Housing Co-ops - What and Why?

What is a Housing Co-operative?

A housing co-operative is not bricks and mortar, it is a group of people and the way they control and collectively manage their housing. By incorporating as a legal body, they can lease, buy and own property and enter into contracts as a group.

Housing co-operatives are organisations governed by the members (who are also the tenants) in a way that gives grassroots control of housing. They provide rented housing without landlords, or rather the tenants become their own landlord.

In its most basic form, a housing co-op is a business, which uses the rental income from its tenant members to pay off loans and mortgages and to cover all other costs of managing the rented property. There is no one else involved in managing this apart from the tenants themselves. The co-op and the property doesn't 'belong' to any individual person, it is in the control of whoever the tenant members are at the time.

Why set up a Housing Co-op?

People set up housing co-operatives for many reasons. There is normally a common aim bringing the group together. A co-operative can be formed to meet the specific needs or ideology of a particular group. Reasons include:

Making Housing Affordable

Co-ops are often set up by people with relatively low incomes, who can't afford a secure home without joining with others to share resources (including time and commitment). Members of co-ops qualify for rent-supporting benefits. Many government benefits, including Universal Credit will give more financial support to people in rented housing than people paying off a mortgage. Paying rent to a housing co-op allows access to this extra support, while still keeping some of the benefits of home ownership.

Shared Aims and Identity

There are often other links within such groups. People who might struggle to find suitable housing because of their particular needs or prejudice surrounding their age, race, religion or gender have formed co-operatives.

There are housing co-operatives for older people, black people, women and queer people. Sometimes a worker co-operative will want to house its members and develop a largely self-contained community, providing work and a home

Collectivising Property

Holding property in Common Ownership means that individuals can't use housing or land for private profit. It means that land and housing become or remain accessible to everyone, regardless of their financial means, rather than being used as investment vehicles or worse, being used by landlords to make money out of other people's needs. Ideally, once property goes into common ownership, it should stay that way forever, a permanent asset usable by co-operative communities indefinitely.

It can feel pretty powerful to know your rent is going to make a project you believe in work, instead of making a landlord richer.

Security to take risks

As long as your housing co-op is financially stable and you are getting on with the rest of the members, your housing is secure – it is not dependent on the whim of a landlord or meeting your mortgage repayments (although the co-op as a whole may still have a mortgage to pay off).

Co-op members whose only financial commitment is rent payment can be free to take action which carries the risk of losing their income, as long as the rest of their co-op supports this. This means if you are a political activist, risking fines, being sued or sent to prison doesn't also mean risking your home. Risking a new business venture or life choice can also be made more possible if you're living in a supportive housing co-op.

Community

Housing co-ops can help people to live with more connection to others, creating relationships of mutual aid, care and empowerment. Co-ops need their members to build working relationships with each other, and other people and groups. They generate resources for communities to act collectively, and create a sense of belonging and larger identity.

This is often facilitated by having deliberate shared space and resources

• Co-Housing: In 'co-housing' people live in individual flats or houses with some shared resources.  Often the properties are purpose-built to encourage community interaction, for example having all the letterboxes together, sharing laundry facilities and having the buildings set around a central garden.  Most co-housing communities have a 'common house' for socialising, joint meals and meetings.
• Communal Living: Plenty of co-ops are 'intentional communities' or 'communes' – pooling resources, living communally, cooking and eating together and perhaps also working together.  For some people this is also a rejection of living in a nuclear family – in other words, having an extended 'family' to share children's upbringing.

Ecology

Being in control of your own housing allows you to adapt and decorate your home according to your own tastes and values – if your co-op can afford it, properties can be built, retrofitted, refurbished and decorated entirely using sustainable/eco-friendly materials and systems.

Sharing resources in the community (eg vehicles, washing machines) means a lower ecological impact.  The more communal your living arrangements, the more resources are saved, which costs less ecologically and financially.  For example, more people living in less space (i.e. in a shared house), means cheaper food and less fuel for heating.

Legal terms for different types of co-operative

There are different options for various bits of a housing co-operative's legal structure, which reflect different values and practical choices.  

This wiki is specifically for co-ops which are:

(all these bullets should hyperlink to the appropriate sections below)

• Fully Mutual
• Par-Value
• In common ownership
• Managed by General Meeting

Radical Routes has found this to be the most useful and ethically preferred model for housing. Here's an explanation of what those terms mean, and the terms for some of the alternative options.

Fully Mutual

All tenants are members of the housing co-op and all members are either tenants or prospective tenants.

This means that no one who doesn't live (or plan to live) in the co-op has any say over decision-making, and everyone who does live there must share decision-making responsibility.  

Not fully mutual

Some co-ops might decide not to be fully mutual because they wish to have members who are not tenants, for example:

• Founding members who no longer live there
• representatives from a particular organisation (eg a spiritual or political group) or local community
• representatives from the local authority or housing association. They might feel this is appropriate if they are a registered social landlord or are managing council or housing association property.

