Affordable home ownership - Community Land Trusts and Mutual Financing

The Problem

High cost of home ownership in much of the UK meaning up to 90% of emerging households cannot begin to own their own home. Little government subsidy and what there is is directed at firefighting local problems rather than long term permanent affordability.

The Social Invention

Credit where it's due, I didn't exactly "invent" this. The fundamentals of the ideas have been around since the beginning of the building society movement. And more recently it builds on work done by New Economics Foundation, CDS Cooperatives and the Community Finance Solutions group at Salford University.

So a growing movement around the country is now promoting a renewed interest in mutual financing solutions to help each other get on the housing ladder through a vehicle called Community Land Trusts.

It's not always easy to describe succinctly, but basically it's a three stage process that means that communities gain long term control of their own development and householders could begin to build up equity stakes in their home from little more than social rent rates.

Step one: Community Land Trust acquires land and holds it in charitable trust for the benefit of the local commmunity in perpetuity. Land could be gifted, donated as part of developers' affordable housing quotas, or even bought in the open market (in some cases we believe we can afford to pay up to 50% of market values and still produce 100% affordable housing).

Local community gets together to design development to address identified community needs for affordable property assets. Mostly this will be housing, but it could be small business units or similar. This creates a "mutual housing partnership" which takes out one huge commercial rate long term mortgage to pay for the buildings. Residents become members of this partnership. Their monthly payments go towards covering the costs of the big communal mortgage.

So long as households from all the income range excluded from mainstream market priced housing participate, overall their payments will cover the communal mortgage. They get shares in the development according to how much they are assessed as being able to afford which are linked to a local property values index.

When a household wants to move they sell on the responsibility for their share of the communal mortgage to a qualifying buyer. If the incoming buyer cannot afford the same amount, the communal mortgage can refinance to make up the difference.

At the end of the day you gain a proportion of the index growth in the original value of your share of the mortgage.

You get the house you need at a rate your can afford. The local community retains a long term interest.

The Author

Jock Coats (jockox3)

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