Financial Model

An innovative financial model

Our model builds on and improves the existing rental cooperative
business model. The traditional rental co-operative model has the advantage that residents are members who are able to take democratic control of their housing – setting stable and affordable rents, incentivising investment in housing quality and building community through the collective management of their homes.

There are some key limitations to the existing rental co-op model however which has stunted its growth in recent years; notably that it is hard to finance, unattractive for people with capital and founding members are subject to higher costs and commitments.

A form of limited equity Co-op known as a Mutual Home Ownership Society (MHOS), established in 2008, responded to some of these challenges. It provided a mechanism through which collectively owned and managed homes could secure finance and capital investment and deliver a return to its members. MHOS has also failed to gain traction however, due primarily to its complexity. In addition, MHOS requires refinancing each time co-op member’s leave, which can make it inaccessible to new members without capital.

Through an action research project entitled One Planet Affordable Living (OPAL), Transition by Design examined MHO in depth and identified an opportunity for evolving the existing rental cooperative housing model, utilising the thinking behind Mutual Home MHO to deliver a range of key and unique benefits.

Withdrawable Share Co-operative

Furze intends to be a new fully mutual cooperative housing model that offers security of tenure, democratic governance, affordability in perpetuity and – this is where we differ from a fully mutual rental co-operative – the opportunity for members to build up savings over time. The idea builds on MHO but offers greater simplicity, flexibility, accessibility and ensures the
homes remain in common ownership.

The income drawn from ‘rent’ is based on a fair measure of housing costs and remains fixed throughout the life of the coop, independent from the property value. Founding members who contribute to capital costs save up some of that cost and recover it when they want to withdraw their shares, provided the co-op can afford to pay out. Payment from later stage members allows the co-op to build a surplus which can be used to
subsidise new housing co-ops. Initial financing can take the form of loan from the public (including members) and / or share investment from members.

Key advantages:

  • It reproduces the well established and understood rental model but allows early members who contribute more to save overtime and “take something back”
  • It provides flexible forms of financing at the outset and does not requires upfront capital from members
  • It allows for mutual support between individuals on higher incomes or with capital, and those on lower income, or without capital
  • Capital gets repaid over time so the co-op is not reliant on perpetual refinancing. The result is a completely nonfinancialised form of tenure
  • It allows the co-op to build up a surplus and contribute to supporting its aims and principles