Housing

“Affordable housing brings stability, economic diversity and improves the physical quality of the neighbourhood.” – John Woods

Housing commons is a way of providing good-quality, affordable housing with secure tenancies. Houses in a housing commons are owned by the community in perpetuity, not by individuals or businesses (even co-operative businesses) or the state / local authority. 

A housing commons is a partnership of 4 member groups: tenants, investors, stewards, and a custodian / commons safeguarder group with a veto vote to ensure that commons principles are adhered to, and that houses are never sold out of the commons. 

The commons group issues rent vouchers that can be redeemed for accommodation in commons housing. Vouchers are purchased by investors and/or tenants, and the cash raised is used to purchase more properties. This avoids debt to the banking system. 

Here we introduce the basic model. We’ll endeavour to get any queries answered in the comments section below.

It might be good to read the ‘use-credit obligations (UCOs)’ introduction, after which the housing commons idea should be much clearer, as UCOs are the basis for the proposed financial model.

Rent-credit obligations (RCOs) are UCOs for housing – ‘rent vouchers’, if you like – issued by the local housing commons group for use as rent in one of their properties. A house is purchased by a local housing commons group with cash, provided by investors, who in return are given 25 years’ worth of discounted RCOs for the property.

RCOs are not denominated in the national currency, but in square metres of the minimum standard of local property that can be rented. More desirable properties (in terms of location, condition, parking, garden, view etc.) are priced at more RCOs per square metre (rental value is ascertained by a local valuer / surveyor). This makes them attractive to investors, because they’re inflation-proof (a square metre can’t shrink over time in the way that the value of the national currency can). RCOs are tied to a local housing commons, and tenants can move between properties in the local commons.

The crucial thing to remember is that in the current system, after 25 years of mortgage repayments, a homeowner will end up paying a lot more than the initial value of the house. But a tenant in the same house, over 25 years, will end up paying more than double the initial value. So 25 years’ worth of RCOs for a property will be worth quite a lot more than the value of the property. This is the concept that makes the model viable.

Here’s an outline of how the housing commons will work when it’s up and running and there’s a thriving market for RCOs. Below, under ‘What can I do?’ we look at how we might get it started.

A housing commons group is a partnership with different classes of member – including tenants, investors, stewards (members who are paid to manage the scheme and maintain the properties) and ‘custodians’ (see below). Tenants are the biggest member class, with most of the votes. Anyone holding RCOs must be a member of a housing commons group, which is how groups can democratically prevent anyone from cornering the market in RCOs and extracting profits from the community.

A local housing commons will have a relatively tight geographical area (to make maintenance of the houses easier – the steward group and/or local builders / plumbers / electricians will be on call to service a group of local houses at short notice if needed). The average size of a housing commons might be around 100 properties. This provides economies of scale for management and maintenance etc, but it’s still small enough for good social relations and commons governance.

For any house, there are never more than 25 years’ worth of RCOs in circulation, and they can only be issued for houses that the commons group owns, and are in good enough condition to be rented out.

The group obtains income for maintaining the properties from re-selling RCOs redeemed by tenants.

Although the commons group will get slightly less than market rent for their properties (because they issue RCOs at a discount), they’ll still be better off than commercial landlords, because they don’t have any debt. Over time, the surplus that they generate through having no debt can be redistributed back to tenants as rent rebates, to keep rents affordable.

Anyone can sell a house to the commons. The seller is happy because the commons group is a reliable, cash buyer and there's nothing unusual about the purchase.

House sellers who receive cash for their house are not investors and therefore not members of the housing commons group. However, if they don’t need cash to buy another property straight away, they could, instead of taking payment for their property in cash, take RCOs, and become investors themselves. There probably won’t be many of these until the housing commons is well-established, but as RCO holders and therefore investors they’ll then be members of the housing commons group.

An investor could be anyone with spare cash that they’d like to invest in their local community. This might include people with a deposit for buying a house, that they realise is not going to be possible, and so they might decide to invest in a project that may provide them with housing another way – that also benefits their community.

There’s a marketplace for small buyers and sellers (see ‘tenants’, below), and there’s a monthly or quarterly auction for volume sales – to investors.

RCOs will never be the object of insane speculation and the creation of billionaires (like various financial instruments, including crypto) as they’ll only ever represent rent on existing properties, which tenants can pay in cash if RCOs rise in price, and so they have limits in the real world. Investors can decide to hold on to RCOs as a longer-term, inflation-proof investment - maybe as part of their pension – or they could sell them on to other investors, or to tenants, who will buy them if they are slightly discounted.

Canny investors will realise that a housing commons group has a very healthy balance sheet. Its assets are solid – houses; and on the liabilities side is the requirement to provide housing to tenants, a month at a time. Housing is not like energy or food – it doesn’t have to be reproduced every month. A house just sits there, and needs occasional maintenance (which the investors won’t have to do themselves). They’ll see that 25 years’ worth of RCOs are worth significantly more than the house, and that the housing commons will acquire housing (that will keep rising in value), without incurring debt, which represents an attractive, safe investment - especially in a world of shrinking investment opportunities.

