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:
- 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 has a say in decision-making.
Why a co-op might not want to be 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 (e.g. 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.
- They do not want to share the responsibilities of managing the co-op, for example if the co-op also operates as a hostel or therapeutic community.
Radical Routes recommends fully mutual – all tenants and only tenants (and prospective tenants) have control over the co-op.
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.
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.
Radical Routes recommends par value co-ops – the amount of money you put into the co-op does not dictate your control over the co-op.
Common Ownership
This wiki focuses on housing in common ownership, as this is what Radical Routes recommends. Despite the similar sounding name, common ownership is distinct from co-ownership.
Common Ownership of Co-op Assets
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.
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. A few places, like as Ecology Building Society or Triodos, are willing to lend to fully mutual housing cooperatives without these restrictions. Radical Routes has up-to-date information on who is lending money and on what terms. Instead of using mainstream banks, 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.
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.
Radical Routes recommends co-ownership - it shouldn't be possible for individuals to profit from shared property, and that property should stay shared forever.
Governance
Management by General Meeting (GM)
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.
Radical Routes recommends managed by General Meeting - control of the co-op is shared by all members and cannot be restricted to just a few members.