops with decisions taken at general meetings are usually exempt from such regulation, and are classed as single households, thus avoiding the need for expensive alterations.

• The kind of independent housing co-ops outlined above have been championed in the UK by Radical Routes. The Catalyst Collective register co-ops for Radical Routes. Somerset Co-operative Services also have excellent information. They can all offer advice if you’re thinking of setting up a housing co-op.

• Good sources of funding for co-ops in the UK include the Ecology Building Society, Triodos Bank and Unity Trust Bank. They could potentially provide mortgages for up to 80% of value of property, and Co-op & Community finance or Radical Routes could potentially provide the rest.

• See the housing co-ops links page for all the above organisations.

• See here for more details on how to start a housing co-op in the UK

Thanks to Alex Lawrie of Somerset Co-operative Services and Donal O’Driscoll of Radical Routes for information

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The specialist(s) below will respond to queries on this topic. Please comment in the box at the bottom of the page.

Peter Burke is a director of A Fairer Society. According to Peter, “My purpose is sustainable development projects. How to create a proposition and a model that investors will trust and invest in. Especially for community-led / asset-backed projects, with my main focus on housing. My passion is designing a feasible plan with social, financial &/or environmental purpose.”

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The views expressed here are those of the author and not necessarily lowimpact.org's

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