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1. The LILAC Initiative
1.1 Purpose of this report
The purpose of this report is to outline the feasibility and details to funders, potential members and local authority partners of building an affordable, ecological cohousing development in Leeds.
1.2 The context
LILAC has emerged in a context of intense interest in how cities can ensure that development is more sustainable as well as inclusive and affordable. We are keenly aware how all future housing development has to play a role in helping national and international efforts to deliver emission reductions in greenhouse gas emissions. Local authorities are rapidly developing climate change strategies and the Nottingham Declaration of which Leeds is a signatory, establishes an agenda in which local authorities can adapt to and mitigate the effects of climate change.
Leeds has embraced this agenda through, for example, CABE’s Sustainable Cities initiative which brings together seven cities including Leeds; the Regional Climate Resilience and Adaptation Strategy led by Yorkshire Forward; Leeds City Council’s Climate Change Strategy; and the Low Carbon Cities Programme which supports Bristol, Leeds and Manchester. There are also a number of desired outcomes in the Sustainable Community Strategy (The Vision for Leeds), the Local Area Agreement, the Local Development Framework Core Strategy, as well as the most recent Council Plan and Corporate Plan which stress the need to create thriving harmonious places, create safe, clean and green neighbourhoods and promote healthy, fulfilling lives.
Affordability has also become a central concern of government policy as highlighted by the 2004 Barker Review of housing supply and the Planning Policy Statement 3 (PPS3) (2006) which underpins the delivery of the Government's strategic housing policy objectives of decent, affordable homes. Leeds City Council has embraced this agenda through its affordable housing strategy
We also aim to contribute to community empowerment through the process of place shaping and the creation of sustainable, mixed communities. We are particularly aware of the 2007 Sustainable Communities Act which stressed the need to promote economic, social and environmental wellbeing agendas and the Empowerment White Paper (CLG, 2008).
LILAC responds directly to these concerns and opportunities by demonstrating how new housing can be permanently affordable, community-led and can play a key role in tackling climate change.
1.3 Pioneering models for community regeneration: ecovillages and cohousing
Lilac draws upon two well established models of ecologically and community minded neighbourhood schemes: ecovillages and cohousing.
An Ecovillage is defined as follows:
Ecovillages are urban or rural communities of people, who strive to integrate a supportive social environment with a low-impact way of life. To achieve this, they integrate various aspects of ecological design, permaculture, ecological building, green production, alternative energy, community building practices, and much more. (http://gen.ecovillage.org/)
Co-housing projects are a well established model of neighbourhood development which mixes private dwellings and shard facilities and aims to maximise social interaction based around a co-house which contains shared facilities such as communal cooking and eating facilities, laundry, meeting space, play area, office and gym. There is a well established and recognised demand for co-housing projects around the UK which includes established projects in Stroud, Lancaster, Lewes, Dorset, Sheffield, Bradford on Avon and London with at least 15 other prospective projects. These projects build upon the well established international co-housing community with 200 schemes in Denmark and dozens in North America.
1.4 The origins and vision of the project
Leeds Ecovillage has been operating as an idea since early 2007 when a local lecture was organised on the idea of ecovillages by Ezio Manzini, Italian Professor of Industrial Design. The project was officially launched in November 2007 at the University of Leeds when 80 people attended, and was reported in the local media. A workshop the following day to take the project forward was facilitated by the President of the Global Eco-village Network, Jonathan Dawson. Since then, monthly meetings have been held in Leeds city centre.
The original aim of the project, to which we still hold true, was stated as: We aspire to build an ecovillage community in Leeds based on the principles of ecological sustainability, co-operation and inclusivity’. We define our values through the following terms:
environmentally sustainable, grassroots, an inspiration and resource, respect, inclusive and affordable, self reliant, a place of learning, a healthy/safe place, connected, diverse (see appendix 10 for more details).
