This definitions review was undertaken by Transition by Design in 2018 as part of ‣ within ‣
From Yorspace
Mutual Home Ownership (MHO) is a new form of home ownership with affordability at its heart.
People living in MHO properties pay a deposit and make monthly payments under the terms of a long lease. In making payments, they accrue collective ownership of a cooperative society.
Ownership is long-term and secure. If a resident wishes to leave, their lease and occupancy rights are transferred to a new incoming member, and their accrued equity in the society is returned to them.
By dealing in equity shares rather than ownership, the property is held outside of the market, and the affordability created is recycled from one generation of occupants to the next.
The model creates a new way of owning equity in the value of residential property. Although relatively new, the model is tried and tested.
| Source | Common Ground report (Political Launch update) |
|---|---|
| Date | 2007 |
| Definition | Report is dedicated to the case for MHO and description of how it works. Outlines process (summarised) as follows: |
| - CLT setup | |
| - Shared Equity co-op setup | |
| - Co-op builds homes under licence from CLT | |
| - Key-worker payments include maintenance | |
| - Finance is raised for building costs using Co-op Housing Finance Soc | |
| - Payments 35% of income | |
| - Residents can reduce outgoings by taking on maintenance | |
| - When residents leave they can take an equity stake | |
| - Payments linked to income index | |
| - Repairing obligations with occupier | |
| - Lease arrangement is proposed | |
| - Assumes salaries £15-25k for London and £13-23k outside Most interesting bit? | |
| Co-op makes payment to outgoing members by topping up its loan to the original level plus inflation… Result is that unlike a conventional RSL scheme would not move into a position where there is additional equity to increase financial ratios of security. Security for its finance will always depend on rental income and retained equity held by the CLT | |
| Comments | Focus of report is on key workers Refers to shared equity co-operative model over specific term ‘MHOS’ |
| Natural focus on CLT as a foundation – enables free/reduced cost land and benefit beyond co- op members, enables wider community and can hold any spare equity in trust |
| Source | CDS Co-ops Consumer guide to MHO |
|---|---|
| Date | V3 Nov 2008 |
| Definition | Mutual Home Ownership (MHO) is a new way of owning a stake in the housing market. It is designed to bring the bottom rung of the property ladder back within reach of households on modest incomes in areas where they are priced-out of the housing market. It is also designed to remain permanently affordable for future generations. Mutual Home Ownership treats living in a home and its value as a consumer durable…. Instead of owning an individual property, or a percentage share of the value of an individual property, residents own equity shares in a mutual property trust owned by them and other residents A Mutual Home Ownership Society is, in effect, is a resident owned property unit trust. In developing MHO we have been concerned to ensure that its arrangements are equitable. Openness, honesty, accountability and equity are a very important part of our Co-operative Principles and Values |
| Comments | Extremely comprehensive and yet concise definition. Use of jargon may make accessibility to new groups difficult |
| Source | CCH – Report Financing Co-operative and mutual housing |
|---|---|
| Date | 2015 |
| Definition | CDS developed the model for Mutual Home Ownership as an innovative approach to developing intermediate market housing on land owned by a community land trust. Instead of owning an individual property or a percentage share of an individual property, resident members own equity shares in a portfolio of properties mutually owned by them and other residents. The number of shares a member owns depends on what they can afford; the rent payable by members being geared to 35% of net household income. |
| Comments |
| Source | Co-op Party, author David Rodgers |
|---|---|
| Date | Jan 2009 |
| Definition | It is a type of housing co-operative devised by CDS Co-operatives ‘Mutual Home Ownership’, the development of which will be an attractive investment for life and pension fund investors; a debt investment secured on the value of property co-operatively owned by the residents who live there. This will be a less risky use of these funds than investing them in shares, asset-backed securities, derivatives and default risk hedge funds on the global financial markets. So how will this work? The key is the use of publicly owned land (and other land that can be acquired at nil or reduced cost) and the separation of the land value from the value of the homes that are built on it so that residents pay for the cost of building their homes, not the land. The land is held as a community owned asset for the benefit and wellbeing of a defined local community by a Community Land Trust (CLT). Consumer durable |
| …It will see a home as a consumer durable, just like a car, a fridge or a washing machine. It will not be a speculative investment which residents buy hoping for a windfall capital gain when they sell it because they expect shortage of housing supply and cheap credit to inflate its value. In mutual home ownership the home’s value is driven by the cost of providing it and the cost of maintaining it. The resident who has the right to use it consumes its value over its normal useful life. Most interesting concluding para: Complex? No. Different forms of co-operative and mutual ownership are well established across the globe and are no more complex than other forms of shared equity ownership. Different? Yes. It is a different way of owning a stake in your home that is designed to be economically, socially and environmentally sustainable. Together the Government and the Cooperative Movement can really make a difference. Further research needed on this “A 12-month interest payment guarantee will be available to the lender from the Co-operative Housing Finance Society Ltd (CHFS)” | |
| Comments | Focus on finance language and opportunities for investors and cheap, public land. Refers to CDS and ‘A Consumer’s Guide to MHO’ Very detailed and technical information, as would be expected by one of the creators and original authors, David Rodgers Extremely comprehensive and well laid out argument for MHO from a lobbying perspective. Lacks any indication of practical steps to undertake – where do we find this? Do we have to rely on support from CDS? How do we know what’s possible through market? The basic practicalities are missing here – more of a policy piece. Further research – · Amending the Commonhold Act 2000 to enable co-operatives to register as Commonhold Associations and develop Co-operative Commonhold housing schemes on land owned by a CLT; Commonhold being a more appropriate democratic form of tenure for Mutual Home Ownership than feudal landlord and tenant property law. · Excluding all homes built on land owned by CLTs from the leasehold enfranchisement provisions of the Leasehold Reform Act 1967. |
| Co-operative London | |
|---|---|
| Source | Co-operatives London, briefing note prepared by Paul Chatterton |
| Date | Feb 2015 |
| Definition | Some key points extracted: |
| - New affordability model | |
| - Case for intermediate housing |
Some limitations: minimum incomes, not suitable for wageless and lowest income groups. Members cannot claim welfare and accrue equity but builds in permanent affordability.
