How to rent without a landlord
A guide to setting up a housing co-operative
Housing co-operatives enable their tenants to reinvest or donate their rent, rather than it going into a landlords’ pocket.
We can help you set up a co-op to do this in the UK. The process is:
Set up an asset-locked housing co-op (I can do this for you)
Arrange the mortgage and deposit (I can help with this too)
Pay rent to your co-op
This is a guide to doing it yourself. It's not easy, but several groups have managed it in London. I'm building a tech company, Roost, to make it easy, but we can arrange a call without you needing to use our product.
Setting up a co-op
Step 1: Find a home
This is a guide to setting up a house-share without a landlord, where the surplus rent can go to good causes. A housing co-operative is the ideal legal form for this – it has existed for hundreds of years and co-ops are very common in Europe.
Co-ops work best with 3-6 people – fewer, and it’s often more expensive than renting; more, and planning permission is required. This form of housing would usually require a license, but co-operatives are exempt.
We’ve been working on a property search tool to show how much rent you would pay for a given property. Let us know if you want free access.
The process for finding a home to buy is the same as renting: search online, book viewings, and make an offer. However, it takes longer after this stage: usually around 12 weeks. There is more that can go wrong, so we recommend putting in two offers to make sure you get at least one.
Step 2: Set up a co-op
There several legal forms for co-ops. At Roost, we use ‘secondary’ co-ops: where residents are members of a management co-op, which in turn is a member of the secondary co-op that owns the freehold. We do this because it means people have complete control over their home while the secondary co-op is big enough to secure inexpensive financing.
This is where the DIY approach differs from how we do it. If you're going the DIY route, I recommend using the model documents for a Fully Mutual Housing Co-operative at cch.coop.
These model rules include an asset lock. This ensures that anything the co-op owns must eventually benefit a charity.
Step 3: Get a mortgage
Ecology Building Society will usually give you a mortgage. They are more expensive than personal lenders, charging ~1.5% above the Bank of England Base Rate. They have some discounts for environmental upgrades. Most successful co-ops work with Ecology BS.
Mortgages in your own name are slightly cheaper, but these have a ‘personal guarantee’. If the house is sold in negative equity, the mortgagor has the legal right to seize other assets the mortgagee owns until it gets its money back.
Step 4: Get a deposit
Putting in your own money
You can put your money in as a donation to the co-op, in which case this is easy. If these are your savings and you need them back to live, then you can structure it as debt. There are model documents to do this.
A loan note is a simple mechanism. Loanstock is slightly riskier but is commonly used around the co-op space.
External debt
Co-op Finance can help with up to £150k for the deposit at between 6-10% interest. It can be a slow process but we’re working to speed it up.
Donations / subsidised debt
Sanford Housing Co-op frequently gives £25k to new co-ops on very favourable terms. London CLH is an enabling group that can point you to more money. Radical Routes can offer its 'Rootstock' of 3% interest loans up to about £100k (but they have other conditions on that loan).
Step 5: Donate or reinvest the rent
Each month you pay rent, the surplus can be used however you wish.
About 30% of rent goes to costs - maintenance, improvements, and retrofits.
About 30% of it will go to mortgage interest, assuming a 25-year repayment mortgage at 5% interest.
The remaining 40% is usually the landlord's cut. It's split between cashflow – the surplus of rent minus costs – and the capital appreciation of the property as the mortgage is paid off.
You can spend it however you want. If you donate it to effective causes, we’ll waive our fee.
What happens when the mortgage is paid off?
After a few years, the mortgage is much less than the value of the property that the co-op owns. It's asset-locked so the value of the home can only go to public benefit.
It could be kept going as a housing co-op without debt, so it can donate much more of the rent.
It could be let at below-market rate. We recommend that it is not let at below 80% of market rate unless it becomes social housing.
It could be sold and the money returned returned to charity.
What it’s like living in a co-op
Co-ops are better to live in than landlord-owned housing.
Tenants have control over the property, so you can change the colour of the walls, put in a new kitchen, or invest in the home's energy efficiency.
Tenants can't be evicted without fault, so you can live there as long as you like. You can move out with a couple months' notice.
What happens next?
Let us know if you would like to set up a co-op. We’re here for a chat if you want to do it yourself, or we can set it up for free.
We have standardised legal forms and access to cheaper mortgages than an individual is likely to obtain.