Setting up housing co-operatives guide


Some tips on how to set up a housing co-operative. Co-ops can be an affordable way of housing yourself if you can't afford to buy, and you don't want to be beholden to or exploited by a landlord.

Submitted by Steven. on October 13, 2006

Many housing co-ops are state funded; the Housing Corporation puts up much of the funding, and therefore can, on the whole, call the tune. However; it is possible to set up a housing co-op which is totally independent.

Essentially, a registered housing co-op is a legal entity which is separate from its members, and it allows those members to co-operate to raise loans, even if, individually, they have limited access to money or credit. With these loans they can purchase secure housing which they themselves control. The members of an independent housing co-op are tenants paying rent, (and so are eligible for housing benefit), but are also their own landlord.

The 'housing' for a co-op could be chosen to exactly suit the needs of the members. It could include extra resources - space, land, workshops, gardens, extra children's spaces. It could be a large or small shared house, flats, a small terrace, a residential mobile home park, a smallholding. It could be established just to provide housing, and an alternative to the low standards and constant insecurity of private rented accommodation. Or it could be set up with the intention of promoting wider aims, such as providing space for self-employment, supporting home education, giving a secure base for a group of people who are encouraged on a shared project, and it allows the members to tailor the property, once chosen, to exactly suit their special needs.

It may take some patience and determination to set up a housing co-op and see it through to fruition, but then the members can reap the reward of relative autonomy in an important area of life, and rents which can decrease over the years as loans are repaid, rather than constantly increase as all other rents do. Housing benefit acts as a conduit to channel public funds into the pockets of private landlords, and although it passes through the hands of tenants, it leaves them with no long-term improvement, and no control. A family on housing benefit could, over only five or six years, claim enough housing benefit to have BOUGHT a small house outright, but of course that benefit is actually accruing to the landlord, not the family in need. They can still be made homeless at four weeks notice, with all the knock-on problems that has for work, education and social networks, whilst the landlord has enlarged his asset base with public money and virtually no work.

1. Get a group of people who will commit themselves to working together to make their common idea become reality. Unless you come as a ready-made group, establishing that common idea is perhaps the hardest part. Contact existing co-ops, especially if there are any in your area. Gather information, ask for help from the co-op network. Send for the invaluable booklet 'How To Set Up A Housing Co-op' from Radical Routes, and contact the Catalyst Collective (both addresses at the end).

2. Register as an Industrial and Provident Society. This is done through the Registrar of Friendly Societies, and gives a group the legal structure that is required. The co-op needs to be defined as 'Not-for-profit' - members cannot make any financial gain out of it as individuals.
Limited Company - members do not carry personal liability for the debts of the co-op, (although of course they will lose their home if they don't pay the mortgage).

Fully Mutual - all tenants must be members and all members must be either present or prospective tenants.

Common Ownership - the property is owned by the housing co-op. The members may loan money to the co-op (and receive interest) but they do not own an individual share of the property if the property is sold, members cannot divide any 'profit' up amongst themselves -it must be used to buy another co-op property or passed to another not-for-profit organisation. Co-ops are about developing housing as a resource, not about treating it as a commodity with which to make money.

3. Work out how to raise the money. This is usually done by getting a 70% or 80% mortgage and raising the rest by issuing Loanstock (see below), and possibly getting a loan from some other group such as Radical Routes (see below). Many co-ops have got mortgages either from Triodos Bank or the Ecology Building Society: before presenting your idea to a bank or other funding source, ask around other independent co-ops to find out what the banks' loan criteria are, as they vary from one bank to another. Again, two major sources of advice and help are the Catalyst Collective and the Radical Routes network.

4. Find a property. Start looking at properties which will suit your aims and will be able to generate enough rent (at local Housing Benefit levels) to repay the mortgage and loans, and cover the running costs (maintenance etc.). Houses are more expensive in some parts of the country than others, but then Housing Benefit levels are generally higher in those areas. Even if most or all members are working, the bank will probably still want to see that the co-op could continue to meet the mortgage repayments if at a later date most tenants were having to claim housing benefit.

It is the co-op as a legal entity that gets the mortgage, not the individual members, so a sound cash-flow forecast is more important than whether all or any of the members are employed.

As a registered Industrial and Provident Society the co-op is allowed to raise money by issuing loanstock to both members and non-members. This is a way of borrowing money from sympathisers without relinquishing any control over the co-op to them. If members themselves lend to the co-op in this way, it ensures that the member who has £5000 to put in does not have any more stake or power in the co-op than the member who invested £50.

Radical Routes
Radical Routes is a mutual aid self-help network which has been responsible for much of the spade-work involved in establishing the route to independent tenant-controlled co-ops described here. Membership of Radical Routes is restricted to housing and worker co-ops actively working towards a shared social and political vision. The network has a solid knowledge of both the legalities and practicalities of setting up co-ops.

Radical Routes also operates an ethical investment scheme through which it can make loans to member co-ops, and it publishes various useful booklets, especially the vital 'How To Set Up A Housing Co-op'.

Catalyst Collective
Another source of help is the Catalyst Collective, who will give advice and also offer a registration service to see you through the process. They produce a pre-registration pack which includes a huge amount of useful information, from setting up a co-op to producing a cash-flow forecast and doing the accounts.

Housing co-ops - useful addresses
Radical Routes Email:
Catalyst Collective also our postal address is: highbury farm, redbrook, monmouthshire, np25 4lx phone: 01600 775414
Registrar of Friendly Societies Victory House, 30-34 Kingsway, London WC2B 6ES, Tel .020 7437 9992
Triodos Bank Brunel House, 11 The Promenade, Bristol BS8 3NN
Ecology Building Society, 18 Station Road, Cross Hills, Keighley, W Yorkshire BD2O 7EH

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Edited by Last reviewed 2006



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