Investors don’t have to see every property – they’d just have to assess the portfolio and the management team. They have to trust that the group can attract tenants by managing the properties well, and choosing properties that people want to live in.

Investors get a one-off return, but there’s no interest to be paid to mortgage companies, and commons houses will never be sold again. In time, the group can wean itself off investors, and rents can fall to the cost of providing housing.

The message to tenants is: this house is for rent at £x per month, but you can buy rent vouchers – at a small discount, so your rent will be cheaper. The discount is worked out by the management committee of the housing commons group, and is possible because there’s no scarcity of RCOs, and no debt to repay. This provides affordability and security for tenants, in well-maintained, well-insulated, high quality properties that they’re actually co-owners of. If there’s a waiting list, the group can vote to prioritise local people in housing need.

There’s a marketplace for the RCOs (an app – a bit like eBay). Investors put them up for sale, and tenants buy them.

The interests of tenants and investors are aligned, in that investors want the rental value of the houses to remain high (to maintain the value of their RCOs); and tenants want good-quality housing (which makes sure the rental isn't too low).

There’s also a ‘custodian’ member class, who don’t propose anything, but have a veto vote. There are some core commons principles – for example around evictions without due process, profiteering, selling property out of the commons etc. They’re disinterested arbiters to make sure that the purpose of the commons isn’t compromised - if the custodians see proposals that go against commons principles, they can veto them.

Custodians could also, for example, stop tenant members setting the rents too low, which would undermine the model by deterring investors.

This will be a national body whose job is to make sure that local housing commons groups stick to the core principles. It can appoint / train / vet local custodians. This body researches trends that will affect the housing commons (including govt. policy), creates guidelines on how to respond to them, and provides arbitration for conflict resolution.

Local groups pay a small membership fee to the society - or there might be system of social franchises. Local groups are autonomous, but subscribe to the models developed by the society.

If any local housing commons group fails (although without debt, they should be robust), the national society will step in to ensure that housing is provided and maintained for RCOs, while working to re-establish good local management with the commoners.

There have been several community-owned housing models, including housing co-ops, community land trusts and cohousing. Garden cities were originally intended to be community-owned, but this was dropped due to opposition from investors. The fact that the housing commons model doesn’t require debt makes it much more likely to grow to challenge the current system.

Friends of Dil Green and Tom Woodroof (of Mutual Credit Services) wanted to provide affordable housing for young people, but were ideologically opposed to becoming landlords (and didn’t want the problem of rent collection and maintaining a single property). Dil wondered if the use-credit obligation model could be applied to housing, and discussed the idea with Chris Cook, inventor of the UCO concept, who agreed that it could.

• It makes housing human – it’s about affordable, good-quality homes with secure tenancies and good terms (with allowances made for times of hardship), rather than speculation. As the commons grows, because it doesn’t involve debt or price speculation, rents can fall to the cost of managing and maintaining the properties.
• Housing commons groups may have management crises, but they’re unlikely to go under, because they have no debt. Members can replace the management, and borrow against housing stock in case of emergency.
• Keeps wealth in communities, which keeps communities alive (unlike some seaside towns that are comprised of mainly second homes and holiday lets). As housing commons groups are local member organisations, they’ll aim to do whatever the local members want – e.g. trees, front porches, solar panels or loft conversions.
• Allows young people to stay in the community they grew up in.
• Parents can ensure a secure home for their kids by passing on their tenancy.
• People will own their own housing – they’ll just do it with other local people, in a way that shares the responsibility for maintenance, and prevent banks and other mortgage providers or absentee landlords from extracting profits from local housing. If you see the housing sector as a way of providing secure, affordable housing, this idea is for you. If you see it primarily as a way of making money, it’s not.
• The group can buy derelict properties, and train young people to renovate them. Experienced people can be employed to train them, and paid with cash or RCOs.

• Because there’s no debt to service, housing commons groups can afford to retrofit insulation, renewables and energy-efficiency measures. This can help keep old people warm in winter, improve the hugely inefficient national housing stock (which all governments have failed to do, and are not really capable of doing, from the top down), move the UK towards net zero carbon (ditto), and provide a springboard to launch a local (renewable) energy commons, which will be much easier to set up in a town with a functioning housing commons.

• Assets (housing and cash) are transferred into the commons, to help build a commons economy. There’s been a lot of talk about building the commons, but it hasn’t taken off in a way that can challenge capitalism. This model could change that, because it’s not based on debt and it doesn’t require altruism.
• Commons housing will never be sold again. Building societies were demutualised and ‘carpet-bagged’ – members voted to remove the legal asset lock that prevented them from being sold, in order to receive a one-off payment. This can happen with co-ops too. As it grows, the housing commons will be holding a lot of very valuable assets, with no debt, so will be an obvious target for predatory capitalists, with clever lawyers trying to get round the asset locks. But this model, with the Housing Commons Society acting as custodian, is designed to prevent this.
• The state won’t be able to close down the housing commons as it did housing co-ops – by withdrawing funding – because the housing commons won’t rely on state funding.

