David Rodgers explains why the co-operative housing (tenure) bill is so sorely needed to fix the UK housing market.
David Rodgers has been Executive Director of CDS Co-operatives, the largest secondary housing co-operative in England, since 1979.
Ask anyone looking for a decent home they can afford and the reality of the crisis in the UK housing market will immediately become apparent.
House building is at its lowest in any year (save during the Second World War) since 1924, with just 124,000 predicted to be completed this year in the face of acknowledged need for at least 275,000.
Mortgage lending is at its lowest ebb for decades as banks rebuild their liquidity and can no longer borrow the cheap money that flowed back to our Western economies from trading deficits with China and other developing Eastern economies: cheap money that created the sub-prime mortgage lending and toxic debt in the USA housing market and the housing market bubbles in the UK, Spain and Ireland that fuelled the global financial crisis of 2008.
First time buyers need a deposit that now averages 27 per cent, the average age of first time buyers has risen to 37 and 40 per cent of young people believe that they will never be able to afford to be home owners.
The shock wave of the global financial crisis is still rippling through the world economy. The only housing sector that is benefitting from these seismic financial and economic shifts is the private rented sector. In the absence of alternatives, private renting is on the up and rents are increasing.
As home ownership begins to fall it is predicted that private renting will continue to rise towards 20 per cent.
These trends in housing supply are exacerbated by the coalition government’s 60 per cent cut in investment in new homes through the national affordable housing programme and its insistence that “affordable rents” are set at 80 per cent of market rents (“affordable” in this context being truly Orwellian, because for most people in need of an affordable home in the high costs areas particularly in the South of England, 80 per cent of market rent is not affordable).
These are the realities facing newly forming households trying to find a decent home they can afford and raise a family in. In order to solve this housing crisis innovative new ways of providing affordable homes are needed.
It is against this background that Labour & Co-operative MP Jonathan Reynolds is presenting to his ten minute rule bill, the co-operative housing (tenure) bill 2011, to the house of commons on 11th October.
The Bill proposes to enshrine in English law the legal principle that the right of occupation of a dwelling can arise through membership of a housing co-operative which owns property rather than solely through the grant of a tenancy by a superior (feudal) landlord.
To create a new form of tenure in the midst of a housing crisis may seem esoteric.
Yes, Jonathan Reynolds’s co-operative housing (tenure) bill will overturn over 1,000 years of feudal land law history which has its roots in the Dark Ages from whence the only way to gain occupation rights was either as freeholder (of the Crown) or as tenant of a superior feudal landlord: a history which has led to the bi-polar approach to housing ownership and rental as the two only available tenures.
This bi-polar tenure structure and the financial advantages in the past that accrued from individual home ownership – advantages that will not return in this world after the financial crisis – is a prime source of the thinking that home ownership is the tenure of choice and that rental is the tenure of the poor or of last resort that dominates UK housing markets.
Jonathan Reynolds’s attempt to create co-operative housing tenure as a distinct new legal way of gaining rights to occupy a home is not just an esoteric legal proposition.
It is motivated by a recognition that, if we are to meet the need to increase the supply of affordable homes, new and innovate ways of doing so are desperately needed; new ways that will allow communities up and down the country to provide the homes they need on land that will otherwise remain barren and undeveloped. Jonathan Reynolds’s thinking is driven by the recognition that, as Albert Einstein insightfully said, “We can’t solve problems by using the same kind of thinking we used when we created them”.
In proposing his co-operative housing (tenure) bill Jonathan Reynolds understands that the UK’s exclusive bi-polarity approach to housing tenure has been and remains a constraint on housing supply. He knows that in the UK co-operative housing provides less than 0.1 per cent of homes in comparison to the average of ten per cent contribution to housing supply in the rest of Europe and 14 per cent in Scandinavia.
Reaching that level of supply of co-operative homes would add six million homes to UK housing supply.
He understands that, given the right legal framework such as has existed in Sweden since 1920, individuals would chose to live and invest in owning equity in a housing co-operative rather than struggle on their own to afford to buy a home with a personal mortgage in a volatile housing market and an economically uncertain world.
He also knows that communities would work to find land on which to develop co-operative housing for their community because they could be certain that, with the right to co-operative tenure enshrined in law, the co-op homes they would help to build would remain affordable in perpetuity for future generations.
He understands that co-operative housing tenure would open the door to institutional investment in the provision of affordable homes because co-operatives, as a long term responsible owner of housing, controlled and maintained by its resident owner members, offers to individuals, pension funds and other long term investors an attractive, secure and assured rate of return on their investment.
He knows that in Germany and other countries communities invest in co-operative housing because it is good for the social, economic and environmental sustainability of their community. He knows that administering a housing co-operative under inappropriate landlord and tenant law creates numerous practical difficulties.
He also knows that the absence of appropriate co-operative legislation puts the UK government is in breach of its international obligations under International Labour Organisation resolution 193 which calls on all member governments to enable the establishment of co-operatives through appropriate legislation.
The co-operative housing (tenure) bill 2011 will open a new door for the building of affordable homes that is so desperately needed. The Government should embrace Jonathan Reynolds’s initiative and ensure that the Bill is given the time it needs to become law.
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• On housing, while Ed has got it wrong, Boris has the answer – Vidhya Alakeson, June 13th 2011
• Government spin on so-called “rich” social housing tenants exposed – Kevin Gulliver, June 6th 2011