Living in a housing co-operative

Housing co-operatives and how they work, how people can get housed in housing co-operative accommodation, and their security of tenure.

Housing co-operative definition

A housing co-operative is a group of people who manage and control the housing in which they live. Each person is a member of the housing co-operative and has an equal say in decision-making. No member individually owns or makes profit at the expense of another. All members are expected to take an active role in providing and managing the accommodation and the level of rent the tenants pay reflects the cost of managing the housing.

Housing co-operatives are usually created as Industrial and Provident Societies and are registered with the Financial Conduct Authority.

This registration is a qualification for registration with the regulator of social housing.

In order to be eligible for funding from the regulators or from local authorities, most housing co-operatives become private providers of social housing (PRPSHs).

How to find accommodation in a housing co-operative

People interested in living in a housing co-operative can:

  • apply to the local authority’s housing register as this may be a requirement to be on a housing co-operative’s waiting list
  • ask the local authority’s housing department for a nomination to a local housing co-operative.
  • write to any housing co-operatives in the area to find out the likelihood of vacancies and keep in regular contact with them

Local authorities may be reluctant to nominate a person to a housing co-operative unless they have a duty to the person under Part 7 of the Housing Act 1996.  Housing co-operatives without office workers can be difficult to contact. Not all of them operate waiting lists and it is unusual for housing co-operatives to have a vacancy. It is difficult for housing co-operatives to attract funding for development and, without expanding the number of properties in the housing co-operative, their ability to provide housing for people other than existing tenants is limited. The local authority or a local advice centre will usually have details of housing co-operatives operating in their area.

Advantages and disadvantages of housing co-operatives

The option of living in a housing co-operative has advantages and disadvantages.

The advantages of living in housing co-operative include:

  • it can provide good quality housing at a reasonable rent
  • tenants have collective control over how their housing is run
  • tenants may receive support from other tenants
  • in learning how to manage their own housing, tenants may learn new skills such as decision-making, budgeting and how to carry out minor repairs

The main disadvantage to living in a housing co-operative are that the co-operative may take up more time and energy than a tenant is willing to give, and occupiers may not have much security of tenure.

Types of housing co-operatives

The type of co-operative affects the rights of the occupiers and how the housing co-operative works.

Fully mutual associations

Most housing co-operatives are fully mutual associations. If they are registered under the Industrial and Provident Societies Act 1965, they are legally called ‘co-operative housing associations’. If so registered, the housing co-operative has an independent legal status separate from its members. All tenants of the housing co-operative are members of it.

Membership can also include prospective tenants.[1]

The two types of fully mutual association are par value co-operatives and co-ownership housing associations.[2]

Par value co-operatives

Par value co-operatives may also be called ‘ownership co-operatives’. They also used to be called ‘Housing Association Grant funded co-operatives’. Par value co-operatives are the most common type of housing co-operative.

Par value co-operatives require equality between members in regard to decision-making and financial interest. Par value status means that no member of the housing co-operative has a financial interest in the housing co-operative other than the face value of the individual share holding, which is normally a nominal sum such as £1. This means that individual members of the housing co-operative cannot be held responsible for the housing co-operative’s finances. This arrangement is often called ‘limited liability by guarantee’.

Co-ownership housing associations

Co-ownership housing associations are also called co-ownership societies.

Each tenant has an equitable stake in the housing association, calculated on the basis of the value of the property in which they live.

Short-life housing co-operatives

There is no specific legal regime for short-life housing co-operatives, which are subject to the normal rules relating to other fully mutual co-operatives. Short-life housing co-operatives are usually registered with the Financial Conduct Authority and the regulator of social housing because of the advantages which registration confers.

The main distinction between short-life housing co-operatives and other fully mutual co-operatives is the purpose for which they are set up. A short-life housing co-operative has property that has been borrowed from the owner to provide short-term accommodation for groups of people. Property owners, such as local authorities or private registered providers of social housing (PRPSHs) often allow property to be used on a short-life basis when they are unable to repair it, or cannot develop the area at that time due to financial constraints. Usually the owner grants a group of people, sometimes called a Short-Life User Group (SLUG), a licence to occupy property for a specific period of time, normally between one and five years. The owner is guaranteed vacant possession at the end of the agreed time. Although there is a great deal of variety, most short-life housing is in a poor state of repair.

Tenant management organisations and management co-operatives

Since April 1994 tenants of local authorities have been able to take over the management of the local authority’s properties by the establishment of a tenant management organisation (TMO).[3] Prior to this date this could be done through the establishment of a management co-operative. PRPSH tenants may also take on housing management responsibilities by forming a management co-operative to manage their homes.

The tenant management organisation/management co-operative becomes the managing agent for the landlord. Depending on what is included in the management agreement between the tenant management organisation/management co-operative and the landlord, they may be responsible for a variety of management duties for the properties that the members occupy, for example ensuring that repairs are carried out.

A TMO is an organisation which satisfies the legal condition that it has a written constitution which must:[4]

  • specify the area in which it wishes to enter into a TMO agreement with the local authority
  • provide that any tenant of a house in that area may become a member of the TMO
  • provide that the TMO will avoid unlawful discrimination when conducting its affairs
  • provide that the affairs of the TMO must be conducted by either the members of the TMO at a general meeting, or by a committee or board of directors who have been elected by members of the TMO

Self-build housing co-operatives

A self-build housing co-operative is a housing association where the members build or improve the properties which they are to live in.[5]

The homes are likely to cost less to build than the market value of the property, and are likely to be built to a high standard. There is no requirement for self-build co-operatives to be registered.

Privately funded housing co-operatives

Some housing co-operatives are set up with private funds. Most of these housing co-operatives only have a small number of houses.

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