Common Ground – for Mutual Home Ownership Soaring mortgage costs for first-time buyers in the South of England mean that those worst affected are workers on average incomes of between £15,000 and £25,000 per year, who are neither poor enough to rent from a social landlord nor rich enough to rent or buy in the open market. This problem is having huge effects on retaining public sector workers in such high cost areas and current government schemes to tackle this issue have proved inadequate. Common Ground sets out a radical approach to securing permanently affordable housing for key workers (and also potentially for others on similar income levels) in areas that would otherwise be unaffordable. The housing model proposed includes a Community Land Trust, designed to take land out of the market and keep it as a public asset so that affordability is preserved on a long-term basis, and co-operative tenure. The Mutual State in Action 3 The Mutual State in Action is a series of publications which build on the ideas presented in The Mutual State – the report of a collaborative programme by the New Economics Foundation and Mutuo which invited contributions from a broad range of organisations to explore the potential for the mutualisation of public services. The Mutual State aims to put the public back into public services. Through user participation, accountability to the local community or recasting public services as self-governing social enterprises, a new mutuality could refresh and invigorate our public services. The first book in the series was A Mutual Trend: How to run rail and water in the public interest by Johnston Birchall and the second, The Mutual Health Service: How to decentralise the NHS, by Ruth Lea and Ed Mayo was a collaboration between the Institute of Directors and nef. Researched and written by Pat Conaty, Johnston Birchall, Steve Bendle, and Rosemary Foggit. This report is a collaboration between the New Economics Foundation, The Housing Corporation, and CDS Co-operatives. CDS Co-operatives 3 Marshalsea Road London SE1 1EP Common Ground – for Mutual Home Ownership Telephone: +44 (0)20 7397 5700 Website: www.cds.coop Community land trusts and shared-equity co-operatives new economics foundation 3 Jonathan Street to secure permanently affordable homes for key workers London SE11 5NH United Kingdom Written by the New Economics Foundation and CDS Co-operatives Registered charity number 1055254 Telephone: +44 (0)20 7820 6300 Pat Conaty, Johnston Birchall, Steve Bendle, and Rosemary Foggitt © The New Economics Foundation, the Housing Facsimile: +44 (0)20 7820 6301 Corporation, and CDS Co-operatives. E-mail: [email protected] Website: www.neweconomics.org ISBN 1 899407 75 8 The mutual state in action 3 nef is an independent think-and-do One of the other things we do tank that inspires and demonstrates real economic well-being. We aim to improve quality of life by promoting innovative solutions that challenge mainstream thinking on economic, environmental and social Access to finance: Access to basic financial services issues. We work in partnership and is a vital part of living and working in the mainstream of society. Gaps in financial service provision in Britain put people and the planet first. exclude many people and communities from fulfilling their potential. nef is working to change policy and pilot new financial products and services to ensure proper access to financial services for all. Appropriate and affordable financial We develop and pilot innovative For more information please call services should be available to all – financial products and delivery 020 7820 6300 whether it be individuals looking for a mechanisms, including the Factor bank account, a social enterprise Four approach to ending fuel poverty, looking for a loan or an inner-city community development credit unions enterprise looking for equity. This is and a wholesale fund for community currently not the case. To address the development finance institutions in gaps in financial service provision nef the UK. are advocating reform to develop a conducive policy environment that ensures access to affordable financial services for all, particularly the most disadvantaged. The programme aim to stimulate and design more effective and sustainable approaches to investment for local Current priorites include international Current priorites are climate change, Current priorites include democracy. economic development purposes, debt, transforming markets, global ecological debt and local sustainability time banks, well-being and public including social investment vehicles finance and local economic renewal services such as the Adventure Capital Fund. nef The New Economics Foundation is a registered charity founded in 1986 by the leaders of The Other Economic Summit (TOES), which forced issues such as international debt onto the agenda of the G7/G8 summit meetings. It has taken a lead in helping establish new coalitions and organisations, such as the Jubilee 2000 debt campaign; the Ethical Trading Initiative; the