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How to set up a housing co-operative

This content applies to England

How to set up different types of housing co-operatives.

Fully mutual housing co-operative associations

There must be a minimum of seven members to set up a fully mutual housing co-operative association. Funding can be obtained from the Homes and Communities Agency (HCA) and it may also be obtainable from local authorities, building societies and banks.[1]

The housing co-operative must register with the Financial Conduct Authority (FCA) and with the regulator of social housing. (For more information, see the page Regulator of social housing.)

A management committee would need to be formed; policies agreed about membership, lettings, repairs, rent and finances; and an architect employed.

Many fully mutual associations use a secondary housing co-operative to help in these tasks (see the page Secondary housing co-operatives).

Short-life housing co-operatives

Funding for a short-life housing co-operative is usually available from the HCA. The funding goes towards the capital costs of rehabilitating empty properties, so that they have a two- to 10-year life expectancy following the rehabilitation work. Other requirements for a short-life housing co-operative are the same as those outlined above for a fully mutual association.

Tenant management organisations and management co-operatives

Tenants of a local authority or a private registered provider of social housing (PRPSH) may decide to come together because of common repair problems they are experiencing. A public meeting may be called to find out what support there is to establish a tenant management organisation/management co-operative. Sometimes the landlord will be supportive of a tenant management organisation/management co-operative being formed and will provide officers to give assistance. Key to the operation of the tenant management organisation/management co-operative is the management agreement with the landlord, as this will determine what it can do.

For tenants of a local authority who want to establish a tenant management organisation (TMO), they must serve a proposal notice on the local authority. The notice must contain the following statements:[2]

  • that the authority is being served notice to enter into a TMO agreement with the TMO serving the notice
  • that the subject of the proposed TMO agreement is the management of houses within the TMO's area. Of these, at least 25 must be let under secure tenancies, and
  • that those houses to which the proposed TMO agreement relates are within the TMO's area.

Before serving a notice, the TMO must use its best endeavours to deliver a copy of the notice to every house that has been identified in the proposal notice, and should be satisfied that a majority of members of the TMO voted in favour of serving the notice, or attended a properly constituted general meeting and voted in favour of a resolution to serve a notice. When the notice is served, the TMO must ensure that membership of the TMO includes at least 20 per cent of the tenants and at least 20 per cent of the secure tenants.[3]

A local authority must accept the proposal notice and notify the TMO of its acceptance within 28 days. The proposal notice can only be refused if the proposal notice contains a similar proposal to one contained in a previous proposal notice, at least half of the houses identified in the current proposal notice were also identified in the previous proposal notice, and within the two years preceding the date on which the current notice is received, the previous proposal notice was withdrawn voluntarily by the TMO. The authority may also refuse to accept a proposal notice if it has reasonable grounds to believe that the TMO failed to comply with the consultation requirements outlined in the paragraph above.[4]

The TMO must also register as either an Industrial and Provident society under the Industrial and Provident Societies Act 1965, or as a company under the Companies Act 1965.

PRPSH tenants can obtain funding from the HCA[5] and the local authority[6] to set up a management co-operative.

Self-build housing co-operatives

Members of a self-build housing co-operative must be prepared to put in a lot of time to build the properties and also to use professionals such as architects and quantity surveyors.

A self-build housing co-operative is eligible to obtain finance from the HCA[7] and from local authorities, as well as from banks and building societies. Self-build housing co-operatives also attract special tax privileges.[8] The HCA has a duty to promote and assist the development of self-build housing co-operatives and to publicise their aims and principles.[9]

The housing co-operative is usually wound up once the building has finished.

Wales

The information on this page applies only to England. Go to Shelter Cymru for information relating to Wales.

[1] s.87 Housing Associations Act 1985.

[2] reg 9(2) Housing (Right to Manage) (England) Regulations 2012 SI 2012/1821.

[3] reg 10 Housing (Right to Manage) (England) Regulations 2012 SI 2012/1821.

[4] reg 11 Housing (Right to Manage) (England) Regulations 2012 SI 2012/1821.

[5] s.87 Housing Associations Act 1985.

[6] s.429A Housing Act 1985.

[7] s.79 Housing Associations Act 1985.

[8] ss.488 and 489 Income and Corporation Taxes Act 1988.

[9] s.75(1)(c) Housing Associations Act 1985.

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