Three ideas: – 1) Community Land Trusts as a way to cap market values of properties; 2) Key worker access to CLTs through employer contributions to the percentage of equity held in covenant, and 3) Rental efficiencies through key workers’ employers paying rents directly to HAs
Description: Dominic’s proposal has three component parts.
First, it would be possible to utlise CLTs to cap market values and ensure at least a part of the equity base is held in covenant for the community, with rental costs of non equity owned property subject to the same ratio (here proposed as 70% of commercial rates with 30% of equity held in covenant).
Second is the idea of engaging with Key Worker employers so they invest in the covenanted part of the equity held by the CLT, conditional upon these houses being used only for Key Workers. This would ensure Key Workers have access to equity and rental capped affordable housing in relevant geographies.
Third is the possibility of Key Worker employers paying rents directly to HAs and in so doing saving tax and national insurance costs.
Improvement: CLTs would cap equity and rental values and so ensure affordability in the long term while allowing those who buy their home to benefit from any equity uplift. Employers of Key Workers could ensure provision of affordable housing for their staff alongside potential cost savings on rent.
Dominic Ellison’s contribution to Rental Matters
I was approached to contribute this thought piece because of my role in Value Structures, a community-owned co-housing co-operative, created to develop residential property for lifelong living under an innovative, hybrid private- and social-ownership model, enabling low-to-medium income households to own a majority stake in their homes.
The Value Structures model replaces the landlord system with a community of land stewards. Members of Value Structures will be empowered to co-design and construct small-scale, ultra-efficient, eco-friendly, multi-family homes with shared resources. Leaseholds will be available for purchase at around development cost, 70% of market value, and held in covenant at 70% of market value in perpetuity. Utilising existing shared-ownership models, the rent for the non-owned equity will be subject to the same market value ratio. The freehold will be owned by Value Structures, the community-focused hub from which its members, the homeowners, manage all properties.
The model is set to develop new homes within existing communities and is designed to be agile – able to develop in small or large sites, yet fundamentally scalable by Value Structures and replicable by others. We believe that the true innovation comes in working within the structure of the private housing market to turn some of the problems it causes into assets. Our members will invest in their homes and see their value rise or fall with the market, although all sales will be subject to the same 70% discount on market value.
Utilising multiple small sites is a perfect strategy for an urban region that alternates between affluent areas and population-dense estates. It will also allow us to build up an asset base incrementally, which is fully protected in community ownership by an asset lock.
However, we recognise that our model, which is aimed at enabling people into home-ownership, cannot meet the housing-needs of all. Value Structures adopts the proportion of take-home pay calculation of 35% for what can be considered as ‘affordable housing costs’, as advocated by Shelter, and so presently we see our financial structures as being useful only to those who earn the Living Wage (within our current area of operation that is the London Living Wage) and above.
If the Value Structures model were to be successfully replicated across the UK, it would not remove the important role of Housing Associations, Council Housing and Housing Co-operatives in meeting the needs of the lowest-earning individuals and families.
Through my work for Hackney Co-operative Developments I am currently involved in the early stage development of a new model for a Community Land Trust and Local Authority partnership housing development, which seeks to investigate alternative models for providing genuinely affordable housing.
This group is looking to develop a large housing scheme which will provide housing at a sliding scale of price, with a large proportion locked at the rates charged for Council-provided housing, through a spectrum of prices to the upper-tier, which aims to be provided at ‘the lower-end-of-market’ prices.
It is envisaged by the group that the development can be delivered with a level of financial efficiency that the higher-priced rentals will subsidise the lower.
I recognise the attractive benefits of a model that would allow those in the greatest financial need to be delivered housing at the lowest cost that can be afforded by the provider and for the rental prices charged to a tenant to increase as their financial circumstances improve. Doing so will allow for a progression of tenants to access highly-affordable homes and go on to subsidise others to do the same in the future, without having to leave their homes and break up community links that have been developed.
However, to do so would incur costs to the provider as it would require an administrative function to monitor the changing financial circumstances of tenants throughout the life-time of their tenancy. Furthermore, to do so effectively would also require that support is given to tenants to improve the tenants’ employability skills so as to improve their financial circumstance, whether this support is provided by the Trust or by others.
One further thought which occurred by the questions posed by Ben Metz around whether there may be agencies outside of the tenant themselves who would be prepared to pay for the residual value created by the provision of affordable rents.
Key Workers are the group of people employed by the public sector in a frontline role delivering an essential public service in the areas of health, education and community safety where there are serious recruitment and retention problems. Central Government recognises the need to recruit and support Key Workers within existing communities and as such provides funding and support to enable Key Workers to buy or rent a home at an affordable price.
The question I would like to pose to Trafford Housing Trust is whether it would be appropriate for them to lobby for a change in legislation that would allow for public sector employers to pay the rents of Key Workers directly to approved Housing Providers, clawing back these costs from the tenants’ gross salary, providing the tenant income tax and national insurance savings (32% standard rate, 42% higher rate) and therefore making rent more affordable?
About Dominic Ellison
Dominic has over 14 years’ experience in business administration within Commercial Business, Co-operative and Social Enterprise and also the Charity and Voluntary Sector at Board, Senior Management and Adviser level.
In 2011 Dominic joined Hackney Co-operative Developments (HCD) as Chief Executive. HCD’s role is to promote co-operative business models and the growth of the co-operative economy in its locality, which it does through providing a range of incubation and support services to co-operatives including business development and governance advice, networking and affordable workspace.
Dominic Chair of Value Structures, a Co-housing Co-operative Community Land Trust. Value Structures offers an agile, flexible strategy to deliver permanent, sustainable, affordable housing.
You can get in touch with Dominic at email@example.com.