Housing: Co-operative Housing

Lord Kennedy of Southwark Excerpts

Thursday 10th October 2013 Lords Chamber

Moved by

[Lord Kennedy of Southwark]

That this House takes note of the development of the co-operative housing sector in the United Kingdom.

[Lord Kennedy of Southwark (Lab)]

My Lords, it is with great pleasure that I open this debate on the co-operative housing sector in the United Kingdom. I congratulate the noble Baroness, Lady Stowell of Beeston, on her appointment as Parliamentary Under-Secretary of State at the Department for Communities and Local Government. In her time in this House she has proved herself to be an able communicator at the Dispatch Box, and I wish her well in her new job and the great responsibilities that it brings.

It is also a great pleasure for me to speak in this House as a Labour and Co-operative Member of the House of Lords. The Labour Party and the Co-operative Party have an electoral agreement going back to 1927, and today there are 32 Labour and Co-operative MPs and 17 Labour and Co-operative Lords. The Co-operative Party can quite rightly claim to be the fourth largest party in Parliament.

I have been a co-operator all my adult life, and I firmly believe that co-operation and co-operative values and principles are playing an increasingly important part in the economy, business and the community and have a really important role to play in the social housing sector. I grew up in social housing in the 1960s and 1970s, and as a family we were very lucky: we always lived in a home that was warm, safe and dry. Southwark Council, as the biggest social landlord in London and one of the biggest in the country, always sought to deliver for its residents in often very challenging circumstances.

I believe that everyone should have access to a home that is decent, safe and affordable to buy or rent and to maintain or run. I am delighted at the commitment that Mr Ed Miliband made to build more homes by 2020. Homes are desperately needed by young families, older people and key workers. The present situation is desperate, with demand far outstripping supply. House building is at its lowest ebb since the 1920s. Struggling families are being squeezed by house prices beyond their means, rising rents, housing benefit cuts and inaccessible mortgages.

The crisis in the supply of and access to affordable housing is a major political and social issue facing the country. It is of particular concern to the many squeezed households for whom the only housing option is high-cost, low quality, insecure private rented housing. A growing number of people are worried about the ability of their children to afford a decent home. Increasing numbers of newly formed households are stuck in the high-cost private rented sector, and do not consider that they will ever be able to buy a home of their own.

There has been a decline in the number of first-time buyers. Saving the now typical 20% deposit required for first-time buyers to buy their first home is currently impossible for many working households. Statutory homelessness is increasing, and ever greater numbers of people are being forced into substandard housing. Poor housing is linked to poor health and poor educational outcomes, leading to increased costs to the state.

The post-crisis landscape presents all concerned with affordable housing supply with new challenges that demand new solutions. The role of co-operative housing models in meeting those challenges has not been recognised. Co-operative housing could be making a contribution to achieving a housing supply that was more stable and sustainable. Around 10% of Europeans live in housing co-operatives, compared to 0.6% in the UK. This alone shows the contribution that housing co-operatives can make.

There are different models of co-operative housing available, giving the opportunity to deliver housing tailored to local need, be it developing market-value mutual retirement co-operatives specifically designed for the changing needs of older people or to meet the housing needs of students and young people, or limited equity co-operatives for squeezed families priced out of the housing market. The work to achieve this needs to be inspired and kick-started by government action, better access to finance and local authorities supporting co-operative housing projects to deliver solutions in each of these areas.

There are three types of housing co-operatives that the Government should seek to support: market-value co-operatives, where members are free to trade their legal right of occupation at a free market price, subject to the rules of the co-operative, giving older people the opportunity to release capital and move into a home that can be adapted to their changing needs while also gaining assistance from other members of their co-operative community; limited-equity co-operatives, such as mutual home ownership, where members own a limited equity stake, allowing squeezed families currently stuck in the private rented sector unable to get on to the housing ladder a chance to build property equity; and rental co-operatives in which members rent their home, having democratic control over service budgets and how their homes are managed, but do not have an equity stake, which offer an affordable alternative to those who wish to have greater freedom and control over their housing.

In the UK, the role of community land trusts has emerged with the potential to provide a better balance of housing supply. They work in rural and urban areas and are a flexible tool to meet a variety of community needs. They offer not only a number of options for rent and low-cost home ownership, but also provide a mechanism for generating an income stream for reinvestment by the community. In areas where a rising population, economic investment and limited stocks of affordable homes threaten to exclude people from the areas in which they live and work, community land trusts could ensure a supply of affordable housing through the control of housing costs and resale prices.

This model can make a significant contribution to the supply of homes. It separates the cost of the land from the purchase price by taking it out of the market place through a community land trust. It ensures affordability through flexible monthly payments that are based on an affordable percentage of income. Any public subsidy is locked in and preserved for future generations due to the structure of equity arrangements.

Unlike individual home ownership, where residents have a personal mortgage loan to buy a home, homes in this case are financed by a corporate loan borrowed by the co-operative. The value of the buildings is divided into shares. When members leave the co-operative they are entitled to take the equity that they have built up with them. The net value of the shares is calculated by reference to a fair valuation formula set out in the departing members’ occupancy agreement or lease, which is the same for all members. The valuation formula in the lease requires resident members to look on property ownership in a new and different way. Mutual home owners will be at far less risk of falling into negative equity, where their houses are worth less than the outstanding mortgage loan. They will also have the benefit of lower transaction costs when they move into and out of their home.