In February 2009, the project was officially renamed LILAC (Low Impact Living Affordable Community) to more accurately reflect our intentions. It was officially incorporated as a bona fide co-operative company in May 2009 as LILAC Mutual Home Ownership Society Ltd’.
The three integrated aspects of the project are all equally key:
a) Low Impact Living
Low Impact living simply means to live as lightly as possible on the earth. Reducing human impact on the ecology of the planet has become an urgent task in face of climate change - and it is this task that starts with everyone of us and how we live.
According to the Carbon Trust, buildings generate 45% of C02 emissions in the UK. The government has set a target of all new buildings to be carbon neutral by 2019, and we respond to this challenge right now. We will work towards the homes being carbon neutral To do this we will prioritise design and materials that minimise energy use and loss over their lifetime, as well as incorporating grey and black water recycling, and where appropriate solar water heating and PV cells.
Natural and locally sourced building materials are really important to our project. Conventional materials have a huge impact on the planet. For example, 22% of energy produced globally is used to make and move new construction materials. We are committed to cement free building as around 7% of global CO2 emissions are generated from cement production. We are also committed to good design to reduce the need for energy input. 15% of all CO2 in the developed world is generated from heating and cooling homes. The advantages of using materials such as strawbale are clear when we see that in contrast to a conventionally built home which produces around 50 tonnes of CO2 during its construction, a home built using straw bale as insulation actually stores 12.25 tonnes of Co2.
Equally important to us is how all the residents can work towards low impact living in their daily lives through avoiding unnecessary consumption and travel, excessive energy use around the home, and looking to the local area to provide as many needs as possible. The resident’s commitment, understandings and implementation of lowering our ecological footprint, as well as achieving a good design and technological add-ons, will be central to accomplishing our environmental strategy and reducing our ecological footprint. Priorities will be on reducing our carbon footprints which can achieve higher savings than expensive technological add-ons. Sharing resources, such as laundry facilities, are also central to reducing the community’s ecological footprint and consumption of energy. The lease agreements and neighbourhood vision document will stress the protocols expected from member leaseholders.
b) Affordable
Building a neighbourhood which is affordable and accessible is a real priority for us. There is much talk of a crisis of affordability in terms of housing. A recent government document highlighted the need to build 70,000 affordable homes each year by 2011. House prices are still much higher than average earnings and the house price to income ratio in the UK is 4.43 (average weekly earnings are £749.93 and average house prices are £172,593).
So what is housing affordability? Affordability is normally defined through the proportion of income spent on housing needs to be no more than 35% of net household income (or in the case of high ecological standards 40%). In these circumstances, Steve Wilcox, in his research for the Joseph Rowntree Foundation (The Geography of Affordable and Unaffordable Housing, 2005) stated the need for creating an intermediate housing market to tackle these problems – where rents are above those of social housing but below market price. Mutual Home Ownership Societies (MHOS) can create an intermediate market that is affordable in perpetuity and sustainable. There is already a large intermediate housing market in Europe. For example in Norway OBOS (Oslo Buildings and Savings Co-operative) provides homes for 214,000 members, and in Sweden HSB Riskforbund provides 375,000 affordable homes. In the context of an absence of 100% mortgages from banks, the MHOS mechanism allows residents to access housing with only a small initial financial commitment and thus has considerable potential to help modest income families access housing.
LILAC will help address the three aims of the Local Housing Strategy: creating decent places, creating decent homes, and tackling housing disadvantage. We aim to do this by creating an affordable, sustainable mixed neighbourhood. The housing situation in Leeds mirrors the affordability crisis nationally. Earnings have fallen well behind average house prices in Leeds. In 2005 Wilcox (2005) listed that average house prices in Leeds were £134,676 with average monthly gross earnings £2,761 giving a house price to income ratio of 4.06.
To further confound the situation, Wilcox (2005) stated that in Leeds 40% of households fall within the ‘broad intermediate housing market’ which is defined as the proportion of working households in each area unable to purchase at lower quartile house prices for two- and three-bedroom dwellings. Significant numbers of households in Leeds, then, live in a city where they simply cannot afford to buy a home compared to their wage.
