1. Introduction: the Status and Nature of Housing Co-operatives

1.1 The essence of a housing co-operative is that the housing is controlled by the tenants who live in it.

1.2 Housing co-operatives have a unique legal status. They are co-operative housing associations, as defined by S.1(2) of the Housing Associations Act 1985. As such, by virtue of Paragraph 12 (1)(h) of the Housing Act 1988, they are exempt from the assured tenancy provisions of that Act. The tenancies they grant are therefore "contractual", that is the terms and conditions of the tenancy are defined not in law but in the tenancy agreement itself. This gives them the unique advantage, in borrowing mortgage finance, of being able to offer a lender vacant possession value as security. This is achieved through making it a term and condition of the tenancy that vacant possession can be obtained in the event of the co-operative defaulting on its mortgage loan obligations.

1.3 To understand what housing co-operatives are and the benefits they bring to housing provision, it is important to have some knowledge and understanding of the origins and history of the wider international co-operative movement. Top of the page

2. A Brief History of the Co-operative Movement and Housing Co-operatives

2.1 The Co-operative Movement began in England in the second half of the industrial revolution. With the loss of the common use of land, workers had nothing to sell but their labour. With no controls or rights labour was plentiful and cheap. It was an age of child labour, exploitation and poverty. Those who failed to find work in the new factories were forced to rely on meagre parish relief for the poor or to starve. By the early 1800's, food prices were high and wages are being reduced. Much of the population suffered extreme poverty and deprivation. During the early part of the century, the early 1800's, Robert Owen, a Welshman who made his fortune in cotton, tried to establish co-operative communities. These early experiments in creating complete mini-communities foundered but Owen identified some of the profound underlying values of co-operation as a means of organising economic activity. He is still seen as the intellectual founder of the Co-operative ideals. In 1827, these ideas were taken-up by Dr William King who founded a monthly periodical, The Co-operator, which he published for 3 years. He urged the formation of small local co-operatives to tackle poverty and distress and improve the situation of working families.

2.2 During the same period, strikes by the weavers in Rochdale had failed to have any lasting effect on wages and living conditions. The weavers, wondering if there is a better way of improving their situation, turned to the ideas of Owen and King. With 28 members they started the first successful co-operative enterprise, the Rochdale Equitable Pioneer Society. In order to improve their standard of living the Rochdale Pioneers set up the first consumer co-operative in a shop in Toad Lane. They started trading on 21st Dec 1844, now recognised as the birthdate of the co-operative movement. They sold the basic necessities of life to their members, butter candles, soap, flour and blankets. Their aim was to supply good quality goods, cheaply and to return any profit to members of the co-operative. Where the Rochdale Equitable Pioneers succeeded where earlier attempts at economic co-operation had failed was that, from their own harsh experience of poverty combined with the theories of Owen and King they worked out that to succeed their co-operative enterprise must work on 7key co-operative principles. These are now recognised internationallyas the 7 Co-operative Principles and remain the practical foundation of housing and other types of co-operative today. Top of the page

Co-operative Principles were defined by resolution of the 24th Congress of the International Co-operative Alliance at Hamburg in September 1969.

2.3 These six principles are as follows:

Definition
A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically controlled enterprise.

Values
Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.Top of the page

Principles
The co-operative principles are guidelines by which co-operatives put their values into practice.

[1] Voluntary and Open Membership: Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

[2] Democratic Member Control: Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Women and men serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights [one member, one vote] and co-operatives at other levels are also organised in a democratic manner.

[3] Member Economic Participation: Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any of the following purposes: developing their co-operative, possibility by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

[4] Autonomy and Independence: Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensures democratic control by their members and maintain their co-operative autonomy

[5] Education, Training and Information: Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation.

[6] Co-operation among Co-operatives: Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional, and international structures.

[7] Concern for Community: Co-operatives work for the sustainable development of their communities through policies approved by their members. Top of the page

2.4 The success of this new co-operative economic theory was remarkable. By the 1870's the co-operative movement had its own wholesale and insurance societies and accumulated capital of over £300,000. Building societies were founded, Nation-wide being founded as the Co-operative Permanent Building Society. Today, despite intense competition in food retailing, UK retail co-operative's have higher sales volumes than any of their large supermarket chain competitors. Total UK turnover is over £8 billion.

2.5 The co-operative idea rapidly spread throughout the world and to other areas of economic activity. Van City Credit and Savings Union, one of the largest financial institutions in Canada is a financial co-operative providing services for members. Through farming co-operatives, known as Wheat Pools, Canadian farmers marketed their crops. In South-west France and Brittany, fishermen market their catch through fishing co-operatives. In Mondragon, Spain, workers work in highly successful engineering co-operatives producing a wide range of manufactured goods. In the Third World, farming, production and housing co-operatives are making a major contribution to improving the living standards of their members.

