Funding cohousing dreams, Chris Coates

Lancaster Cohousing is recognised, UK-wide, as one of the most successful housing developments of its type, with member, Chris Coates, a board member of the UK Cohousing Network. Here, he explains how Lancaster began to fund its dreams – by asking for £5,000 per full member

WE hadn’t even begun negotiating on a plot of land when we issued a call for people to make a £5,000 interest-free loan to become a full member the group.

It came about because the bank, who we were talking to about financing the project, said they would take us more seriously if members had invested some of their own money. When we asked, How much? they suggested £5,000.

We had operated a fee of £25 for those who wanted to stay in touch with us and essentially attend meeting as observers, with no voting rights.

But when the five of us, mainly spearheading the project, decided to ‘go for it’, we knew we needed to source funds somehow.

It’s amazing how much more seriously a lender, such as a bank, will take you when you have something in the region of £80,000 in the kitty. It gave us a load of credibility.

Of course, we were sorry that not everyone who wanted to join us could, because they didn’t have easy access to £5,000, but we had to find a way of starting. I had personally thought it would be difficult to recruit, but it wasn’t.

We had chosen setting ourselves up as a company limited by guarantee because of its relative simplicity. Nobody raises an eyebrow if you are a company limited by guarantee. Not only would we have a serious amount of money at our disposal, but we operated to a legal structure that prospective lenders were well used to.

With each £5,000, there was the right to withdraw it, with immediate effect – minus some expenses to cover the likes of drawings by an architect. As it was, the interest on the amount we raised, when added to all the £25s we collected from annual subs, more than covered many of the costs we incurred, such as room booking. 

On one occasion, we had someone deciding not to join us, but saying we could keep hold of their £5,000, to assist with cashflow, until such time as we felt able to pay him back.

And, of course, not everyone who gave us £5,000 stayed the course. Some folk had to move away, for jobs; others weren’t won over by the plot of land we eventually acquired; and I am sure there were others again who thought we were just plain daft, buying a derelict site during a recession (2009).

The five of us were all agreed we wanted to find land only in Lancaster. The land we did eventually acquire was by a stretch of river. It was what a freelance land agent, we had been working with, called a ‘distressed site’. It was a former industrial site, where the developer had gone bust and they were having to sell.

If a lender is only going to provide a mortgage to the value of 70 per cent of the land, then the gap has to be plugged somehow.

So, we secured the land, fairly confident the site would receive planning permission – but with no guarantees. The site had previously received planning permission, which had lapsed, so we had good reason to believe it would be granted again.

Planning permission was, thankfully, given, which was obviously a relief. And we financed the design and construction of the housing by a combination of a commercial development loan, from the Triodos Bank, and 30 per cent deposits from members on their house or flat (the £5,000 loans becoming part of the deposit).

We are now 60 adults in 38 houses.

We, the company limited by guarantee, built the properties and leased them on long-terms leases, for which people can get personal mortgages.

When it comes to someone wanting to move on, they have the opportunity to sell their lease on the open market. And we have found that, because of the essential attractiveness of where and how we live, that tends to result in the purchase price being a good bit higher than it might otherwise be – from which we take a 1.5 per cent ‘transfer fee’ on the uplift.

We operate a waiting list of ‘pre-approved members’ – about six, at present, each of course looking for their own preferred type of property.

It’s one-bedroom flats that we have found to have the highest turnover.

Our ‘pre-approved members’ are given a pretty much ‘warts-n-all’ preview of what they might be getting into. We make sure that, when they sign up, it’s with their eyes wide open. To become a pre-approved member, the applicant needs to have read, and agreed to (with a signature), our policies.

We have produced policy guidance advice for prospective cohousing groups, here. 

When we didn’t have to physically distance, because of Coronavirus, prospective applicants were required to attend at least one group meeting, so we could get the measure of each other.

While some existing residents have had reservations about some applicants, we have never refused anyone. As it is, the terms of the lease dictate that, should we refuse the sale of a lease to someone, then we – as a community – must purchase, within six months, the lease ourselves.

That can focus the mind, wonderfully.

Chris Coates is a founding member of Lancaster Co-housing. He is a board member of UK Cohousing Network and co-author of an upcoming guide to cohousing: The UKCN Practical Guide to Cohousing.

Photo courtesy of Lancaster Co-housing

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