Costs limited to 35% net incomes In sum MHO is a radical departure from conventional routes to home ownership. It promotes self-management, decommodifies housing and creates more stable neighbourhoods | | Comments | Gives detailed outline of Lilac’s specific model Interestingly no mention of CLT or limited the amount of equity a household can take on… So no reference to Lilac’s departure from the original model |
| Source | Lilac – MHO feature on Preorg.org & Lilac website FAQs |
|---|---|
| Date | 2014 |
| Definition | From Lilac’s website: Instead of residents owning an individual property, the homes and land are owned by a Mutual Home Ownership Society (MHOS). The MHOS is registered as a co-operative controlled by its members. Its members are the residents who live in the homes it provides. Each member or group of members has a lease which gives the right to occupy a specified house or flat owned by the MHOS. - Mortgage finance, monthly payment, equity shares - Equity shares not differ by more than +-10% of build cost - MHOS controlled by its members For members who leave after three years the value of the equity shares will principally be driven by references to increases (or decreases) in national average earnings. Exiting members will get the value of their original shares plus interest at 75% of the increase (or decrease) in average income. The MHOS retains the other 25% of the increase (or decrease) to fund the replacement of kitchens, solar panels etc as and when required. The lease gives members the right to remain in their homes after the initial 20 year term or for as long as they want to do so Some key terms: - ‘rental charges’ - ‘foothold’ on housing ladder - transaction costs of buying reduced • the benefits are recycled from one generation of occupants to the next • it is easier to finance environmentally sustainable housing • it encourages active citizenship and community engagement on multiple level Preorg.org: Members of the MHOS have been involved in the build and design of their homes, and democratically control the housing community in which they live. In an HMOS the properties are owned by a co-op but unlike in a normal housing co-op most of the tenant’s ‘rent’ money goes to building up equity that they can then withdraw when they leave. The rent at LILAC is set at 35% of your net income until you have acquired all your equity shares, then it falls to 10% of your income. Serves ‘intermediate market’ It may be possible to do a hybrid co-op model – some space rented and some on the equity model. |
| Comments | Lilac website: General info seems to be lacking, unable to find briefing paper of affordability which used to exist. FAQ definition very good, but hard to find. Preorg interview: |
| Use of example is common with other reports, trying to give explanation of how equity shares might be worked out, which I find quite unclear Seems to dwell quite heavily on inflexibilities around if high earners leave and pitfalls of a smaller MHOS |
| Source | Terrace 21 website |
|---|---|
| Date | Unknown |
| Definition | Rather than residents owning an individual property, the MHOS own the properties and individual households buy equity shares. The model of MHOS means the houses remain affordable forever, which protects the houses from speculative development and means future generations can afford to live and stay in the area. MHOS is a relatively new form of tenure in which residents buy equity shares as they can afford to but based on a minimum monthly payment of 35% net income of each household. 20% of each household net income goes towards paying off their equity shares, and the other 15% of net income goes towards the co-operatives general running costs (such as building maintenance costs). As it’s based on a percentage of members net income, as a household income rises they can then buy more shares. In order to ensure fairness and to avoid households gaining vastly more power and shares, value of equity shares owned by a household must not differ by more than 10% or less than 10% of the build cost. Once a household has paid for all their equity shares for their home, they simply pay just 15% of their net income instead. In order for the project to be financially viable, each household needs to meet a minimum net income level. If a household income should fall, they have the option to sell their shares if there is a willing buyer in the scheme (although that buyer can only buy up to 10% more than the total of the build cost for one house). Or, in specific circumstances such as loss of employment or disability, it may be possible to convert to a standard rental tenancy with the co-operative. The MHOS is a co-operative that is controlled by its members who all live in the MHOS homes. |
| Comments | Simplest and most concise definition found – the full definition is given above excepting additional detail outlined under three headings; (i) affordable, (ii) sustainable, (iii) equity share. Refers to simple 20% net income to paying off members’ equity shares Pay 15% once equity paid off, rather than the 10% in Lilac |