Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence

Memorandum by CDS Co-operatives (CDS) (AH 59)


  1.  CDS Co-operatives (CDS) is pleased to submit evidence to this important inquiry. We are a specialist housing association supporting and servicing housing co-operatives. Our purpose and vision is "to provide high quality, efficient and financially viable services that enable and support resident control and to make a significant contribution to solving the housing needs of our nation by developing housing co-operatives and other forms of mutual tenure".

  2.  CDS was formed in 1975 and has been steadily growing for 30 years. We own, or manage on behalf of our client co-operatives, 2822 homes. Our activities are concentrated in London and the South of England although our work has stimulated interest across the UK.

  3.  In 2003 CDS published "Common Ground—for mutual home ownership." This extensive research report written by the New Economics Foundation (NEF), identified the scale of the housing crises in the UK. It foreshadowed many of the conclusions which Kate Barker would reach in 2004 in the Barker Review. Stimulated by the Government's challenge to housing providers to find new and innovative solutions to meet housing needs, our report recommends the use of a new form of tenure to increase housing supply. The report sets out detailed recommendations, based on extensive research and dialogue with user groups, for the establishment of community land trusts and mutual home ownership to create a permanently affordable intermediate housing market in which residents can have an equity stake.

  4.  Housing is higher on the political agenda today than it has been for a generation. CDS believes that the creation of a new intermediate housing sector, available to those people who currently fall short of the first rung of the housing ladder could radically change the way we view publicly resourced housing programmes. The community land trust/mutual model CDS proposes, which is detailed below, addresses many of the issues that the Select Committee identify as vital. The model we propose promotes homeownership and balances economic inequalities, providing a new route for buyers to own housing equity and get into the housing market in a way that locks-in affordability in the long term for the benefit of future generations of residents. The model also envisages the use of modern methods of construction which would add vastly to the speed, design and environmentally sustainable development of new homes with the active participation of communities where housing needs are to be met. Use of the model will boost housing supply while generating more affordability, and easily accommodates regional disparities as set out in our case studies.

  5.  CDS believes that affordability and supply are intrinsically linked. The public feel what many of us in the housing sector know: that the housing market is becoming overheated and unsustainable. Creative new approaches are needed to avoid the consequences, both financial and social, of the housing market's failure to meet the demand for affordable, well designed and sustainably built new homes. CDS approves the sentiment behind the Government's strategy outlined in the ODPM publication: Extending Home Ownership. We have reservations about the specific measures proposed which we believe could fuel an already overheated housing economy. We hope that, in the final analysis, the Committee will call on the Government to adopt a twin track approach promoting affordability through innovative methods to increase supply. In this submission we aim to set out the case for innovation and new ways of working.

  6.  Any additional government support to make affordable housing more accessible to the growing number of people seeking an affordable decent home, is to be welcomed. However, we question the benefits of any intervention that does not stimulate housing supply. There is a growing wealth divide between those who own their own homes and those who do not. Not owning property damages your long term wealth, which is why home ownership is so popular. Before the General Election 2005 a number of think tanks and policy forums acknowledged the need for people to be "asset owning" and indeed this has driven financial policies such as the child trust fund. The aspiration of individuals to own assets is a powerful force and can be harnessed co-operatively so that more people benefit. We contend that the ability to secure a decent home at an affordable price is a fundamental issue of social justice and that to have a stake in its value will help bridge the growing wealth gap between those able to buy and those who are currently excluded from the market by high house prices.

  7.  The Treasury's own report into housing supply, written by the Bank of England economist Kate Barker, shows that fewer homes are being built each year than at any time since the Second World War. This supply side deficit is the prime cause of the rampant house price inflation of recent years. Barker says that between 70,000 and 120,000 additional affordable homes are needed each year to meet demand and that even if that massive increase in output is achieved, it will only bring long-term house price inflation down to the European average of 1% above the underlying inflation rate.

  8.   Extending Home Ownership is, in our view, too limited in its scope. Injecting subsidy into the market is a crude measure which risks adding further pressure to house prices. It is also a one off consumption subsidy to the privileged few rather than a long term investment that will permanently increase the supply of affordable housing. In addition to benefiting just one occupant, HomeBuy also has the disadvantage of leaving them bearing the whole cost of buying and selling the property while only gaining part of the growth in value.

