In 2012 we adopted a Mutual Home Ownership Society model of home ownership and tenure. Rather than residents owning an individual property, the MHOS owns 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.
- ‘Rental’ charges based on 35% of net household income
o You secure ‘foothold’ on housing ladder even with a lower household income
- Members can buy more shares as income rises
- Reduced transaction costs (no houses ‘bought’ or ‘sold’; no outside agency fee)
- Linkage to average earnings helps reduce risk and retain affordability
- Remains affordable from one generation of occupants to the next
- Housing remains permanently affordable for the benefit of the local community
- The benefits are recycled from one generation of occupants to the next
- It’s easier to finance environmentally sustainable housing (e.g the Ecological Building Society)
- It encourages active citizenship and community engagement
- by sitting within the Granby 4 Streets Community Land Trust (land owners) the scheme is committed to the revitalisation – economically, socially and environmentally – of Granby’s ‘Four Streets’ and wider area.
- Each share = face value £1,000
- Each share owned by a member and financed by the monthly repayments
- Each member buys shares as they can afford to:
- Income rising? Buy more shares. BUT, value of equity shares owned by a household must not differ by more than 10% or less than 10% of the build cost.
- Affordable payments = 35% of net income. If this amount is above amount required to finance equity shares of value of build cost +10%, the remainder will go to Terrace 21 Equity Fund
- If income falls? Sell your shares if there is a willing buyer within the scheme. OR, in specified circumstances such as loss of employment or disability, it may be possible to convert to a standard rental tenancy.
- Once household has paid all equity shares for their house, household payments will then be 15% net income (which will cover the co-operative’s building maintenance costs etc).