|Co-operative Housing: Experiences of Mutual Self-help (Habitat)|
When individuals decide to combine their efforts through a co- operative, the tenure arrangements they propose are extremely important and must be discussed thoroughly before proceeding. Equally, policy-makers will need to discuss tenure issues in formulating legislation which facilitates the growth of co-operatives.
The most basic issue is that of individual or collective tenure. The most discussed issue when an individual wants to leave a house or flat concerns the value invested in the property, which, in many cases, will have risen considerably since construction. On the one hand it can be argued that the individual is entitled to the increase in the equity. On the other, many cooperatives see a wider social responsibility to be achieved by creating a housing system outside the speculative housing market.
Co-operatives have evolved three basic types of tenure which serve different needs and perspectives. They are: (a) limited; (b) multiple mortgage; and (c) continuing (or global mortgage).
A. Limited housing co-operatives
In this type the co-operative acquires land and then subdivides the land on completion of the project so that each member receives his or her own plot. The society is then wound up as it has achieved the objective of providing a plot (and usually services and superstructure). The individual plots become the property of each member.
The Pagtambayayong Foundation has promoted this type of organization as its first initiative was to form associations for land-buying. It is also the ultimate goal of the Cotton Printers Co- operative Housing Society in Zimbabwe although at the moment land and houses are collectively-owned until all members are housed.
B. Multiple mortgage housing co-operatives
The co-operative owns and maintains the common areas (e.g., roads, paths, recreation areas and other community facilities) but the members own their separate units and the land. Each member usually has a separate loan agreement where a long-term ban is involved. A member can normally sell a plot on the open market. This type is sometimes known as a condominium and is used particularly for flats (apartments).
C. Continuing housing co-operative
The co-operative owns all the land, houses and common areas. Members do not own their units individually, but through their membership of the co-operative, own an equal share in all the assets of the society. Thus, in a society with 100 houses and 100 members, each member would own one hundredth of all the assets. Members cannot sell their houses and, when a member leaves, a transfer of the house is normally to the co-operative which finds a new member to occupy the unit. These co-operatives are sometimes called single or global mortgage co-operatives as there is one long-term loan to the co- operative, not a ban to each member.
The Ethiopian co-operative societies are of this type as are many in both industrialized and developing countries.
These co-operatives have to make special arrangements when a member leaves. As the value of a member's investment in the property will probably have risen over the years an arrangement has to be made to repay the member's investment or equity at the time of transfer. A number of methods are used: a payment at fixed value repays the exact amount invested by the member; or a payment at par value repays the amount invested plus an added amount which is linked to inflation, for example, the inflation rate minus 2 per cent.
A repayment at market value assesses the market value of the property and pays that to the departing member.
The reason for paying less than market value, as in fixed or par value, is to provide the new member with housing at less than market rate housing thereby increasing affordable housing stock. (The calculation of equity is normally the value of down payment plus the amount already repaid on the principal [not interest] of the loan).
The issue of equity at the time of transfer has been one of great concern to continuing cooperatives. On the one hand, many co- operatives have an objective of providing affordable housing. On the other hand, members become aware that in a period of inflation the market value of their units can exceed the fixed value. They also argue that they need the market value to reinvest in housing in a prevailing market and that original members had to make their initial investment at the then market value.
This issue can place considerable strain on co-operatives which try to maintain a fixed or even-par value system. If the members not change the rules to a market value system then frequently "under the table" payments and premiums are paid. The success of fixed value cooperatives depends on the prevailing rate of inflation and the strength of commitment of members and the leadership of the co- operative (which is in part a reflection of societal norms and values). It is also difficult to maintain this system where co- operatives form a small part of a national housing system controlled largely by market forces.
Cultural factors also play an important role. In many countries ownership of land has a high value and the relatively sophisticated concept of pint ownership, even if it offers security equal to freehold title, will not be accepted as yet.
D. Some legal aspects of tenure
As noted in the Introduction, co-operatives are normally registered under a Co-operative Societies Act or similar legislation and have bye-laws which regulate their affairs. The bye-laws, and other legal instruments, include provision for matters such as transfer and the rights and obligations of each member. These have been discussed in depth in other publications and are not covered in detail here.
The Cotton Printers Workers Co-operative Society has this type of legal framework (although a somewhat different tenure agreement) as is discussed elsewhere. The Ethiopian co-operatives also operate under a uniform framework of bye-laws.
The Pagtambayayong Foundation's legal structure is far looser with written agreements for particular activities, such as joint land purchase, building materials loans and employment creation through the manufacture of building materials.
The José Isiais Gomez scheme has individually-owned plots and houses and the process of participation is consultative rather than through membership. The project did demonstrate the possibilities for participation in a society which had previously operated on more authoritarian norms. The building brigades were, unintentionally, a training in group organization where organizational skills were developed and appropriate rules evolved.
In some instances the complexities of housing co-operative legislation and of the bye-laws may not be understood by illiterate and semi-literate members who have little, if any, experience of participatory organization or of the codification of mutual support rules. Many writers and practitioners have argued that co-operatives are, in many instances, too complicated an institutional form for these groups and that simpler types of organization are more suitable.
This is true in many cases but one should be aware that it is sometimes used to continue systems with considerable elements of patronage and external domination by governments and by other organizations. The distinction must be drawn between support which encourages participation and eventual independence, and support which leads to dependence.
Given the above, promoters and leaders have to find answers to the following questions:
(a) What are the expressed needs of potential members of a co-operative?
(b) What are the precise goals set through a process of group participation in determining how to fulfil the needs?
(c) Do the goals simply involve working together in group activities (e.g., digging drains, putting on roofs) or do they involve substantial financial commitment such as regular saving, owning property jointly or running a business?
(d) What is the most appropriate form of organization to reach the goals set by the members of the group?
If the goals are simple, an informal organization may be the most appropriate, i.e., with simple rules drawn up at a general meeting. The organization of building by residents at José Isiais Gomez shows how this was achieved through experience in one instance.
If the goals are relatively complex, a more formal organization may be required, such as a registered society for activities such as regular savings or a co-operative to own property. Promoters will have to assess the advantages and disadvantages of each type of organization.