There needs to be greater understanding by national and local government of the role that these models can play in bringing balance back into meeting the goal of everyone being able to find and afford a decent home in a good neighbourhood. There is a growing body of evidence to show that housing co-operatives are good for people and society. In particular, studies show that co-operatives outperform all other types of social landlord on all measures of performance. They create housing in neighbourhoods that are socially, economically and environmentally sustainable. Housing remains community-owned and affordable for future generations. Their grassroots nature helps co-operatives to create community buy-in. They help to maintain the independence of older residents through mutual aid and support, reducing the demand on the state.

With community support, co-operatives can achieve more for less by helping to bring into use public land assets that would otherwise not be developed for housing. Co-operatives have the capacity to increase the supply of housing that is genuinely affordable for working households, enabling the Government to deliver greater numbers of affordable homes.

Co-operatives contributing an average of 25,000 additional new affordable homes per year over the next two Parliaments is a realistic and achievable vision if it is given the support needed. Given the right framework for success and proper support from the Government, people could have the opportunity to participate in creating co-operatives to help meet local housing needs. Through their active involvement they will be committed to making their locality the best that it can be.

Co-operatives and mutual forms of ownership can ensure that homes remain permanently affordable and give residents an equity stake. Instead of paying increasingly high rents for housing over which they have little control, people could enjoy housing that benefits them and wider society. Through housing co-operatives and other mutual organisations, tenants and residents have taken control over decisions that affect their lives and created strong and cohesive communities.

All the available evidence shows that co-operative forms of housing perform well in terms of value for money compared to housing association and local authority provision of housing. Additionally, they have proved themselves to be a successful model of genuine community empowerment, providing a range of social and community benefits due to the large framework of mutual support that they create.

Lack of secure tenure has emerged as a big issue with the growth of the buy-to-let market. In a co-operative, the members are in control and have the security of their democratic rights and the security of the contract, which currently has to be a tenancy because of a lack of appropriate co-op housing legislation. In a co-op, a long-term, enduring right of occupation of a member’s home is always granted. This can be ended only if the member is in breach of its terms and the co-op has obtained an order for possession from the court. This is a very secure form of occupancy. Although not protected by statute, it has the protection of a member’s democratic rights.

Local authorities have a vital role to play in restoring balance to the supply of housing in their areas. The strengths and weaknesses of the housing supply situation vary from authority to authority, and across the country and in different localities. There is a marked difference between the north and the south of England, and in Scotland and Wales.

Co-op housing is a model of community housing to which people will aspire because of the significant benefits it brings. Councils need to develop an understanding of the different ways in which co-operative housing models can help them fulfil their responsibility to ensure a balance in the mix of housing available in their areas and to achieve strong communities. Local councils have the power to help, through ensuring that their local development frameworks include references to the development of community land trusts and co-operative mutual housing models as a means of increasing affordable housing.

Where local authorities hold ballots on stock transfers, residents should have the option to vote for community-led stock transfers under a co-operative model, such as the community mutual, which was developed by the think tank Mutuo, is endorsed by the Welsh Assembly and offers active membership opportunities to all tenants, the community gateway model, which was developed by the Confederation of Co-operative Housing and Co-operatives UK—there are currently community gateway housing mutuals in Preston, Watford, Lewisham and Braintree—or a hybrid mutual scheme such as has been developed in Rochdale.

Local authorities, housing associations and housing mutuals can also convert to a mixed-tenure version. Residents in this type of mutual home-ownership development would be able to start on a standard rented tenancy with the right to buy equity shares as and when their income permitted them to do so. They would have the right to participate in the democratic governance of their home just like any other member of the mutual. The right to buy equity would mean that the home would not become unaffordable for future generations of occupants.

In some areas, tenants will prefer their housing to remain under local authority control. Where this is the case, tenants could be encouraged and assisted to form tenant management co-operatives to take control of the management of the council-owned housing in their neighbourhood. The right to manage could be extended to housing- association tenants, who could also be given the support and encouragement to take over control and management of their homes through management co-operatives.

The Government have an important role. Among other things, it includes recognising co-operative housing in law and placing a duty on local councils and the Homes and Communities Agency to promote mutual housing and report annually on how they are doing. It is important to ensure that new co-operative homes are as affordable as possible for squeezed working households.

I could go on. We are in a housing crisis. Co-operative housing has an important role to play in helping to solve the crisis. It is for both local and national government to recognise the important role that they can play, and to provide support and the tools to do the job. I look forward to contributions from all noble Lords in this debate, to which we will come back again and again. I beg to move.

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[Lord Kennedy of Southwark]

My Lords, first, I join in the tributes to the noble Baroness, Lady Hanham, that were made in the House. I should have said that in my earlier remarks. I thank all noble Lords for speaking in the debate today. I agree with many of the comments made by noble Lords on all sides of the House. I am delighted that the Government support co-operative housing. I look forward to seeing the sector grow, in that case, which would be good. Co-operative housing has an important role to play and if the Government support it and create the conditions in which it can flourish, it can make a positive difference to many people’s lives.

Some of the statistics put forward by the noble Baroness, Lady Stowell, are interesting and only time will tell on these things. Lots of people living in social housing do not particularly believe that the Government are on their side at the moment. We need only look at the decisions that have been taken in the three years that they have been in office. Having said that, I thank all noble Lords for their contributions to the debate today, which have been very useful. I will certainly come back again and again on this issue.

Motion agreed.