Different types of housing co-ops

From My Wiki

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

Radical Routes recommends fully mutual – all tenants and only tenants (and prospective tenants) have control over the co-op.

Par Value Shares

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 shares

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

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

Radical Routes recommends common ownership - it shouldn't be possible for individuals to profit from shared property, and that property should stay shared forever.


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

Radical Routes recommends management by General Meeting - control of the co-op is shared by all members and cannot be restricted to just a few members.

Other Models of Housing Co-ops

If you want to set up a co-op that is not fully-mutual, par-value, in common ownership, and managed by General Meeting - there are other models available to run co-operatives, or non co-op housing with varying levels of tenant control. We have listed 3 here - short life co-ops, buy-in co-ops, and Tenant Management Organisations.

In terms of what a housing co-operative can be, both short life co-ops and TMOs are halfway between a Radical Routes-style housing co-op and traditional renting, in that tenants have more control over their housing than in traditional renting, but there is still a landlord with ultimate control over the property. As well as these options, new models are emerging such as LILAC (Low Impact Living Affordable Community), which combines an element of buy-in and renting.

The RRFM14 (Radical Routes Fully Mutual 2014) housing co-op model rules are a template set of model rules registered with the FCA, that only permit fully-mutual, par-value, in common ownership, and managed by General Meeting. For this reason, we only focus on this style of housing co-op in this toolkit and some sections of this toolkit may be less relevant to other models. We suggest contacting Confederation of Co-operative Housing, UK Cohousing, National Community Land Trust Network or Community Led Homes to find out more about other forms of Community Led Housing.

Short Life Co-ops

Short life co-ops usually take over buildings in poor condition, perhaps due for renovation or demolition, which are otherwise unlettable. These properties may be owned by individuals, companies or councils.

The members and the nature of the properties taken on by short life co-ops vary widely. There may be a few members living in multiple occupancy of a flat above a shop, or there may be members in families occupying an entire street of houses. The rent the owners charge the co-operative is often minimal, because of the condition of the buildings. If a council has buildings it cannot afford to renovate for its own tenants, it may be willing to let them cheaply or free to a co-op. It is often possible to persuade owners this is a good idea as it helps prevent vandalism and further deterioration. Such agreements have sometimes extended over years where delays occurred in the planning process or a council did not have the money needed to renovate its properties. The rent the co-op charges its members should cover the landlord's rent plus management costs, which includes money to pay for any work needed on the houses.

In the past short life co-ops were sometimes formed by squatters who agreed with the owner to  stay for a length of time or to make improvements to the property. Since squatting in residential buildings has been criminalised this is now much less likely to happen.

Tenant Management Organisation (TMO)

A TMO rents or manages property from a landlord who may be a private individual, company, council or local housing association. The co-operative has an agreement with the owner of the property which says  what the co-operative is responsible for, normally membership and maintenance. The cost of the responsibility taken on by the co-op is calculated and the money is either taken out of the rent by the co-operative or the owner repays the co-operative an agreed amount to cover its costs. Co-ops have sometimes managed to accrue pots of money under this arrangement that have then been used to buy property.

TMOs are similar to short life coops in that they do not own the properties their members live in. They differ in that their housing is usually better quality and more long-term.

If you plan to buy a house and live together as a co-operative, but the group has not lived together before, you might consider renting a house and operating as a TMO before taking the plunge. It may be possible to rent a large house as a group at a cheaper rate than if each person were to rent a room separately. The co-op also gets a base from which to plan your next move.

Buy-in co-operatives

These are co-ops where members have to buy a share of the property in order to join and sell that share when they leave. This can be either outright or with a mortgage so is much like the open property market, except that the co-op can choose only to sell to people who fit in with their community's membership requirements. Most likely this will mean committing some time to working or participating in that community. There isn't a sponsoring body for this type of organisation but there are examples like Glen Kerry Cooperative, and Old Hall Community.