Community investment in co-ops: Not such a new idea!

Andrew Bibby looks at some of the historical precedents of the community shares model

It is rather a pity, perhaps, that George Bernard Shaw is not still alive today.

Shaw wrote more than 60 plays and was politically active as a member of the Fabian Society. But he was also relatively well-heeled and had money to invest. As a supporter of the principle of co-operative housing he was prepared to place quite significant amounts of his own money in a loan fund to help develop new co-operative housing estates.

It is this aspect of Shaw’s life which has attracted my attention, and for a particular reason. One of the co-operative organisations in which I am active, Calder Valley Community Land Trust, has recently launched a community share issue, our aim being to raise around £200,000 towards the purchase of buildings and land in the centre of Todmorden. It’s part of our long-term strategy of creating more affordable homes to rent in our part of Yorkshire.

Mostly we’re targeting local people with a little money available to invest directly in their own community. But, who knows, if Shaw were still with us, he would probably be on our mailing list for the share offer document.

Of course, Shaw would have plenty of investment choice at the moment.  My community land trust is only one of several CLTs currently looking to raise capital through this form of ethical investment. Other community benefit societies are also increasingly using the same mechanism: many co-operatively run village shops, pubs and renewable energy schemes have got themselves launched by tapping into withdrawable share capital of this kind.

Related: More articles from our new year look at ways to grow the co-op movement

Part of the upsurge of interest in community shares is due to the very welcome development of the back-up available for new share issues, helped enormously by the Community Shares Unit (a joint Co-operatives UK/Locality initiative). The creation of a quality mark (the Community Shares Standard Mark) has helped to encourage strong business plans and weed out those with poor prospects, as has the development of a network of trained community share practitioners. Ethex helps by offering an online platform for share issues. The Booster programme of matched funding (funded by Power to Change and the Architectural Heritage Fund) helps too. 

However, George Bernard Shaw reminds us that this particular co-operative idea is certainly not a new one. Shaw’s investment was in an organisation called Co-Partnership Tenants, a ‘second tier’ co-operative body which was raising capital in the years immediately before the First World War to help finance and build a network of tenant co-partnership estates. These were put up across the country in the period from 1901 into the 1920s, in Ealing, Letchworth Garden City, Bournville, Burnage (Manchester), Stoke, Oldham, Leicester, Wrexham and a host of other cities and towns. The idea was an interesting one: to develop a form of housing which, while still offering rights to investors also gave tenants a direct ‘divi’ from the profits.

Although this history is today little known, it’s possible to argue that the tenants’ co-partnership estates were the first significant venture in Britain into what we now know as the housing co-operative sector. There had admittedly been earlier engagement by co-op societies in housing (the Rochdale Pioneers put up an estate of over 80 houses in the late 1860s, for example). A report for the Co-operative Union found that, by 1907, over £1m had been spent by societies on building houses to sell and approaching £2m on housing to rent (a further £6.5m had been lent by co-ops as mortgage loans). But generally speaking co-op societies saw housing as just an investment opportunity: as a convenient way to invest the often excess capital they had themselves taken in from their members.

The co-partnership tenants’ societies of the early twentieth century followed the slightly earlier example of the Tenant Co-operators Ltd (formed in 1888) and were attempting something rather different. Their aim was to create a form of housing tenure where tenants had considerably more engagement in the management of the houses where they lived. There was an emphasis, too, on communal facilities such as meeting halls and allotments.

Just as today, some of the capital to achieve this came from committed investors looking for what the Co-partnership Tenants described as a ‘healthy’ investment opportunity. Indeed, really significant sums of money came in. Shaw’s own investment was for £5,400 (perhaps equivalent to £600,000 today). The co-operative historian Johnston Birchall, whose 1995 journal article Co-partnership housing and the garden city movement remains the only significant account of this movement, suggests that Co-partnership Tenants had raised capital of £900,000 between 1907 and 1913 (admittedly some of this would have come from more conventional capital sources). Shaw and his fellow investors were offered a rate of return of 4.5%. Their money helped to ensure that, by 1914, seven thousand new houses had been built.

If the Co-partnership Tenants’ appeal to supporters for capital foreshadows our approach today in the community land trust movement, the loan fund established by the Co-operative Productive Federation (CPF) can be seen as a very early example of the idea which was later to return as ICOF (Industrial Common Ownership Finance) and now today as Co-operative and Community Finance. The CPF was established in 1882 as the body to represent the growing numbers of productive co-operatives (what today we would call workers’ co-operatives). The productive co-op movement was very much smaller than the retail side (and there were difficult arguments between them and the CWS as to how co-operative production should be structured) but nevertheless the CPF did its best to service its member co-ops. 

Even from the roots of that history in the early nineteenth century we can see leading co-operators wrestling with the question of how co-ops could find the capital they needed – on terms which kept control with co-op members and not with investors. The relationship between labour and capital remained a challenging one.  “The co-operator is not against capital. Capital is exactly like fire – an excellent servant when it warms the inmates, but a bad one when it burns down the house,” George Jacob Holyoake once suggested to the audience at a Co-operative Congress, calling for investors to have a fair return but no further power over co-op affairs.

Investors prepared to invest for social as well as financial returns were certainly appreciated. Well-off co-operators such as Edward Vansittart Neale, E.O. Greening and the writer and judge Thomas Hughes, for example, all put their own money where their principles were, by investing in individual productive co-operatives during the second half of the nineteenth century. 

Vansittart Neale, Greening, Hughes… perhaps it’s a pity that they too are not still with us. They too might have found themselves on my CLT’s mailing list…