Or they may decide not to be fully mutual because they wish to have tenants who are not members, and so do not share the responsibilities of managing the co-op, for example if the co-op also operates as a hostel or therapeutic community.

Par Value

Par value means “same value”. All shares in the co-op are always worth the same value, usually a nominal £1. The value of the shares a member holds is usually the limit of the member's liability should things go wrong (a good reason for incorporating in the first place).

It is not necessarily restricted to just one share, but many housing co-op rules (including the Radical Routes housing co-op rules) do not permit the withdrawal of shares. In other words, you buy a share when you join (probably for £1) and you don't get the money back when you leave.  So there's not much point in buying more than one share.

It is this type of co-op (with non-withdrawable shares) which is sometimes known as a 'par value' co-op.

Ensuring everyone has the same “par value” share supports the democratic basis of “one member, one vote”. In co-ops which are not par value, there is a danger that those who have invested more in the co-op through shares have greater sway over decision making

Alternatives to par value

If your shares change in value, they are not par value. This would be meaningless if they weren’t also withdrawable.

For example, mutual home ownership societies are housing co-ops that allow you to increase your share ownership with a portion of your rent, and withdraw that share when you leave. The value of the share (and cost of the rent) is tied to average income (and personal income).

In other models, shares might be tied directly to market value

Shares in co-ops cannot be transferable, so traditional company models of share ownership are not an option.

Ownership

This wiki focuses on housing in common ownership, as this is what Radical Routes recommends.

Most banks and building societies prefer an element of co-ownership when they grant a mortgage, and some banks may insist on each member personally guaranteeing mortgage repayments. In this case it is best to find another bank or building society, or you will each void your liability of £1 and, if things go wrong, may lose some or all of your money linked to the guarantee. A few places, like as Ecology Building Society or Triodos, are willing to lend to fully mutual housing cooperatives without these strictures. Radical Routes has up-to-date information on who is lending money and on what terms.

Common Ownership

Common ownership is where the assets of the co-operative are held in trust for future generations. Members of the co-operative benefit from their use while being a member, but they do not individually gain financially from them by selling the assets, as they can in co-ownership. The ownership of houses and land cannot be divided up among the members. The property remains in common ownership from generation to generation of members and if the co-operative is dissolved the assets must be passed to another co-op or not-for profit organisation with similar aims and principles. This must be specified in the co-operative's registered rules.

The alternative - Co-ownership

In co-ownership each member owns a share of the property and receives a share of the (likely increased) value of the property if the co-operative is discontinued. In some circumstances, members can be liable for debts incurred by the co-operative.

Radical Routes does not recommend co-ownership.

The main problem is that when members leave they generally want to take their share of the capital (the value of property owned by the co-op) with them, particularly if they are hoping to use the money to buy their own place. Unless the co-op's rules specifically prevent it, this would take into account any increase in the market value of the property. The co-op then needs new members who can replace the capital taken out by their predecessors in order to buy their share of the property. This means the cost of joining the co-op tends to reflect (or at least rise in line with) the wider property market, making it very expensive and not accessible for those on low to medium incomes.

This is obviously a disadvantage to anyone wanting to join who can't afford, but it can also damage the co-op. If the co-op can only afford to accept new members with enough money to buy-in, they may accept members who are not really suitable for the group.

Governance

Management by General Meeting

A general meeting is a meeting which all members of the co-op are expected to attend. “Management by general meeting” means that most talk and decisions about the co-op will happen at these meetings, so that all members can be involved and have their say.

This would include looking at maintenance, the co-op’s finances, rental income, membership issues, legal obligations, etc. Many co-ops hold monthly general meetings, though they can be more or less often depending on the co-ops needs.

The general meeting has overall responsibility, but you may decide to delegate some tasks or decisions to individuals or smaller groups, for example by choosing a rent officer, or a secretary, or a maintenance team. If this happens, you should make sure to check in with these groups or individuals at future meetings. A general meeting can also employ staff, though this is not common in general meeting housing co-ops.

Management by Committee

Some co-ops are run by a management committee. This means only a small group of members make the decisions on how the co-op is run, and have legal responsibility for managing the co-op. Usually, a committee is elected by members in a yearly election, though not all committees work like this.  Similar to a general meeting, a management committee can delegate tasks and decisions to individuals or smaller groups, or can employ staff. Hiring staff is more common for co-ops managed by committee than for co-ops managed by general meeting. The management committee should report back to a general meeting with the whole co-op, these will be happen less often than in a co-op managed by general meeting, perhaps only once a year.  The general meeting can decide to sack the committee or re-elect them and can vote on other proposals put to a general meeting, but generally doesn't have much other input. This can make it difficult for members who are not on the committee to have a voice in decision-making, particularly on a short time-scale.

Co-ops managed by committee are usually larger co-ops, where the large number of members makes it more difficult to manage by general meeting.

Other co-op models

There are other ways to run co-operatives. If you want to set up a co-op that is not Fully Mutual Par-Value, In common ownership, Managed by General Meeting, many sections of this toolkit will not be relevant to you and so we suggest contacting.

Rowan come back to this tomorrow.