Earlier this month the Social Market Foundation published a paper considering alternatives to the traditional homeownership model in the UK as a way of promoting affordable living. In particular, the paper considered the role that co-operative housing could play in the UK, noting that in countries such as Sweden this model of housing represents 23% of their housing stock compared to just 0.2% in the UK.
Could the co-operative housing model play a bigger role in Scotland and what are the benefits and drawbacks of the model compared to other established housing models such as social housing and private sector renting?
Co-operative housing in Scotland
In Scotland there are two distinct types of housing co-operatives:
Fully mutual
This type of co-operative is a specific type of registered social landlord ("RSL") and are landlords themselves rather than managing another landlord's stock. The premise of this scheme is that the tenants collectively have control over the management and ownership of the properties. Fully Mutual co-operatives must be registered under the Co-Operative and Community Benefit Societies Act 2014 and when registered the co-operative becomes its own legal personality separate from its members. The co-operative must have a minimum membership of three (or two if both members are registered societies) (*1).
Tenant management co-operative
Under this model, the co-operative is a society or company formed by tenants who have taken over some or all of the management of the properties which remain in the ownership of the local authority/RSL as the landlord. Delegated management responsibilities can include responsibility for the allocation of properties provided this is undertaken in accordance with the local authority/RSL allocation rules and legislation.
For a tenant management co-operative to be formed they must make an application to the local authority/RSL and be approved by the Scottish Government (*2). In the event that the local authority/RSL refuses an application, the co-operative can appeal to the Scottish Government who will make the final decision. As ownership of the properties does not pass to the co-operative under this model, the landlord would pay for works such as repairs themselves.
In each case the tenants will have a Scottish secure tenancy or short Scottish secure tenancy.
Benefits of Co-operative housing
Key benefits identified by those living in co-operative housing compared to other housing models include:
Social benefit
Active involvement in the management of the property means that residents are regularly meeting with each other to discuss issues which fosters a great sense of community and this interaction can address issues of loneliness, isolation and mental ill health.
An affordable option
Generally speaking, renting from a co-operative is a cheaper alternative compared to the private rented sector and student housing where rents can be prohibitive. It is well documented that there is a shortage of affordable housing in Scotland and for many people access to social housing is not an option due to the pressures on this resource and home ownership is out of reach due to financial restrictions in the mortgage market. The co-operative model can therefore provide a middle ground between renting and owner occupation, sectors which typically house students and young professionals.
Resident empowerment
Co-operative residents have much greater control over the management of the property and can more readily address issues that are important to them. For example, the prioritisation of upgrades to security measures to make residents feel safe in their homes as opposed to general maintenance and decoration.
Barriers to Co-operative Housing
It was reported in 2019 that there were just 11 registered co-operatives and several more unregistered in Scotland, compared to 685 housing co-operatives across the UK. Given the cited benefits of co-operative housing why is this model not more extensively used in Scotland?
Appetite for involvement
For many people, and families in particular, juggling work and other commitments, the prospect of having additional responsibilities for organising common repairs and attending regular meetings can be off putting. Renting from a traditional RSL provides the benefit of an affordable rent for a good standard of property with no further responsibility other than to pay rent on time for the tenant.
Acquisition of land/properties
The acquisition of land /properties by a co-operative is seen as a significant barrier. Many existing co-operatives have been created as a result of transfers of stock from RSLs as opposed to acquisition of new stock. Competition for open market properties can be stiff and it can be difficult for co-operatives to mobilise quickly enough to make offers on properties with a view to expanding their stock, a point highlighted by Edinburgh Student Housing Co-operation in this report.
Funding
Linked to the point above, finance is a significant limiting factor for co-operatives seeking to expand. RSLs and local authorities have the advantage of being able to access government grants and cheaper finance to increase stock.
Existing housing models
Statistics from Scottish Government for 31 March 2022 estimates that social rented properties account for 23% of all stock in Scotland. In comparison housing associations and local authority properties account for 16.3% of all stock in England. The greater availability of social housing in Scotland (albeit recognising that demand still outstrips supply), along with other existing affordable models such as mid-market rent and low-cost homeownership models could explain why the co-operative model of social housing is not used as extensively in Scotland in comparison to other countries.
Whilst the co-operative model of housing does have its benefits, the difficulties of accessing finance and acquisition of land/property is a significant limiting factor for expansion of this model. Coupled with the availability of other housing models this means that co-operative housing will likely continue to play a limited role in the Scotland until such time as those barriers are removed.
S.2 (2)(b) Co-Operative and Community Benefit act 2014.
S.55 Housing (Scotland) Act 2001
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