From AshWiki

Models of mixed tenure co-operatives

Mutual home ownership

A type of mixed tenure particularly suitable for co-ops has been developed by the Co-operative Development Society (CDS). It is called Mutual Home Ownership, or MHO. It's important to remember that the MHO rules are only a model. If we like some parts but not others, we're free to alter them if we're setting up a brand-new co-op. Alternatively, if we develop in partnership with a major developer (which could even be CDS), we can negotiate if we know which features are important to us, and which we're less concerned about.

The basic idea of MHO, *as far as I understand it*, is this. Different members pay different rent, depending on their income. It's designed to be an affordable rent relative to income, though there is a minimum, which is what the co-op would need to run (including repaying loan interest) if everyone was paying that much. Members paying more than the minimum build up equity (a kind of investment share) in the co-op. The amount of equity is linked to their rent and how long they've lived in the co-op, but can't ever be more than the value of their home. When they leave the co-op, they get back the equity they've put in. If the value has risen (i.e. house prices have gone up), they also get a proportion of the increase. (This is 90% in the standard MHO rules, but it could equally well be, say, 75%.) The rest is ploughed back into the co-op. The details of the calculation are complicated, but the basic idea is that with the extra payment you are paying off a small part of the capital on the co-op's mortgage, and the value of your equity is calculated accordingly.

Owning "equity" in the co-op is like having lent it money. It doesn't give the member any more say in the way the co-op is run than another member with less equity or none. Decisions are still made by general meetings where all members are equal. Indeed, as with social vs. market tenants, the co-op could be set up so that no-one knew who else had equity, or how much they had.

The member doesn't actually own their home: instead they own an "equity share" in the whole co-op, whose value is somehow linked to the value of their home. This means the housing is always owned by the co-op -- it doesn't get depleted by being sold off. Also as any transaction is only in equity (shares) in the co-op, it doesn't attract things like stamp duty.

The MHO model is built on top of a Community Land Trust (CLT). See also Development:Community_land_trust.

The Baker model

Charlie Baker, of URBED in Manchester, also has a model for mixed tenure co-ops. In broad terms is is similar to MHO: a co-op with an underlying CLT, where some members rent, and some own varying proportions of their home and pay more accordingly.

So how do they differ? David Rodgers, of CDS, told me that "Charlie's amazingly clever", that as a result "his ideas have lots of complexity which he grasps as a coherent whole but can be confusing" and that "his scheme has lots of bells and whistles." On the other hand, Charlie said in an e-mail "You should check out David Rodgers' model for this too" but that the latter was "very complicated". (I'm not making this up!) Personally I'm less clear about Charlie's model than about MHO, but this is probably less a function of their relative complexity than of the fact that David Rodgers was kind enough to meet me over lunch when I had an hour to interrogate him about MHO, whereas I haven't had that opportunity with Charlie.

As I understand it, one basic difference is how they are funded. CDS assume you have got either funding from the Housing Corporation, or cheap land from a local authority. Charlie's model is flexible, allowing for Housing Corporation funding if you can get it, but aiming to show how to build a new co-op even if you don't get any grant funding. It works by selling outright a proportion of the development. What would normally be the developer's "profit" goes towards subsidising the "affordable" parts of the co-op. Also, unlike MHO where members' "equity" in the co-op can be on a sliding scale, it has only three levels: members rent, own, or are on "hire purchase" which is somewhere in the middle. But I've seen a calculation where the "owners" seem to be paying a higher monthly amount, which sounds like MHO, and I'm not very sure how the difference is calculated between owners and hire-purchasers, or what the owners' relation is to the co-op, or what happens when they want to sell up.

Other notes on Charlie's Model are at Development:Meeting20061125:AffordableCoop