Co-op cut-off?

Housing co-operatives, once encouraged by all parties, have seen big reductions in grant. Paul Gosling looks at the long-term prospects

After decades of support from both Conservative and Labour governments, the end of public subsidy for housing co-operatives may be in sight. The grant paid to them by the Housing Corporation has steadily declined in recent years, to the point where the co-operative sector fears that it may be completely ruled out for funding when a new strategy document is published next year.

There are at least 2,000 housing co-ops, possibly far more, and some are very large - Clay's Lane co-op in the East End of London has 600 tenant members. Housing co-ops differ from other types of housing association in being owned and managed by their tenants, and might appear to be the type of self-help initiative supported by a Conservative government. Instead, tenant management has been systematically undermined over the past four years, to the point where the proportion of the Housing Corporation's budget going to co-ops has declined from 3.4 per cent to 0.1 per cent.

Comments made by David Curry, the housing minister, have led co-ops to worry whether there is any future for them. A spokeswoman for the Housing Corporation says: "Ministers have made it clear ... that they are not in favour of any group having majority control of any social landlord registered with us from now on. That might affect our ability to fund co-ops in the long term. There will be clarification coming from the Department of the Environment in the next few weeks."

For the moment, though, the DoE is unable to confirm its attitude to housing co-ops. While Mr Curry has been forthright in saying that tenants should not be in a majority on local housing companies that are eligible for Social Housing Grant, the 1996 Housing Act specifies that they will still be eligible. Fears had been expressed in Parliament that housing co-ops might have all funding withdrawn.

CDS, a secondary co-operative that gives advice and support to 66 housing co-ops, approached the DoE asking for an assurance that entitlement to grant would be maintained. David Rodgers, director of CDS, says: "I have a letter from a month ago that the existing strategy continues, saying that the Government will continue to fund co-ops through the Social Housing Grant. The criteria clearly state that one group not being in control does not apply to housing co-ops."

But this has not been enough to reassure the main representative body of housing co-ops, the Confederation of Co-operative Housing. "The facts speak for themselves," says Margaret Jones, the Confederation's secretary. "Only three housing co-ops were financed by the Housing Corporation last year, so it looks as if they are not funding housing co-ops. It has got to the stage where people are not applying to the Corporation. They have put forward the idea that they are still funding co-ops, but where are they?" She says that 10 years ago, 60 per cent of housing co-ops that applied were allocated grants, but now the figure is negligible.

The co-op sector is anxiously awaiting a Housing Corporation strategy document on co-ops that was to have been published this year, but which will not appear before next year at the earliest.

"The Government's attitude is one of complete contradiction," says Marianne Hood, of the Tenant Participation Advisory Service for England (TPAS). "The Government has promoted tenant participation, and brought in legislation to give tenants the right to manage." But local housing companies with a tenant majority (with the specific exception of housing co-ops) are now barred from receiving grant. "Why?" asks Ms Hood.

David Curry told the House of Commons that he was worried that tenant- controlled bodies were less likely to take hard decisions, such as voting for rent increases, and would be unlikely to attract private finance. This view was rejected by a survey conducted by TPAS jointly with David Couttie Associates, and in another report by Price Waterhouse. These found that tenant-managed housing stock was better run, with a greater willingness to tackle difficult problems.

Several major lenders have recently committed loans to housing co-ops, while several specialist lenders will only lend on homes if they are owned by co-ops. The financial basis for housing co-ops has improved with a recent ruling from the Inland Revenue that members are eligible for Miras tax relief.

Even if co-ops continue to be eligible for Social Housing Grant, they cannot compete effectively against large housing associations with economies of scale. The competitive bidding system for Social Housing Grant in itself makes grant allocation to housing co-ops rare.

Nick Raynsford, Labour's spokesman on housing, says that if the Labour Party wins the next election more funds will be allocated to co-ops, particularly for self-build groups. "Housing co-ops can make a very important impact, and can take over estates and buy properties where tenants are willing to put the effort in," he argues. "It does require an important input from the tenants. We don't have any illusion that the majority of tenants will want to do this. But the Housing Corporation should be giving assistance"n