  9.  What is needed to address the crisis in the housing sector is the creation of a new intermediate housing market that will remain permanently affordable: one which will last to the benefit of future generations, not just the first buyer; one which will bring the first rung asset owning opportunity of the housing ladder back down to everyone in stable employment on low to modest incomes.


  10.  CDS starts from the viewpoint that housing is a basic right to which everyone should be entitled, rather than a speculative commodity. However we are also aware that nine in ten households are keen to be asset owning. That is to say most people want to own their own home and to be part of the asset rich community. CDS/NEF research has shown that in 2005 those people on intermediate incomes of £32,000 or less, in London, and £25,000 or less in the rest of the UK, are unable to get onto the housing ladder at all, findings that have been confirmed by the Joseph Rowntree Foundation.[113]

  11.  These people are left either saving for a deposit against ever increasing house prices while paying high rent, or waiting for market crash. For some, inheritance income provides an opportunity to buy property, but most are left in the rented sector. The gap between the asset rich and asset poor continues to grow, and will have an effect not just on this generation, but will cascade down generations to come.

  12.  CDS alongside other organisations has sought to provide a practical solution to this problem.


  13.  In 2003 CDS jointly published with the New Economics Foundation, a report entitled Common Ground—for Mutual Home Ownership. Since then we have been actively pursuing the practical application of this model and are very close to setting up a demonstration project in Stroud, Gloucestershire, which we hope the Committee will come and visit when it is underway.

  14.  Our new hybrid mutual model of affordable home ownership for intermediate wage earners, incorporates key features of the limited equity housing co-operatives popular in Scandinavia together with the Community Land Trust (CLT) model popular in the USA. The initial premise of our report was, as set out above, that the Government's Homebuy scheme, and subsequent Extending Home Ownership concept, are often oversubscribed, increasingly unaffordable and do not remain as a permanent intermediate market housing.

  15.  In our model gifted or discounted land is removed from the market and held by a community land trust in a democratically owned and Community controlled Industrial and Provident Society. The CLT leases the land on a long lease to a Mutual Home Ownership Society (MHOS), a shared equity housing co-op. Only this type of organisation has the capacity, because of its legal and tax status, to create this new form of tenure.

  16.  Membership of the MHOS provides access to lower mortgage costs on a corporate rather than an individual basis together with the ability to accumulate an equity stake in the property. Capital growth in the equity stake a resident funds is paid out on leaving the scheme. Monthly payments are geared to be affordable at 35% of a member's net household income.

  17.  Community Land Trusts exist and own land in order to provide benefits to the local community. In the United States they are used as a community tool for sustainable social and economic development, with the primary aim of providing affordable housing and helping people into home ownership. The CLT balances the need and interests of the individual with the interests of the community as a whole. It does this by separating the value of the land from the cost of the property on it. A CLT holds the freehold of the land in perpetuity, and leases it to the owners of the buildings on it, who are often individual home owners or co-operatives. It is this long term ground lease that regulates the occupancy and limits the resale value of the property, so that each CLT reformulates its own resale value.

  18.  CDS strengthens the CLT model by adding to it a co-operative or mutual element. The practical benefits of a shared-equity model of co-operative housing are that:

    —  Reduced interest rates can be secured from corporate financing.

    —  Any loan can be structured to give residents greater certainty over interest rate risk.

    —  Because the property is not bought and sold, but equity shares traded, many of the transaction costs of buying and selling a home are avoided.

    —  Costs can be controlled through resident management and other social benefits obtained.

  19.  The model itself has won support from Members of Parliament, key workers, housing professionals and local authorities. Kate Barker described the model as "particularly appealing because of the retained ownership of the land asset."


  20.  CDS is pleased that the Select Committee will be considering construction methods within this inquiry. Through membership of the International Co-operative Alliance, CDS has long standing relationships with organisations such as Oslo Buildings and Savings Co-operative (OBOS) in Norway which dominate the market in the provision of high quality housing in the co-operative sector. A recent trip to Norway provided insight into the possibilities for using modern methods of construction in developing our projects and we are keen to share this with the Select Committee.

