Nathan Brown, Cooperantics
The growth of new housing co-operatives is held up a lack of capital rather than poor profitability. Over the life of a mortgage, co-ops tend to become cash rich in the latter half of the term, when they no longer need it. To buy a property using mortgage finance co-ops need sufficient money to put down a deposit. Unless the co-op can snap up a bargain, the high cost of short-term debt finance can turn a viable proposition providing lower than market rents into an offer as expensive as the “market”.
What is needed is more patient capital. Loanstock is not usually available in the sufficient amounts due to an inflated housing market. Withdrawable share capital or multi-stakeholder approaches to involve investors (e.g. Community Land Trusts) aren’t workable for fully mutual housing co-ops with only occupiers in membership. Public funding is reducing and restricted to providers regulated by Homes & Communities Agency – an administrative burden requiring scale.
Money is sitting in co-operatives’ pension funds, investment portfolios or long term interest accounts/bonds. Inward investment from the movement into co-operative housing could simultaneously provide ethical, relatively stable investments while growing the movement.
This idea would provide capital at an affordable rate to leverage mortgage finance. Most investment portfolios have an element of relatively stable investments with a low-moderate return which could include bricks & mortar managed by co-operatives? Internal investment displays self-responsibility, self-reliance as a movement and promotes co-operative principles 6 (co-operation amongst co-operatives) and 7 (concern for the community) in investment.
Co-operatives would need to direct their investments and/or pension funds to a fund that specifically provided asset-based investment to housing co-operatives.
The first step is for a large co-operative(s) with fund managers, or a financial co-operative, to investigate the legalities prior to launching a dedicated fund.
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