Could co-operative housing solve the current crisis?

There are various models of co-operative housing, with some catering to specific residents, such as students, the LGBTQI community, those living with disabilities, and fully sustainable, eco farm-based communities. The key word is community, an element largely absent from many rental and traditional housing ownership models. To maintain the property, and perhaps even build and develop it, residents must work collectively. The board is made up of residents, and decisions about the property are made by residents for residents.

In Australia, co-operatives are legal entities governed by the Co-operatives National Law, which gives every member an equal right in the ownership and control of the co-operative (no member can hold more than 20 per cent of the shares).

New research from the Western Sydney University surveyed around 300 co-operative housing residents across four Australian states to understand systems of governance and operation, concluding that co-operative housing offered a valuable part of solving the housing crisis.

At a time when most rental agreements are one-year long, co-operatives have a clear benefit in terms of stability. The majority of survey respondents had lived in their co-operative (46 per cent) or the co-operative sector (55 per cent) for more than 10 years, and most (74 per cent) want to live in their co-operative for the rest of their lives.

Leo Patterson Ross, CEO of Tenants’ Union of NSW, says, “Everybody I know who has lived in a co-op has shared similar observations about the experience. The main thing is that they’ve felt a much greater sense of control and dignity, with greater connections and engagement with their neighbours. Because of the stability, you can get to know each other over longer periods of time and really feel a part of something.”

But Patterson Ross cautions that it is not all sunshine and roses.

“They all also say that it is a bit more hard work since you have to go to a lot of meetings, there’s a lot of organizing, and people do need to be involved at a more intense level for it to work,” he says.

“Overwhelmingly though, people have talked about it as a really positive experience and something that they really wish more people had the opportunity to be a part of.”

The legal framework

The Co-operative National Law and the various state Co-operative Acts determine the co-operatives’ organisational rules and conduct. The National Regulatory System for Community Housing applies to all of the social housing co-operatives, and tenant legislation acts apply to rental housing co-operatives.

In NSW co-operatives are overseen by NSW Fair Trading. They are governed primarily by the Co-operatives National Law (the CNL) and the Co-operatives National Regulations (the CNR) and Co-operatives (New South Wales) Regulation 2020 (the Local Regulations).

Ann Apps is an Honorary Lecturer in the School of Law and Justice at the University of Newcastle. One of her areas of research is co-operative law, and she is a member of lus Co-operativum, a community of international co-operative lawyers.

She tells LSJ that there are different models of housing co-ops.

“Common Equity NSW looks after rental co-operatives where the members rent their homes or units and the co-op is really only a rental management body. In Victoria Common Equity owns many of the buildings and so is the landlord,” she says.

“In NSW, Common Equity is more like an agent for the government who owns the buildings.  The Common Equity tenants are dominantly people on low income who qualify for public housing.”

Apps differentiates between a co-operative governance model and a co-operative ownership model.

“There are a number of intentional communities that use the co-operative model – however most only adapt the model as a governance model for the community, rather than an ownership model,” she says.

“For example, Narara Eco Village [on the NSW Central Coast] uses Community Title for ownership. Community Title is like strata title and the owner can get a bank loan by mortgaging their title. Property owners within the Narara community must belong to the co-operative, and it operates as a governance model for the village. There are a few intentional communities, or equity co-operatives, that also have a co-operative ownership model.”

Members of equity co-operatives have contributed equity, or capital, to purchase the land and buildings.

“If there is any bank funding it will be on one title.  Any development – houses, units etcetera – will belong to the co-operative as a whole,” Apps says.

“Individual members of the co-operative own shares in the co-operative which represent the assets of the co-op. Often the right to occupy a house or unit will either be a right that attaches to the member’s shares, or it might be a separate contract, like a lease.  The difficulty in getting this sort of development up and running is that individuals are unlikely to get finance backed by their shares. Although it is legally possible, it is not popular with banks.”

Housing co-operatives may lease a property with the responsibility of tenancy management, or own the title. In the case of University of Sydney’s student housing co-operative Stucco, the property is co-owned by government and residents, with tenancy management left to the voluntary student-residents. In NSW, Common Equity NSW Ltd is the peak body for housing co-operatives. The organisation both owns and leases a portfolio of properties which it sub-leases to co-operatives – along with providing training and support. The co-operative then works in tandem with Common Equity to manage the property, collect rent, and select new members.

As many as 184 co-operatives provide 3,732 homes in Australia in addition to 25 Aboriginal and Torres Strait Islander co-operatives that provide 1,287 homes. In NSW, there are 36 co-operative housing developments, in contrast to 113 in Victoria and none in the Northern Territory.

