Bob Knowles

Anchor the creation of local complementary currencies in reconfigured HA rental policies.

Description: By offering to accept rental payments (in part or wholly) in a local complementary currency in areas where there are none a HA would provide a powerful incentive for their creation but with zero risk to income streams, at least initially.

Improvement: Zero initial risk and a bold public statement made by any HA adopting such an approach. Over time this would lead to a range of local economic and social benefits that are well documented in the study of complementary currencies.

Bob Knowles’ Contribution to Rental Matters

Money, Rent and Housing Associations


As quintessential social enterprises, housing associations (HA’s) exist for a social purpose rather than as a conventional business, which exist to maximize profits for shareholders. HA’s make homes affordable for many people that might otherwise not afford a decent home within the context of full commercial market costs (i.e. private rented or mortgaged owner/occupier).

The fact that there are over five million social homes in the UK (about ½ HA’s and ½ councils) indicates that HA’s perform a vital function in our society. The demand for social housing is increasing.

However, HA’s have to operate in a financial system and economy principally structured for commercial activity driven by the profit motive. For example, banks – the creators and providers of debt capital to HA’s – do not exist to provide a social function but are driven by the imperative to maximize profits for their shareholders. Thus the structure, terms and costs of their loans are often unharmonious with what HA’s are actually trying to achieve.

The majority of HA’s are highly leveraged. This means that HA’s have to achieve a delicate balance: maintaining affordable rents within government guidelines whilst servicing their debt, covering operating costs, maintaining solvency and ensuring they can generate a surplus to develop new social housing stock. Conventional methods of HA financing using bank style lending are rigid.

In addition, the government’s proposals to encourage even greater numbers of tenants to purchase their homes from HA’s at nominal prices put further pressure on the HA’s with regard to maintaining this delicate balance.

Is there a way in which HA’s could ‘decouple’ themselves from this dichotomous position? Where HA’s can operate within the conventional economy and achieve greater results with regard to their social mission by not having the constraints imposed by the commercial pressures of conventional finance?

I believe there is. Freed from these constraints, HA’s could approach the issue of tenant rents far more flexibly (for example, tailoring rent policy to protect those particularly vulnerable tenants from not being able to meet fundamental needs) and also expand the scope of their social impact in other ways.

Alongside councils, HA’s have the potential, as socially oriented stakeholders within their communities, to create a means of funding their activities that is harmonious with their social mission. Furthermore, the approach outlined below provides tremendous potential for HA’s to widen their scope for social impact:

HA’s and councils can create their own money.

The Nature of Money

Contrary to the beliefs of many people, the vast majority of our money supply (around 97%) is created and cancelled by banks. Less than 3% is created by the government. Banks create money when they create credit – i.e. when they lend money. The government creates money by minting and issuing notes and coin.

The moment a loan is created out of nothing by a bank an equivalent deposit is made in the account of the borrower. The majority of lending is secured against a borrowers’ assets and the majority of assets used as security are ‘real’ assets such as property.

Also, when all or part of a loan is repaid, money has effectively been taken out of circulation and cancelled. In order to maintain a certain level of money supply, banks need to keep creating credit with new loans.

In effect, money is a fungible representation of value, created and anchored principally against assets of real and enduring value – such as homes. This fungibility, and a ubiquitous faith in the value of money relative to real things, is what gives money validity as a medium of exchange, a store of value and unit of account. Other than that, money is just data in computer systems, or paper and metal symbols of value.

So, if money is literally created on the back of houses, do banks have a monopoly on this? No they don’t.

Banks create money in the form of national currency. However, in the UK sterling does not have to be the only medium of exchange. It is not illegal to create alternative or complementary currencies that function completely differently to meet certain socio-economic needs more elegantly than conventional national currency.

There is nothing to prevent two parties entering into economic activity using any medium of exchange they wish – as long as any taxes applied to that economic activity are paid in UK sterling.

Examples of alternative/complementary currencies include the Bristol Pound ( and Swiss Wir (

What is interesting about the Bristol Pound is that the local authority accepts the currency as payment of local taxes and also pays an increasing number of its staff part of their net salary in the currency. The mayor receives his entire net salary in the currency.

The Wir is a mutual credit currency which facilitates transactions on a B2B basis whilst avoiding undue interest and other charges. It is based on mutual trust between the members. The currency currently turns over in excess of 2bn CHF (Swiss Francs) equivalent per annum. Transactions typically involve a combination of conventional national currency and Wir (partially for the tax reason above).

There are many other forms of complementary currencies designed to meet specific socio-economic needs. Too many to detail here, but the sky is the limit for creating solutions to improve the wellbeing of people in local communities and generate a local ‘common wealth’.

The Opportunity for Housing Associations

It is feasible for a HA to play a key part in creating a local complementary currency programme which could over time:

  • Pay for a significant proportion of the capital costs of building new properties
  • Refinance an expanding number of existing properties within the housing stock of the HA
  • Reduce pressure on the HA’s income from interest and other finance costs
  • Provide tenants and the local communities with new media of exchange that can better facilitate the provision of services that are exposed to austerity cuts (this could be particularly important in ensuring vulnerable tenants – such as elderly needing care at home – can be better catered for)
  • Provide tenants with the means to pay their rent using complementary currency rather than conventional sterling, and
  • Enable solutions that can assist young aspiring families in beginning to own their own home using innovative shared ownership models.

As indicated above, a local complementary currency system anchored to a proportion of the properties of the HA could strengthen the balance sheet and have an immensely powerful impact with regard to resolving key socio-economic issues facing tenants and other community members.

Perhaps the greatest attraction is that the HA can ‘propagate’ the above processes with minimal cost and minimal risk. It can start small and grow through a highly risk managed process. In addition, there are IT platforms and regulatory solutions that can be acquired at little or no cost that are already proven.

However, it is vital that the HA is able to access deep levels of expertise and understanding in order that the solutions can be properly designed, implemented and managed. Over the last ten years Empower Community has been establishing relationships with some of the best minds to help develop this approach.

The next steps from a Housing Association’s perspective are:

  1. Work with appropriate parties that can help design and implement the currency
  2. Undertake an analysis of the current financial framework of the HA (capital value of stock, structure of borrowing – including security arrangements, income and operating costs etc.). This will indicate the scope for participating in a local currency programme
  3. Understand which other community oriented local stakeholders might want to participate (council, other HA’s, credit unions etc.)
  4. Analysis of the key socio-economic issues being faced by local communities, and
  5. Determine the design and scope for a local currency system and the potential impacts for the HA, tenants and local communities in general.

About Robert Knowles

Prior to developing social enterprises, over the last 10 years focused on both social and environmental issues, Robert had a twenty-year background in business and financial services, working with organisations and their senior management. This has included designing and delivering solutions in new ventures creation, capital raising, institutional investments, project finance, tax planning and personal wealth planning. His main area of focus over the last five years has been working with Empower Community to help councils and housing associations establish solar PV programmes for both their own housing stock and private residential homes in their respective local areas.

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