Memorandum by CDS Co-operatives (CDS)
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 Groundfor
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
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.
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 Groundfor
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
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.
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
"Community Land Trusts & Mutual Housing Models",
GLA Housing and Homelessness Unit, November 2004. Back