Kate Burrell explains how...
Alienated by housing prices soaring out of your reach? On a low income but want some control over your housing? If you’ve never looked into co-operative housing, now’s the time. I’ve been chatting with co-ops old and new to discover the highs and lows and marvellous outcomes that can be achieved through co-operative housing.
What are co-ops?
A co-operative is a business owned by its members. This means the members own the wealth of the business together, not as individuals. Housing co-ops can either buy property themselves or rent and manage property from the council or housing association.
The best things about setting up a co-op include the sense of community, the group energy and the skill sharing. Ecologically, you reduce your drain on resources. People on low incomes who could not normally get a mortgage can form a co-op and collectively buy, manage and live in housing of their choice. Housing stock is taken out of the hands of profit-oriented landlords and reclaimed by people for living. Co-operatives last for years and once a house is co-operatively owned, it tends to remain so.
The biggest challenges will be: getting on with each other (common aims and visions help), finding affordable housing (you’ll probably need to look at the cheap end of town or out in the sticks, or find something needing major works or renovations). Raising the cash is also challenging. Mortgages to co-ops are 70-80%, which means the rest has to come from somewhere. It helps to have one co-op member with access to cash, or access to sympathetic supporters who are willing to invest in the co-op. Bear in mind the time commitment too. It may take a couple of years to find your dream co-op home, and lots of time beyond that to renovate it.
Step 1: Find the people you want to live with. The more you have in common with these people, in terms of head space, aims and vision, the better the chance you have of seeing it through together. Decide if you can hack living communally or if you’d prefer to live collectively (with individual units alongside each other). Get support for your project from other people around you.
Step 2: Raise some initial cash. You’ll have to pay for admin costs, like phone calls and registration. You could all put a couple of quid in a kitty each week, get a grant or have a fundraiser.
Step 3: Get registered. Start early. Look up different legal structures of co-ops on the Radical Routes website (radicalroutes.org.uk). Catalyst Collective give free advice and will complete your registration process for £375.
Step 4: Keep good records. You’ll need share certificates for members (everyone in the co-op pays £1 to become a shareholder). Make start-up packs for new members and keep an accounts book – showing all the money in and out. Share knowledge and workload.
Step 5: Find investors. You’ll need to raise at least 20% of the mortgage yourself. Most co-ops do this using loan stock. Get members themselves, family, friends and supporters to lend money to the co-op at fixed or zero interest rate. These people have no say in the running of the co-op and can ask for their money back at any time. Over the years, co-op rents accumulate enough money to pay the investors back.
Step 6: Find a gaff. Talk to estate agents, tell them what you need, look in the paper and view any likely potentials. Alex Laurie of Upstart Services, Somerset-based supporters of co-op development, explains the options. “Co-ops, like individuals, are finding it harder than before to raise the cash to buy property as house prices have gone through the roof. We recommend to people that they consider looking at small houses on large plots and then extend the housing by building extensions, for example. On a positive note, now is a great time to be doing low impact development – using straw bale houses or ecological techniques. If a council is considering new development on land, the fact that it is ecological could tip the balance in your favour.”
Step 7: Get a business plan together by working out how much rent will come in and how much mortgage will be repaid along with loan stock and building maintenance. Get local co-ops to give you a hand. This document is gold dust and absolutely necessary when approaching mortgage lenders.
Step 8: Get a mortgage: Compare deals. Usually it’s 70-80% value of property over 25 years. They need the business plan, maybe some background info on members and might want to call by for a chat and then an evaluation of the house you find. Alex Laurie says: “The other option is to make friends with a housing association, but relationships can be tricky to manage. Housing associations are good at negotiating sales or providing inexpensive loans to co-ops, but remember that if you are using this route the housing association retains the right to take property back from the co-op whenever it suits them.”
Step 9: Buy house, move in, and party!
I spoke to a Sparkland co-operista about her experience.
Eirlys is a founding member of Cog Housing in Easton, Bristol. Initiated in 2003, it took Cog two years to set up the co-op, make a business plan, raise cash, get a mortgage and find a house. A group of four, they were lucky to find a property for £135,000 in 2005 that could house them all. They originally set their rent at slightly higher than market value (£240 per member per month) in order to repay mortgage, loan stock (other borrowed monies from friends, family and supporters) and build a maintenance fund, but two and a half years on, their rent is still only £245, compared with local market value of about £250.
“In our business plan, we had to prove that there was a need for a housing co-op,” says Eirlys. “We researched how much faster housing prices are rising compared to income. I am passionately in favour of setting up housing co-ops because there will always be people who need affordable rent and now I know that this house will be available for years to people who need it.
“Be prepared, though. If you want to do this you’ve got to be on a mission. At Cog Housing, we are all busy people, really engaged in the local community, but we all just spent the whole summer doing loads of DIY instead! Maintaining your own home is really empowering, though, and getting in touch with your basic needs is a practical way to prepare for the effects of climate change.”
• Avon Co-operative Development Agency helps people to register as co-ops: business plans, finances, explaining legal aspects, writing tenancy agreements, membership issues. Offers training in how to be a co-op member. Service is free to all those in the Bristol area and in the rural parts of West of England (former Avon area). They can provide a ‘skeleton service’ to others.
CDA: Brave Ltd, The Coach House, 2 Upper York Street, Bristol BS2 8QN
0117 989 2536 www.avoncda.coop
• Somerset Cooperative Services: a workers’ co-op helping to start up and support social enterprises and housing co-ops. “In particular, groups and individuals wanting to set up new co-operatives.” Nice bunch!
Fullards Farm, Trull, Taunton TA3 7PE
0845 458 1473 www.somerset.coop or www.upstart.coop
• Thanks to Radical Routes for their fantastic website. Very sound and conscious people, working for free, and recommended by everyone I spoke to… Radical Routes is a network of radical co-ops whose members are committed to working for positive social change. The network is made up mainly of housing co-ops of various sizes (but none have more than 15 members), a few workers’ co-ops and a couple of social centres. See ‘How to set up a housing co-op’ booklet, downloaded from radicalroutes.org.uk/pub.html, or send £3 cheque or postal order made out to ‘Radical Routes Ltd’
c/o Cornerstone Resource Centre, 16 Sholebroke Avenue, Leeds LS7 3HB
0845 330 4510 or 0113 262 9365 www.radicalroutes.org
• Catalyst Collective: loads of info on their website and support services over the phone. They have worked with 150 housing co-ops and can complete housing co-op registration for £375.
Catalyst Collective Ltd, Nest Farm, High St, Ilketshall St Margaret, Bungay, Suffolk NR35 2NA
0845 223 5254 www.catalystcollective.org
Worth researching for mortgages/loans:
• Triodos Bank: www.triodos.co.uk 0117 973 9339
• Ecology Building Society: www.ecologybuildingsociety.co.uk 0845 674 5566
• Unity Trust Bank: www.unity.uk.com 0845 140 1000
See also Kate Burrell's Housing Glossary
published in The Spark issue 54 - autumn 2008
details correct at time of going to press but may now have changed - please make your own checks
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