LILAC responds to this situation. We aim to build 20 homes, which will be managed as part of a Mutual Home Ownership Society. A MHOS is a new way of owning a stake in the housing market. See next section for more detail.
C) Community
LILAC isn’t just about building houses, it’s about building a sense of community. We want all residents to feel they are part of a strong flourishing neighbourhood where they can directly participate and their views matter. Part of building this strong sense of community will be about design. Our design will maximise community interaction, based around the Danish co-housing model which mixes people’s needs for their own space in private homes with shared facilities in a co-house.
This co-house will be at the heart of the community and will include communal cooking and eating facilities, laundry facilities, meeting space, play area, office and health space. This space will be regularly open to the wider community for events and access to facilities. The project will create a beautiful living environment which will maximise green spaces, areas for food production and social interaction. Living in the community will provide opportunities for weekly shared cooking and eating, social events and regular community meetings and events.
1.5 Mutual Home Ownership: an innovative new tenure model
Instead of residents owning an individual property, the homes and land will be owned by a Mutual Home Ownership Society (MHOS).
The MHOS is registered as a co-operative controlled by its members. Its members will be the residents who live in the homes it provides. Each member or group of members will have a lease which gives the right to occupy a specified house or flat owned by the MHOS.
Membership of the MHOS will give members involvement in the build and design of their homes and the right to democratically control the housing community in which they will live. The cost of building the homes owned by the MHOS will be financed by two mortgage loans from long term investors such as Ecology Building Society or Triodos, and grants, deposits from members and possible an IPS share issue.
The cost of buying the land and building the homes owned by the MHOS and financed by the mortgage is divided into equity shares. Each equity share, which has a face value of £1,000 on the date on which it is issued, is owned by a member and financed by the payments members make each month.
The number of shares owned by each member depends on the build cost of their home and what they can afford (these are the number of shares which are financed by 35% of net income). The more they earn the more equity shares they can afford to finance. As their income rises they can buy more equity shares. If their income falls, rather than lose their home, they can sell equity shares if there is a willing buyer or, in specified circumstances such as a sustained loss of employment or disability, convert to a standard rental tenancy.
To ensure sustainability of the project, the value of the equity shares owned by a household must not differ by more than (+ or –) 10% of the build cost. If affordable payments (set at 35% of net income) are above the amount required to finance equity shares of the value of the build cost + 10% the remainder will go into the contingency and future fund.
Under the terms of their lease, each member will make monthly payments to the MHOS which, will pay the interest and capital to the lender, and cover a deduction for management, maintenance, insurance and service costs (such as cleaning, lighting of common parts, and grounds maintenance).
The MHOS is controlled by its members who live in the homes it owns. They elect the Board of Directors which controls the day to day management of the MHOS within the remit set by members in general meeting. If a member moves out and sells their shares before they have lived in the MHOS for three years they will only be able to sell them at their original value (or a lower value if their value, calculated in accordance with the valuation formula, has fallen).
For members who leave after three years the value of the equity shares will principally be driven by references to increases (or decreases) in average incomes for the area. They will get the value of their original shares plus interest at half the rate of increase (or decrease) in average incomes for the area.
Like any other person taking on a loan and repayment obligation the MHOS will need to carry out a credit check and personal financial assessment to ensure that potential members are able to repay the mortgage debt servicing obligations they are taking on. The MHOS will also require members to have advice from an independent financial advisor to ensure that they understand the financial obligations and risks they are taking on.
The initial lease will be granted for a fixed term of 20 years. This gives members a legal interest in their home and the equity shares they own that can be registered with the Land Registry. Longer leases are not possible as a longer fixed term lease would mean members would be able to buy the home and the land it is built on outright (called leasehold enfranchisement). That would mean that it will go into the open market and not be affordable for future generations. This would defeat a key purpose of setting up this MHOS which, as well as giving members an affordable investment in the housing market, is to ensure that the homes in it remain affordable for future generations.
