Could co-owned homes help solve the housing crisis?

Not enough of these: an aerial view of London. Image: Getty.

This year, London’s housing market has reached a new nadir: there are now more wards with average house prices of £750,000 than £300,000. Meanwhile, social housing has lengthy waiting lists and is unavailable for most Londoners.

Renting is the only option, with more than a quarter of Londoners now in the private rental sector – but it remains both expensive and insecure. Generation rent is in crisis and needs assistance.

A huge increase in house building across all tenures is undoubtedly required – but it’s not clear this will be enough to address ballooning house prices. Many people will still need to rent, and doing so must be made more attractive.

This is where new forms of “co-owned” housing – co-operatives owned by tenants – can help.

Currently, the private rented sector naturally encourages increased rents: as properties are re-let, rents can be set against higher averages. There is also little tenant security.

But under the co-owned model, tenants are central: enterprises provide greater security through long-term lets (although tenants can leave when they want), and affordability, through rents benchmarked to lower market levels and or income levels.

Reducing the biggest cost to households – housing – enables people to save (for a deposit, perhaps), and curbs imbalances between tenures. Co-owned housing is not simply a rental optional: it’s a credible alternative to home ownership. It would cater for many Londoners on incomes from £20,000 to £60,000, including the growing army of self-employed.

The plan

Here’s how it would work. Co-operative enterprises would be established, in the same manner as housing associations; these would then manage and let properties, and hold the leaseholds on a not-for-profit basis. The enterprises would be co-owned by tenants, giving them a stake and greater rights in their home. Practices like rip-off letting fees would cease – enterprises work for the benefit of tenants.

This is not just theoretical concept. In other countries, like Sweden and Switzerland, this form of housing is already common, and it’s being developed in Wales, too. The opportunity for London is to achieve scale and show leadership, making it a priority of the future mix and housing agendas of the new mayor to local authorities.

It’s not only tenants who’d benefit: there could be a boon for cash-strapped public authorities, too. Councils, Transport for London, Network Rail, the NHS and the police all have public land, where homes could be constructed, creating a long-term income. Even charities and semi-public institutions such as FE colleges and universities could benefit – and gain from enabling staff to live where they work.

Co-owned schemes could be financed in a number of ways: through land transfer, public funding, pension investment, or bonds and borrowing against future rental yields. Land sales could be used to kick start it, but they shouldn’t fund the whole thing: after all, the model is about enabling councils not to sell their assets, but to turn them instead into long-term income as well as affordable housing.

Such a scheme could be a good vehicle for pension investment and peer-to-peer lending. And major part of Crossrail has been financed through borrowing against future business rate and fare income – let’s use the model for new housing, too.

To rapidly unlock this housing, maximise the benefits and leverage funding, the new mayor should establish a development body on the model of Transport for London. This would contract developers to build homes which in turn could encourage new, innovative entrants. Here, too, Crossrail is a model, contracting companies to construct the new rail line. This transfers risk (though also gains).

A TfL development agency would help realise the savings of constructing in scale. The resulting savings could be used to fund more housing. Councils could also contract the TfL body, or set up their own.

The approach has many other advantages, too. It could spur new, higher levels of green building standards. The designs could use innovations like kit-built homes, and help develop supply chains and apprenticeships. Critically, it could unlock complex sites with multiple public owners and stop developers sitting on land.

Incentives would be turned around: the revenue generated for councils would mean that, instead of luxury flats, the housing London needs is built first. Finally, the new model could help curb transport gentrification impacts, which force people out of their neighbourhoods: instead, anchor affordable homes and help schemes like Crossrail 2 build support.

London can crack the liveability crisis. It can be a leader. The co-owning model can help deliver and scale quality, attractive, environmental, affordable, desirable housing.

Ultimately, we could see the equivalent of a modern “Georgian renaissance”: housing that stands the test of time and adds to London’s character and future success.

Jake Sumner is the author of “Building for Generation Rent”, a report published by the Policy Network.


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