I was at the third Reef community workshop, and it was great – for me the most interesting yet. In this post I will not try to break all of it down; rather, I want to reflect on the approach to co-housing proposed by Wooncoop, based on the presentation that Luc gave at the workshop (slides, need access to The Reef’s shared drive).
In the governance breakout session, Matthew (is he on the platform, @noemi?) gave us a very useful analytical point: distinguishing co-living from co-housing.
- co-living is based on an operator, that manages the building, and a bunch of tenants, that live there. Some operators lease the buildings (eg: Gravity); others own them (eg: Co-House); others still even develop them. In all cases, however, people rent the space from the operator, and they tend to get an inclusive service (rent, utilities, maintenance, cleaning, laundry…). Co-living, therefore, tends to be based on convenience, and there tends to be an inverse relationship between convenience and community. People live in the spaces, but everyone is in their own journey, not really owning the space as a common project. Turnover tends to be high.
- co-housing is based on ownership. People buy a living unit which is part of a larger context; sometimes they even develop it together. In Edgeryders, we have been in conversation with co-housing pioneers for many years. Community spirit is strong in co-housing projects; the down side is that they tend to support fairly standard middle-class lifestyles. This is driven by liquidity considerations: buying into a co-housing projects in a modern city is very expensive (think 300-500K), far and away the biggest expense in the life of most of us. When you sink that much money into something, you want to make sure you have a robust secondary market in case you decide to cash out and move onto another city. Most people who will spend that much money for a place to live are fairly standard middle-class people people, who want a fairly standard middle-class lifestyle, so the spaces are built for “the housing market” instead of for the people who are going to live there in the first place.
Wooncoop, a housing cooperative based in Gent, proposes a model that is neither co-living nor co-housing. As I understand it, it works like this:
A group of people decide to go live together.
They engage Wooncoop, and become themselves cooperators. This unlocks access to all of the governance mechanisms of cooperatives under Belgian law. Buying three shares of the cooperative (3 x 250 EUR) each is mandatory for those who also want to live in a Wooncoop project.
A suitable building is found, or developed. The group needs to contribute for at least one third of the cost of purchase/development. The remaining amount is split into two: in an ideal situation, about half is funded by a standard bank loan (presumably against a mortgage), and the remaining half is funded by an investment of Wooncoop itself. WC has many members who are not living in WC projects, but simply invest in it because it has an attractive mix of guaranteed returns (2%) and solid assets (brick and mortar) backing the investments. In practice, at the moment banks contribute for more than one third.
People in the group are given units in the building to live in. They do not own these units, but they do have the right to live in a Wooncoop building. They need to pay rent, but:
- The rent reflects “the pure cost of the building” (see below, this was contradicted by other elements in the presentation).
- People can lower their rent by investing in the project beyond the minimum 750 EUR. Their rent will be lowered by 4% of the amount invested. In no case the rent can be lowered to less than 50% of the full amount. If people invest beyond the amount that lowers their rent by 50%, their rent no longer goes down, but they receive the standard 2% return on the extra amount.
- People can ask to move around, from one space to another, depending on the life cycle phase (for example: you marry and get kids, move to a larger space; your kids leave the nest, move to a smaller one, etc.). Also, WC reserves the right to forcibly relocate people who end up with “more space than they need”. The principle is that no one should have more private bedrooms than people. However, communal extra rooms are possible. This is mostly a goal for now; WC estimates that they can act as a complete, self-contained system when they manage to get 1,000 units (now they have 10 projects, hoping to have 20 by the end of 2020).
Cashing out is possible, but not guaranteed. If you want to move, you can try to sell your shares to someone else, or sell it back to Wooncoop (this process is tightly regulated by law. At the beginning of each year, the board allocates a sum for shares buyback, and cooperators who want to cash out apply and are processed as a first come-first served basis), but no one has any obligation to buy from you. On the other hand, as long as WC is standing, any capital that you have in it is remunerated at 2%, whether you live in it or not. Again, this is mostly theoretical for now, as WC is only two years old, maybe only one person is doing it next year.
There some parts of the WC model that I really like:
- Neither buy nor rent. You don’t own the house (too expensive anyway), but neither do you throw away money in rent, because, like WC likes to say, “you pay rent to yourself”. You own the coop, which owns the building.
- Small investments are possible and remunerative. Buying a home in Brussels will cost you several hundred thousands; if you only have smaller sums, you need to go for financial assets (funds etc.), and pay rent in the mean time. But with this model, you can put even 10K in your home, and it will immediately decrease your rent, which is the same thing as giving you a financial return. A 30K investment will result in a decrease in rent of 0,04x 30,000 = 1,200 EUR/year, or 100 EUR/month.
- No need for an extra corporate vehicle. WC is already a coop, and it has at least some standing in the Belgian real estate scene. Using it would save a lot of overhead.
But I also have some doubts:
Cashing out is problematic (see item 5 above). In fairness, this is true of all forms of investment in “strange” spaces like The Reef.
The model is predicated on zero interest rates, which are a historical anomaly. A 2% rate of return is attractive now, with saving accounts yielding 0% interest. But what would happen if interest rates were to go back to 2010 levels, 2%? Likely, it would be harder for WC to find cooperant-investors. This would mean for them resorting more to bank loans, and would threaten the viability of the model. When I asked Luc, he pointed out that macroeconomic indicators point to a continued period of near-zero interest rates, and that in 25 years “WC will be completely independent from bank credit”.
The model is designed for pure housing, not hybrid live-work spaces. Conversely, it is not clear what the role of businesses like Edgeryders could be. Could a company be a cooperant too? How comfortable is WC with hybrid spaces like The Reef, part residential and part commercial?
No obvious role for largish investments. WC does not like to have large investors, because they would break the cooperative were they to cash out with a million EUR. Imagining Edgeryders could bring substantial investments in greening the building, how would that work? Would it have to be given to WC, and used to lower the cost of the project?
Project security. WC sees all its projects as part of the larger WC system, so much so that Reeflings would acquire, for life, the right to live in one WC unit, but not necessarily in The Reef. This is clearly a weakness from our side; and WC itself will probably see their own side of the issue, namely that The Reef might not be attractive for their members who just want an apartment with a middle class lifestyle.
Where do “savings” go? Consider this slide:
6 to 20% of your rent goes to “saving”. But the cooperant’s investments are remunerated at 2%. So, the rest must go to WC itself, to fund further growth. As a cooperant, I might not be so hellbent to fund growth for growth’s sake.
I would be curious to discuss it more in detail with Luc and @patrick_andrews.