Mutual Home Ownership                                                                                                         home
     
Is mutual home ownership  the answer to key worker housing?
In over half of English counties, people whose incomes are below £30,000 cannot afford to buy their own homes.  As a result, many employers in high cost housing areas have difficulty in recruiting and retaining staff.  This lack of affordable housing has badly affected the provision of public services.  Though situation is worst in  London and the South East, many other areas suffer similar problems.  In 2001, the GLA’s Housing Scrutiny committee published its report on key worker housing, 
In response, Mayor Livingston said that it was vital that “a new intermediate housing market be developed to meet this new demand’. Sally Keeble MP, Parliamentary Under-Secretary for Housing echoed this view when she spoke at the Guardian Key Workers Conference in 2002.  She emphasised the government’s view that there was also a need to look at new innovative forms of housing tenure in this area.  Spurred on by this, CDS Co-operatives, the leading co-operative housing association in  London and the South East launched a research project to examine new forms of tenure; particularly those which involved mutual or co-operative ownership. 
The New Economics Foundation was commissioned to carry out the research.  Its brief was to look into the feasibility of producing a scheme which would enable the tenants of a co-operative housing scheme to have a limited equity stake in their home.  Would it be possible to create a permanent sub-market form of co-operative that would permit say a London –based key worker to have the same equity interest in their home as they would have if they owned a home in another part of the country where housing costs were lower?  Was this kind of scheme what the key workers really wanted and did it answer their needs. After a year’s research and development, NEF were satisfied that their model for a new form of mutual home ownership was a practical proposition.  The legal and tax structure of the model had been shown to be robust.  Market research had showed a high approval rating amongst potential clients.  So in October 2003 they published their proposals in a report entitled ‘Common Ground- Mutual Home Ownership’ .
The core elements of the Mutual Home Ownership  Model as as follows:
·   The land value and/or any other subsidy provided to achieve affordability should be retained as a permanent asset for the community benefit in a tax exempt Community Land Trust (CLT) which grants a 99 year lease to a mutual home ownership co-operative.
·   The development of housing on the land is undertaken by the co-operative.  The housing created and a mortgage charge over the land held by the CLT is used as security for raising finance for the development and security for long term mortgage loans.
·   The mortgage finance that members will finance through monthly charges, and which will give them their equity stake through mortgage debt servicing, will be corporate not individual, to gain the benefits of lower mortgage rates and costs.
·   Equity stakes will start with an initial investment by members of 5% of the cost of the % of the share of the mortgage debt they will service.
·   Equity stakes will be unitised through a Property Unit Trust type system to provide a highly flexible tenure permitting some trading of equity stake ‘units’ to members as other members leave.  This has the advantage of members being able to have a limited opportunity to staircase up or down and increase their equity as their incomes rise.  It also has the advantage of enabling new members on lower incomes to move in when higher earning members leave.
·   Rights of occupancy are to be governed by a contractual lease which enables the open market value of the housing to be used as security for loans.
·    All internal routine repairs to be the responsibility of members .    
·    As security for rental payments, the co-op will have a lien on member’s equity stakes  
·    Members leaving the co-operative will transfer their equity ‘units’ to a new member through the co-op at a price that reflects the % of the current market value the equity units they hold represents.
·    Day to day management, servicing and external maintenance to be controlled by the members through an elected committee.
        
So what’s the next step?  CDS is looking to develop two pilot projects this year.  Considerable interest has been shown by local authorities desperate to find a solution to their key worker housing problem.  The initial response of lenders has also been very positive too. CDS is currently considering options in Milton Keynes, Oxford, Cambridge, Stroud and east London. Their aim is that the projects should be ready to proceed by the late summer of this year.
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This article was first published in the Labour Housing Group Newsletter

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