One of the biggest financial drains on any family is the home. Whether you rent or you buy there are pros and cons. If you buy you eventually pay off your mortgage, but by the time that happens the house is 15, 20, 25 years older and now requires more ongoing maintenance. If you rent you can’t personalise or upgrade your house and there’s always a chance you can be asked to move.
What if you could find a way of increasing the pros and reducing the cons by combining the two approaches?
A little while back I wrote a post on using community projects to create capitalist wrappers around communist/socialist ideas. In that post I was thinking on a large scale of how a community could separate themselves individually from some of the negative sides of capitalism, but still live in the “normal” world by working together as a community.
One of the ideas I mentioned in that post was to form a co-operative company to be the legal responsibility for home and land ownership etc. Whilst the key ideas from that post are unfortunately unlikely to happen (it largely depends on buying an entire village or something), I have since been thinking of a slightly more realistic version.
What if a group of people got together as a co-operative and bought their homes together, rather than renting from private landlords? And what if the rent decreased with time?
Here’s a basic outline of what I was thinking:
- You form a members co-operative. Every member puts in say £1000 (that could be a £1 membership fee plus £999 into a savings account).
- You buy the first house and the first tenant moves in, paying market rate rent. As the mortgage gets paid off and you build up a bulk of finances you buy the next house and the next house.
- The longer a member is renting, the lower their rent payment becomes. I was thinking perhaps halving every ten years. If they move into a house with a market rent of £1000 per month, after ten years that would go down to £500 (ignoring inflation). After 20 years it would be down to £250 and down to £125 after 30 years.
It could continue halving, but would probably need a minimum cap to ensure some money coming in. Either way, by the time you retire you’d have very cheap housing.
My other thought was that this privilege could stay with the renter even if they moved. Imagine this scenario:
Member Sally started renting a £500 per month studio when she was at university. A couple of years later she got married and moved into Flat B with a market rate of £650 per month. After a few more years they have children and decide to move to House C with a market rate of £1200 so they can have more room. Because she’s been a renting member for 10 years, they would only pay £600 per month on House C.
This way you could easily move to the right home for each stage in your life. No deposits to pay, no agents fees to pay, just look at the portfolio of available houses and say “we’ll take that one!”
Of course sometimes there might not be a perfect house for you that’s already available, at which point you could ask the co-operative to buy one. The problem is, a new property needs a new mortgage. My idea would be that each new property had a minimum length of full payment, regardless of the status of the member, so that the first say 10 years of a propery would always be paid at market rate. That could almost certainly be reduced as the co-operative grew.
As people move and houses are left vacant, more new members would join starting from year zero, paying full market rate on a house that may already have been paid for, thus supporting the rest of the membership. In time it might be possible to reduce that initial rate, too.
You could stay in the same house cradle to grave, if you wanted, or you could move every few years. You’d be free to do as you please. You could decorate as you want and make changes to the house. Some of these I think the co-operative could even pay for, if they add value to the house. Think your house would be better with a conservatory? Make a case to the property manager and have one built; your rent goes up, of course, but you’ve just added a room without having to move!
Unlike most private landlords, for whom it doesn’t make business sense, the co-operative could also make efforts to improve the efficiency of the house. Solar panels, battery storage, air-source heat pumps, rain water collection etc. In fact it might be possible for the co-operative to make some money out of all the solar panels on all the houses if they do it well.
The hardest thing, I think, will be buying the first few houses. Once the first few are bought, I think the momentum would allow the co-op to continue to grow quite quickly. These could start as fairly local co-operatives, covering a city and it’s surrounding areas, for instance, but in time I could see these local co-operatives joining forces so that you could carry that long membership benefit with you wherever you moved.
It almost seems too easy. I know that the numbers would need crunching properly, to make sure that staff, ongoing maintenance, mortgages, insurance and fees could all be paid, but on the surface this seems quite doable.
What have I missed?