Cooperative housing – would we better off together?

Lending difficulties are holding back the development of housing co-operatives, despite providing an affordable alternative for families in the housing crisis.

John Lewis, that bastion of middle class consumerism, remains one of the best known and successful of UK co-operative businesses. So if co-ownership models are thriving in the retail sector, why are housing co-operatives not enjoying the same success?

Today, co-operative and mutual housing accounts for just 0.6% of UK homes across all tenures. Compare these figures with European counterparts – 18% in Sweden; 15% in Norway; an 8% share in Austria – and it’s clear we lag woefully behind our neighbours.

Bringing Democracy Home, a 2009 report produced by the Commission on Co-operative and Mutual Housing, found that co-operative housing in the UK had “largely been overlooked by public housing policy debates for many years”. Since the 1960s, successive governments have made home ownership a main housing policy at the expense of shared ownership models, it claimed.

At Sanford, a fully-mutual housing co-operative in New Cross, south east London, residents become members of on paying £1 to enter the scheme. This secures them a voting share in the housing asset and makes them collective landlords of the property until they leave.

Sanford is one example of the many government-funded co-operative models that grew out of freely available capital funding in the 1970s.

Phil Bradley, a 25-year-old professional and a resident of Sanford for two years, says there are many advantages to living mutually. Other than the cheaper rent (rooms at Sanford are £45-a-week including bills), you can also pick up useful skills. “You can learn plumbing, web design, secretarial skills – the DIY is empowering and you learn a great range of skills to add to your CV. It’s not lonely here either. There’s more green space and decisions are made to make your life nicer, not to extract more profit.”

Unlike private rental arrangements, in a co-operative there is no need to ask a landlord if you want to make changes to your home. There is no top-down management structure; at Sanford the residents have monthly meetings where they make maintenance decisions collectively.

Jim and Jill Getrupp live at the self-build housing co-operative Greenstreet, also in London’s New Cross. Outside the co-op the couple say they would be struggling to bring up their two daughters in a one bedroom flat, rather their spacious two bedroom house. The lower rent is secured by way of “sweat equity”, because Jim helped build the properties in 1994, and this gives Jill the opportunity to stay at home with her family without the pressure of needing a second income to house their children.

Higher satisfaction

The advantages of mutual housing are also borne out through the statistics. The Tenant Services Authority’s ‘national conversation’ survey, carried out in 2009, showed an 88% satisfaction rating among tenants of co-operative houses compared with an average of 77% rating for housing associations and council tenants.

If co-operative housing is such an attractive option for tenants, why are there so few new developments? And why are the general public and even housing experts still ignorant about their potential role in the housing sector?

Nic Bliss, chair of the Confederation of Co-operative Housing, believes there remains a “staggeringly paternalistic” model of social housing in the UK which has prevented the co-operative movement growing shoots. “We’ve developed a whole generation of people who expect someone to tell them what to do and expect things done for them”, says Bliss. “Co-operatives are the antithesis of this.”

But it is also current funding models and lack of government support that has slowed growth, Bliss say. “The key messages we were getting from the people who lend to organisations, was that they weren’t in the position to lend to small organisations. In the current climate it is very difficult for small organisations to borrow money.”

Going it alone

Gavin White, who lives at Sanford, found out firsthand how difficult this was when he tried to set up his own co-operative earlier this year.

“The registration of a co-op is simple enough,” he says; “The real difficulties lie in property purchase costs. The co-op friendly banks will only lend 70% over 25 years and to finance that and the other 30% basically means that every co-op is faced with finding and financing 100% of the property costs, and that results in the rent having to be comparable to the private rented sector.”

Chris Handy, chief executive of Accord – the housing association that developed Redditch Co-operative Homes, one of the only large-scale co-operative developments in the last decade – believes three main factors are required for a successful co-operative model: a committed local authority; funding support from the Homes and Communities Agency; and a housing association interested in the priniciples of co-operatives.

These key elements came together for the RCH development when land was gifted by the council, but Handy argues that the government could do even more to promote the growth of this sector.

“The government could encourage local authorities to enter into build now pay later schemes which would mean that housing associations wouldn’t have to pay for the land cost upfront, but at some point in the future when housing prices increase – essentially an interest-free loan.

“They could also encourage developers, who have to meet section 106 planning conditions, to enter into deals with housing associations willing to develop housing co-operatives,” Handy adds. “The government could say to local authorities that a proportion of the New Homes Bonus should be spent on developing new housing co-operatives in their district.”

Co-operative housing ticks many of the ‘big society’ boxes but there aren’t currently the incentives for people to develop them. If they are to become a mainstream housing option, in the same way that co-operative businesses have become viable commercial investments, they need the support of the local authorities and the purchasing power of housing associations.

As a councillor and RCH board member Bill Hartnett states: “Housing associations have got a lot to learn from mutual housing. There is nothing to be afraid of by giving tenants more power.”