In the 1980s and 1990s, investment in rental housing co-operatives was boosted through the Commonwealth-State Housing Agreement’s (CSHA) Community Housing Program, which funded housing co-operative development at the initiative of the then Minister for Urban Development, Tom Uren. The co-operatives developed in that period were often held by the government or in common equity companies that gave full tenancy management powers to the housing co-operative.

Victoria led the way when it formed Common Equity Housing Limited (CEHL), a company that provides resources and support to the housing co-operatives, including ongoing technical expertise, program management, asset portfolio management and resourcing. NSW followed a similar path with Common Equity NSW. Bar the 12 per cent of housing co-operatives which are funded by members’ private equity, most are registered as charities that must operate in funding agreements with state or territory governments that require the co-ops to charge affordable rent. Being a charity requires the co-op to charge rents that are less than 75 per cent of the market rate.

A neglected sector with untapped potential

The reason for the lack of co-operative housing developments since the 1990s is unfavourable conditions for investment in this type of development, Apps says.

“In terms of the private investment market, banks have become increasingly reliant on residential-backed mortgage securities,” she says.

“This has made investment in strata development the dominant model, as the developer can hedge their risk by selling off the plan to individual unit holders. Smaller private investors are incentivised to invest in strata units by the negative gearing model, and lower interest rates and the ready availability of bank finance has led to a boom in large multi residential apartment blocks. In Australia, it has also contributed to our current housing crisis because those units owned by investors are generally leased on short lease tenures of six to 12 months, and as the investor’s costs increase along with demand, rent goes up.”

It is not only private investors who have spurned co-operative housing investment, Apps says.

“In terms of public investment, the various governments have neglected public housing for decades. Australia had a rising middle class, so it was assumed that everyone could potentially become a homeowner. Australia had comparably high wages until we began to dismantle the centralised wage fixing system in the 1980s, and when real estate was affordable and there were opportunities for young families in regional Australia, the great Australian dream was realised for many families.”

Patterson Ross says, “The idea of owning your own space and being able to control it and not having to engage with other people is something that has become a default setting, but isn’t really reflected in in how anything in our society works. Even if you’re living in a detached home, you’re relying on your local council and your local community to provide services.”

He says the biggest barrier co-operatives face now is the access to land that isn’t already owned and able to be used for this purpose.

“The level of support, energy and resources that needs to go into setting up a co-operative is intense. I think a lot of people, once they understand and are exposed to the to the model, get that it’s a really easy way to deliver that kind of stability and longevity that people are really looking for because the private rental sector doesn’t deliver it.”

A new strategy for student housing

In 1991, University of Sydney students established Stucco, a student housing co-operative providing low-cost rental housing for students at financial disadvantage. The property is co-owned by the University of Sydney and the NSW Department of Housing. The co-operative houses 40 people across eight self-contained units, each with a kitchen, phone, and bathroom that costs each member $100 per week. In 2015, Stucco installed a 114-panel solar system and battery network to reduce energy costs and work towards a fully self-sustaining system. Each member commits to a minimum of five hours per week of maintenance or administrative work towards the property, and fortnightly General Meetings cover committee reports, collective discussions and votes over proposal, and forward planning.

Julie LaPalme, Secretary-General of Canada-based Co-op Housing International (CHI), explains many countries such as Egypt, Turkey, India, and Poland have many housing co-operatives due to the fact that at one time their governments had enabling policies that fostered development.

“Deregulation and the neo-liberal governments since the fall of communism have changed the legal landscape for co-ops. As with changes in government, policies tend to change and the co-op sector has to adapt to different conditions,” she says.

According to CHI data, it is estimated that close to 11 million Polish citizens live in co-operative housing, with some projects housing up to 100,000 individual members per co-operative.

LaPalme says, “Countries that are more consistent over the years are Nordic countries like Norway and Sweden where co-operative housing is more common, probably because there they have an equity model. In other countries like Germany and Switzerland where co-ops have been around for a long time, they use a rental model. Berlin and Zurich are good examples of cities with many co-ops. In Zurich, nearly 25 percent of housing is composed of co-operative housing.” She adds New York City has many co-operatives but most of those are ownership co-ops.

As to its long-term possibility in Australia, Patterson Ross says “I think the path from where we are now to co-operatives making a really significant difference is a bit of a long one because we do need to see the scale.”

“If we get one set up, which shows that it’s doable and achievable in the modern era, and then another one happens and another one happens, then the people living in those co-operatives will have a significantly improved experience of renting and living that is worth pursuing. We do need to have a sustained strategy about growing the co-operative sector for it to start to make a big difference, but we should celebrate little wins along the way as well.”