The Housing Commons
Four participant stories.
Anitha needs to sell her house - she’s moving to another town. Her house is valued at £250,000 and she has no mortgage. She’s signed up with an online agent, and is hoping to get the sale done in three months - resigned to having to move to start her new job before then and rent while selling her house from 100 miles away. It’s difficult, and expensive, but that’s just how it is.
Then a neighbour tells her about the local Housing Commons. If they like the house they will agree to buy within two months.
Since they are reasonable about the price, she is very happy to sell to them.
Dylan and family hate the insecurity of being tenants, but house prices have gone through the roof, and their savings toward a deposit can’t seem to keep up. They read about this new landlord in the town - the Housing Commons, which apparently treats tenants really well. It sounds too good to be true, but it checks out when they ask around. Rents aren’t super cheap, but reasonable, but the Housing Commons accepts payment with ‘rent vouchers, which can be bought online, at prices always lower than the cash rent.
There’s a waiting list - the Housing Commons is popular, but the rules favour local people in need, so they join the list, and 6 months later they’re in - and they get a month’s rent rebate as a welcome. Dylan uses some of their savings - and the money they had thought they would need for the first month’s rent - to buy rent vouchers for the next six months, and they feel as if they’ve made a good choice.
It turns out that the tenancy deal is better than they dared to believe. They feel secure - no forced evictions, no sudden rent rises, and the maintenance is excellent. They are now considered to be ‘Commoners’ - involved in making decisions about how best to manage the the Housing Commons - and in two years they will begin to qualify for rent rebates each year.
Jyoti and Frankie manage some of their savings themselves. They like the idea of investing in something positive, but they need it to be safe, and offer a decent return. They read about the Housing Commons in the local paper, and decide to check out the website.
The offer for investors looks like this:
Investors buy rent vouchers, which are pre-paid rent credits. Investors holding vouchers can decide how they use them.
Vouchers work like this:
Vouchers are not denominated in £, but in square metres. If the rent for a house is set at 100 vouchers, 100 vouchers will always pay the rent - whatever the cash rent is. This makes vouchers inflation proof (in respect of market rents).
Vouchers are redeemable only by tenants of the Housing Commons, in lieu of rent payments.
The Housing Commons publishes its plans regularly, and announces how much cash it wants to raise. Investors who buy vouchers in bulk get a significant discount off the cash rental value.
Tenants can pay rent in cash, but prefer to buy vouchers - even at quite small discounts off the cash rent. This is made easy for them through the Housing Commons website.
The Housing Commons will not charge high rents, but will track ‘market’ rents (lower rents are delivered through rebates, in the form of vouchers). This keeps investors feeling confident about the future value of the vouchers they hold.
Back to our investors:
Jyoti and Frankie look at the detailed reports on the site, showing rent and voucher prices over time (both bulk investor prices and sales to tenants). They can also see that the Housing Commons is legally constituted with clear and effective governance, and has almost no debt, against property holdings in the millions; that it is well run, with high tenant satisfaction, and conclude that the risk is low given the likely return. They decide to put in £10,000, and perhaps more if they are satisfied over the coming year.
The Housing Commons was started by a few people concerned about the housing market in a small town - how it was becoming impossible for young people to stay in the town and have decent homes, how incomers kept pushing prices up, how poor tenant’s rights blighted lives.
A few of them had cash to invest after downsizing, and wanted to do something positive with it, while not feeling rich enough to give it away.
They saw that buying houses with debt (mortgages), always leads to doubling the cost through mortgage interest, and looked for a way around that.
The basis of the Housing Commons model they developed was this:
The model didn’t do away with the important, messy business of estate management. They needed a push to get to the number of properties which would keep a capable person in full-time work - so the first years were all about finding new people who were willing to support the idea. During this time, many wrinkles were ironed out and good practice established. It wasn’t trouble free, but owning houses without debt always provided a strong foundation.
Once they had around 15 houses, things began to take off. Another town started a similar project, building on their experience, and local estate agents began recommending the Housing Commons as buyers (estate agents love cash buyers who can act quickly), at the same time, locals began asking if they could invest. More tenants had become actively involved as Commoners, especially once the rent rebates kicked in. Then four more towns started schemes.
At around 120 properties, they had decided to stop growing, and instead split into two Societies, one on the north and one on the south of the town. They remained connected, making it possible for tenants to swap vouchers from one Housing Commons for those of another, with well-managed ‘exchange rates’, and they increasingly shared infrastructure costs.
The working model settled down to this. Tenants can pay up to 3 months in advance, with either cash at market rents or vouchers, which mostly sell at around 5% less than that. Monthly auctions keep voucher values in line with local rents, and the careful design of these auctions, plus the requirements that anyone wanting to hold vouchers must be a Commoner, have deterred speculators (Investors are Commoners, too).
There is a queue of investors, and people wanting to sell houses to the Housing Commons - the issue is more about not getting too big - the Commoners know that they want to retain a social feel. It turns out, too, that when there is a downturn in the housing market, the Housing Commons can act as a buyer of last resort, saving mortgagees in negative equity, or arrears, so that they can stay in their homes.
The follow-on project - an Energy Commons for the whole town, raised money fast for solar and wind installations, and then moved on to retrofitting Housing Commons and other properties, with the savings turning into Energy Voucher rebates (not to mention the reduced CO2).