  21.  CDS believes that if we are to truly revolutionise the provision of good quality housing for the UK's citizens, whether through co-operative provision, or on the open market, we should embrace these methods as have our European partners. In addition there is the potential for considerable job creation in areas of deprivation, for example in some of the steel communities of Wales and in the South West, where manufacturing facilities could be sited.


  22.  Many communities across Britain are keen to establish Community Land Trusts to acquire land or property.

  23.  In Stroud, Gloucestershire, CDS is working Stroud and District Community Land Trust and English Partnerships to develop a pilot mutual home ownership project on the former Cashes Green Hospital site that has stood empty and derelict since 1993. As well as developing a new form of intermediate housing tenure, the community have a vision for the site that includes community allotments, community recycling, a village green, a multiple use community building and the integration of a care home for disabled young adults into the community: sustainable outcomes that would not be achieved if the site were sold for development on the open market.

  24.  In London, the Mayor of London commissioned a report into the use of Community Land Trusts and mutual models, published in January 2005.[114] The report specifically endorses the CDS model stating "this new mutual model has the in principle support of the Mayor of London". On the core elements of the model the report states: "Learning critical lessons from the experience of shared-ownership co-operatives at home and overseas, this is a robust and financially viable model that has the potential to prove more accessible and grant a better return on public subsidy than current low-cost home ownership initiatives". On co-operative housing the report states: "There has never been a better time for co-op housing to state its case and bring its wealth of experience to bear in helping deliver affordable homes, tackling social exclusion and creating sustainable communities". The Mayor has subsequently commissioned a detailed feasibility study by the London Development Agency. This report is now in the final stages of drafting. It is understood that it will recommend piloting the model in London.

  25.  In High Bickington in Devon, the High Bickington Project 2000 is concerned with providing affordable housing for local people. Working closely with the district and county councils, they have formed a Community Land Trust to develop farmland in the village which was previously owned by Devon County Council. Their plans for a number of houses on the open market, will also allow them to build affordable housing and a new school to replace the landlocked school in the centre of the village. Together with a community woodland and plans for workshops to provide focal points for local businesses, the project aims to invigorate High Bickington and create a valuable partnership between the villagers and local authorities.

  26.  In the early 1980s, steep rises in land value in West Oxfordshire had a destructive effect on many village communities. In response, Stonesfield Community Trust (SCT) was founded in 1983. Local activist Tony Croft donated a quarter acre site in the village of Stonesfield for affordable housing for local people in perpetuity. A seed corn grant of £3,000 from a local company was used to register the trust and negotiate planning permission, which alone increased the value of the donated land from £3,500 to £150,000, enabling SCT to raise a mortgage and build the first four properties.

  27.  SCT has since borrowed additional funds from the local authority and ethical investors. They have developed a further 10 affordable homes on another quarter acre site, and converted a redundant glove factory into workspace units for the village. More recently, a second development has been completed to house the village post office at a low fixed rent. All properties have high energy efficiency standards to ensure low running costs. By 2004, most borrowings were fully repaid and net income from CLT property of £40,000 a year now funds a local youth service.

  28.  When the absentee landlord put the Isle of Gigha on the market in August 2001, residents formed a steering group to consider a "community buy-out". The Scottish Land Fund provided support for a feasibility study and a ballot of islanders secured overwhelming support in late 2001. The community borrowed £1 million from the Scottish Land Fund and raised a further £3 million in grants to complete the purchase.

  29.  The purchase included 41 of the 67 houses on the island. The Trust has since developed six properties for sale to owner occupiers and is developing 18 houses for rent in partnership with Fyne Homes Housing Association. It formed a construction consortium with Fyne Homes and three local builders to carry out home improvements on the old properties and to build the new homes. Building apprentices are being trained, and a small quarry on the island provides local materials.


  30.  The Government, agencies and local authorities should support the widescale use of the CLT/mutual home ownership model proposed by CDS. The support of the Select Committee would provide powerful momentum.

113   2 "Can Work, Can't Buy" Professor Steve Wilcox, Joseph Rowntree Foundation 2003. Back

114   "Community Land Trusts & Mutual Housing Models", GLA Housing and Homelessness Unit, November 2004. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 20 March 2006