UK Social Investment Forum; and new ways to measure social and environmental well-being. Contents About the authors 5 Fieldwork Interviews with Key Workers and Acknowledgements 1 Focus Group Findings 38 Preface 2 5.1 Interviews in the South West – Main Findings 38 Foreword 3 5.2 Interviews in London – Main Findings 41 5.3 Summary of Findings from Key Worker Perspectives 43 Executive Summary 4 5.4 Shared equity Co-operative Model – 1 Introduction 7 Focus Group Feedback 44 1.1 Housing Crisis – the Property Market Bubble and 6 Creating Pilots and the Shared Equity Co-operative Negative Equity Threat 8 Housing Model in Detail 46 1.2 London’s Housing Shortage and the Intermediate Market Problem 9 6.1 Legal Structure Requirements 46 1.3 Tackling the Housing Supply Shortage 10 6.2 Investment Finance Requirements 46 1.4 Key Worker Housing: Current Approaches 6.3 Co-operative Housing – and Emerging Solutions 11 Loan Guarantee Society Services 47 1.5 London Housing Commission and the Plan for London 11 6.4 Other Forms of Finance and Funds for Financing Equity Stakes 47 1.6 Starter Homes Initiative and Low-cost Home Ownership Programmes 12 6.5 Making the Model Easy to Understand: Unitisation 48 1.7 Increasing Housing Supply – 6.6 Reduced Land Value or Other Subsidy Input 48 Sustainable Communities Plan 13 6.7 Tenure Requirements 50 6.8 Risks and Sensitivities to Economic Changes 50 2 Mutual Solutions for the Intermediate Market 15 6.9 Community Development Finance Partnership – 2.1 Community Land Trusts – Securing Permanent Long Term Interest Free Finance Service 50 Affordability 15 6.10 Cost Benefit Comparisons with Shared Ownership 2.2 Early British Housing Co-ops – Tenant Co-partnerships 17 and Homebuy 50 2.3 Co-ownership Housing – Key Worker Housing in the Post War Period 19 7 Conclusions and Next Steps 53 2.4 Shared Ownership Co-operatives 21 Endnotes 54 2.5 Comparative Analysis of Co-operative References 56 Tenures Internationally 21 2.6 Evaluation and Key Lessons for a Glossary 59 New Tenure Model in the UK 24 Appendix 1: Research Terms of Reference 62 3 Community Land Trusts and the New Shared Equity Appendix 2: List of Third Party Interviewees 63 Co-operative Model 26 Appendix 3: Legal Advice Summary of Key Issues 64 3.1 Co-operative Homeownership Model – Appendix 4: Shared equity Co-operative Model – Core Principles and Options Rejected 26 Core Elements 66 3.2 Shared equity Co-operatives – Appendix 5: Financial Model(s) – Annexes 1–6 68 Proposed Model and Key Assumptions 27 Appendix 6: Interest-free Home Loans – 4 Key Worker Housing Initiatives in Two English Regions: JAK Co-operative Lending System 83 Urban and Rural 29 4.1 Current Approaches in London and Interest in a Mutual Model 29 4.2 Current Approaches in the Rural South West and Interest in a Mutual Model 32 About the Authors Pat Conaty is a Senior Associate of the Steve Bendle is Chief Officer of Envolve New Economics Foundation and an Partnerships for Sustainability and a Honorary Research Fellow at the Director of, and consultant to, Wessex University of Birmingham. He led the Reinvestment Trust: the organisations are development in 1997 of the Aston committed respectively to supporting the Reinvestment Trust – the first mutually transition to sustainable lifestyles and owned, local Community Development providing the financial framework needed Finance Institution in Britain. He is also a for local rural economies to work. regular trainer for the Community Previously he worked for five years as an Development Finance Association. independent consultant, focusing on Recent projects include product housing, community and environmental development work for London Rebuilding issues and from 1980-1993 was Society on housing finance, Community Managing Director of the Horizon Development Credit Union work on bill Housing Group (at that time South payment systems and work over the past London Family Housing). He has played three years on Community Land Trusts a part with others in seeking to initiate for affordable housing and workspace and implement a broad range of social projects with Community Finance initiatives, among them ‘People for Solutions at the University of Salford. Action’, where empowerment and holistic thinking are built-in rather than bolted on. Johnston Birchall is a Senior Lecturer in Social Policy at Stirling University and Rosemary Foggitt is a solicitor and a Senior Associate of the New Economics director of Common Futures Ltd, a Foundation. He has a research specialist social enterprise research and programme developing a ‘mutual development consultancy. She works incentives’ theory of what motivates both as a translator and researcher and people to participate. Since writing has been involved in a number of major Building Communities: the Co-operative European Union funded projects in the Way (Routledge, 1988) he has published area of financial services, consumer extensively on co-operatives and mutuals, rights, financial literacy and financial including: Co-op: the People’s Business exclusion.