The lease will give members the right to remain in their homes after the initial 20 year term for as long as they want to do so. The right of occupation granted by the lease is legally secure under the terms of the lease contract and cannot be ended other than through a breach of the lease by the member or by a failure of the Mutual Home Ownership Society to meet its obligations to pay its mortgage. Ultimately, if the Mutual Home Ownership Society fails to meet its financial obligations there is a risk that members may lose their home.
The finances of the MHOS will be structured to maintain reserves to avoid any risk of repayment default. A financial intermediary, the Co-operative Housing Finance Society Ltd (CHFS), will provide the long term investors with a 12 month interest guarantee as security against default. CHFS has been in operation since 1997 and has a track record of monitoring default risk.
Members can move between properties in the scheme as they become available and as their housing needs change as long as all the equity shares can be financed by incoming members.
Under the terms of the lease, members will be responsible for all internal and non structural repairs including any heating appliances, kitchens, bathrooms and other services inside their home. The MHOS will be responsible for structural repairs and for the maintenance of the exterior of the houses.
Members will need to pay a minimum deposit equal to 10% of the equity shares they can afford to finance through their monthly payments. 5% will be paid on joining and the other 5% when land is purchased. It is important that members make a positive personal financial commitment to become a part of the MHOS.
A MHOS guarantees affordability because:
• ‘rental’ charges are geared to 35% of net household income
• members secure a ‘foothold’ on the housing ladder at lower household incomes
• members can buy more shares as their income rises
• transaction costs on buying into and leaving are reduced because homes are not bought and sold
• the linkage - to average earnings - helps reduce risk and retain affordability
• it remains affordable from one generation of occupants to the next
A MHOS is sustainable because:
• the housing remains permanently affordable for the benefit of the local community
• the benefits are recycled from one generation of occupants to the next
• it is easier to finance environmentally sustainable housing
• it encourages active citizenship and community engagement on two levels;
1.6 Organisations who contributed to this Project Development Plan
LILAC: the Mutual Home Ownership Society was set up by the current development group of this project registered with the Financial Services Authority (registration number 30689 R) as a bona fide Industrial and Provident Society based on rules developed by CDS Co-operatives. LILAC is a democratic organisation whose membership is open to all sections of the community.
amazonails: amazonails is the leading UK strawbale building company, recognised internationally for their work, and have been involved in the design and construction of these innovative low-impact structures for over 12 years. They are a not-for-profit social enterprise, registered as an Industrial & Provident Society in March 2007 and offer Design, Consultancy, Training & Support in Strawbale building & other sustainable building techniques to Self-builders, Architects, Schools, Community Groups and the Construction industry. amazonails' aim is to encourage everyone to become involved in the construction process through the use of straightforward practical teaching methods: particularly those who have traditionally been denied access to construction, such as women, younger and older people- at least 50% of course participants are women. They also aim to inform and educate the wider industry about the benefits of using sustainable, thermally efficient, natural materials that allow buildings to breathe and create a healthy rather than toxic living environment. They are at the cutting edge of design, having pioneered several types of low-impact foundations through the Building Regulation system in the UK, specialising in designs that use no cement, are self-draining and require no intrusive trenches into the earth: making them accessible to all. They have acted as consultants to clients such as the Ecology Building Society and the National Trust, and have built the first semi-detached strawbale houses in the UK. LILAC undertook feasibility study with amazonails and information from this is incorporated in this Plan.
CDS Co-operatives: is a registered social landlord based in London specialising in the development of housing co-operatives and other forms of mutual housing tenure which has registered LILAC as a co-operative company and has provided strategic advice on the MHO model.
UnLtd: is a charity which supports social entrepreneurs who want to change the world for the better. They offer funding and support, to help these individuals make their ideas a reality. One of the members of the Development group received a Phase 1 grant form UnLtd which helped them establish the company and produce this Project Development Plan.
Forward to next section: 2. The process of the project development plan
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