If a housing commons keeps growing rather than splitting to cover more (but smaller) areas, then it’s possible to imagine a small town being dominated by one housing commons group, and possibly becoming quite exclusive, with members only accepting people like themselves. This is something that custodians can limit, with appropriate, human scale as a guiding principle. Scale can be reached by many, smaller groups rather than one giant group. Then if one group tries to be exclusive for whatever reason, people can go elsewhere.

Here's where we've got to in Stroud. We're looking for people to give it a go in their town. Let us know if that's you.

It’s a new idea, and you can be involved right from the start, and have a say in how it evolves. Contact us if a) you’re part of a group that would like to set up a housing commons in your community (see below) – we’ll co-design a project with you for your community; b) you’d like to talk about the possibility of investing; or c) you’re a legal or housing specialist wanting to contribute to the design.

We’re looking to start in the UK. The legal structures around property are different in different countries, so the model will have to be built differently for each country. As the idea develops, groups will have to do the work to develop their model in line with local laws.

We see the housing commons developing in 4 phases:

This involves building a few, small, working models as examples. We have a low-risk design for a pilot, which we're testing in Stroud.

This phase will be similar to the first building societies - groups of people who are currently tenants, and realise it would be better to work together, rather than strive individually to become owner-occupiers. These people could pool their money to form a housing commons in their town.

To start, the group finds a willing house seller and investors (who can invest either cash or a house), and sign contracts. Cash investors put money into an escrow account. Later, the money is moved from the escrow account to the seller’s account, and the investor gets the RCOs for that property. At this point the seller has the money, the investor has the RCOs, and the housing commons group has the house.

Legal agreements will be in place, stipulating that, in case of failure, the house will be returned to the seller or will be sold to reimburse the investor. Because there’s no debt, the house can’t be lost.

If you'd like a pilot project in your town, or if you’re experienced in any aspect of housing management, maintenance, law or finance, and you want to offer advice or contribute to the national group, contact us. We’re partnering with Mutual Credit Services, who will hold your hand through the process.

When we have a small number of pilot projects, to show that the concept works, it will spread to more towns. This can be helped by forming groups of interested people who know their local area, including what local tenants need (student bedsits, small houses for older or single people, larger family homes etc.). Their role will be to find more people happy to invest in / sell property to the commons, and to set up local word-of-mouth crowdfunding - asking people to put 5-10k into a local, secure investment pool. On the basis of that, the local housing commons will be able to begin to buy the kinds of housing stock required locally.

At this point, the group can help people who can’t pay their mortgage, and are likely to be evicted, but want to stay in their home. The commons group can give them RCOs for the value of the mortgage they’ve already paid, use investment funds to pay off the mortgage, and have a relieved tenant, who can pay RCOs to continue to live in their home.

When the concept has been shown to work, and as fledgling housing commons start to grow in a range of communities, ordinary people selling a house will realise that the housing commons buying their house from them in exchange for RCOs is an attractive option, because the RCOs can be shown to be worth more than the market price of the house. We want to get to the situation, as quickly as possible, where sellers, investors and potential tenants are approaching housing commons groups, because the benefits for all parties are clear.

Once a market has been established, and word spreads, more people will transfer homes to the housing commons in exchange for RCOs, because it makes financial sense. Some people will even want to sell their house for RCOs and use them to keep living in it, because it removes the worry of insuring, repairing and maintaining the property.

Estate agents and letting agents will change the way they work – otherwise, as the commons grows, they’ll lose business.

A national, regulated, ethical, mutual investment fund could be set up, to invest in commons groups everywhere. Specialist ethical financial institutions could help design a fund. Many people would like to invest in their community, but there’s no low-risk, well-managed, simple way to do it.

Each housing commons group will remain small and locally-focused. Scale will be achieved by federating local groups into district networks, which will be federated into regional networks, which will be federated into national networks. This will build resilience, communities of good practice, and allow people to move from one area to another, and swap RCOs.

At this point it could really take off, and housing move towards becoming a common resource. The state might fight it, but as this really does solve the housing crisis, we need to get as much support as we can.

We’d like to ask for your help. Let us know what does and doesn’t make sense. Ask questions in the comments section, and we’ll get them answered for you. More details will also be provided in upcoming blog articles, but the above covers the basic concepts.

Let us know if you'd like to start a housing commons group (or a general commons group) in your town. We're developing materials to help local groups. You could be part of something world-changing from the start.

Thanks to Dil Green of Mutual Credit Services for information.

Dil Green was an architect and builder for 30 years, working on projects from an extension to London’s Science Museum to an award-wining eco-surgery. He now works away at systemic leverage points around Governance, Wisdom: Pattern Language, and Economy:  https://opencredit.network/Mutual Credit Services. He lives in Brixton, and blogs at digital-anthropology.

Date on Lowimpact:2022-12-23