2.6 Today over 150 years after the movement was founded, under the umbrella of the International Co-operative Alliance, the co-operative movement boasts over 800 million members world-wide in over 100 countries.

"Co-operatives contribute directly to improve the standards of living of half the World's population."
(Background paper for United Nations World Summit on social Development, Copenhagen 1995)

2.7 Last but not least the co-operative principles were applied to housing. Retail co-operatives provided affordable housing for their members as early as 1861, but the first exclusively housing co-operatives appeared in Germany in the 1890's. The Bismarck Government, as part of its measures to reduce worker unrest and revolt, promoted the provision of housing on co-operative lines. With migration from persecution in Europe, the idea moved to the new world, to America. In New York, the East River Housing Co-operative set up by the Garment Workers Union in 1927 still provides good quality housing today. After the Second World War, the Allied powers re-established the co-operative movement in Germany to underpin the return to democracy. At the same time the idea spread to Scandinavia. In Norway today, over 17% of all housing is co-operatively owned and managed. If you rent a home in Norway, you are more likely to rent from a housing co-operative than from any other type of landlord. From the examples of housing co-operatives in Scandinavia, Canada began to develop housing co-operatives in the early 1970's. Today over 400,000 Canadians live in housing co-ops. Vancouver has more co-op housing than the whole of the United Kingdom. Top of the page

2.8 Finally in the late 1960's and early 1970's UK housing co-operatives began to develop from Scandinavian and Canadian examples. The circle is complete, what began in Rochdale is finally applied to UK housing provision. The first housing co-operatives to develop were co-ownership schemes. Soon after, in the 1970's rented co-ops began to develop using the new housing association grant provisions of the Housing Act 1974.

2.9 The fact that housing co-operatives began to develop late in the history of UK housing is no surprise. Unlike many other countries where a range of tenures is more common, UK housing has for decades been dominated by the twin tenures of rented council housing (a role latterly taken on by housing associations) and owner occupation. Co-operative housing has been slow to develop, squeezed as it is between home ownership - attractive because of tax relief- and paternalistic provision of social rented housing by councils and housing associations. With low rents and rent controls, there was little incentive to seek to use the co-operative principles as a means of meeting housing need. Only those groups who were excluded from access to council housing, or whose quality of housing was poor or badly managed applied the co-operative principles to improve their housing conditions.

2.10 If by now you are saying "That's all very interesting, but it is a small peripheral part of UK housing. Why should we support it and help to finance it?" The answer is threefold:

1) Co-operatives offer lenders vacant possession value on loans, can raise rents at will should the need arise and are therefore a secure investment.
2) With rising rents, the abolition of rent controls and the decreasing supply of rented homes, the climate is right for housing co-operatives to develop a major role in affordable housing provision.
3) Co-operatives offer immense benefits to housing consumers. Top of the page

3. The Benefits Housing Co-operatives Offer Tenants

3.1 Housing co-operatives bring 4 main benefits to tenants

1 Financial:

• tenants control their rents (within their co-op's financial framework),
• tenants control service charges,
• tenants control Value for Money (i.e. the balance between the quality and cost of a service),
• tenants control rent arrears more effectively than traditional housing managers
• any surpluses made by the co-operative can be used by the co-op to improve the co-op's housing.

2 Quality of Service:

• tenants control the quality of management because managers are directly accountable to them.

3 Social:

• housing co-ops build communities where people know and assist each other, housing co-ops can reduce vandalism and anti social behaviour, Top of the page
• housing co-ops often organise other services for members, such as child care and social activities.

4 Personal:

• housing co-ops give members the opportunity of using skills which would otherwise go to waste,
• housing co-ops create opportunities for people to develop new skills which are useful in other walks of life,
• housing co-ops reduce dependency and give people a stake in where they live.

3.2 For these reasons housing co-operatives enjoy a wide spectrum of political support from all political parties.

3.3 This does not mean that co-operatives are free of all controls. They are registered housing associations in their own right and must comply with all the required standards of performance demanded by the Housing Corporation which is the body which provides housing association grant for such co-operative schemes. One of the requirements is compliance with the Tenant's Guarantee which ensures proper and fair terms and conditions of tenancy and proper rights for tenants. These rights are enshrined in the co-operative tenancy agreement.

Thank you to:-

Co-operative Development Society (CDS)
3 Marshalsea Road
London SE1 1EP
0207 397 5700

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