are co-operatives the missing middle?


The down payment for housing security for Linda Seaborn was just $1. That was not in the very distant past. Nor was it for a spot in a rustic commune in the bush. Seaborn paid $1 for a townhouse in suburban Hobart in 1999. She moved in the following year and still lives there today.

Seaborn lives in a housing co-operative. While common in cities such as Zurich and New York, they make up a vanishingly small proportion of housing in Australia.

Co-operative housing is the missing middle in Australia’s property landscape, and those who work in the emerging local industry argue it should be harnessed by state and federal governments to help solve the country’s housing crisis.

“The security of housing co-ops gives people a secure and stable old age [and] retirement,” Linda Seaborn says.

Co-operative housing can include anything from public housing rental schemes to collectives that work together to build a complex before switching to a strata plan.

Melina Morrison, chief executive of the Business Council of Co-operatives and Mutuals (BCCM), says when you boil it down, housing co-ops look like ordinary housing.

“The issue here is that something’s exotic until it’s not,” she says.

What is co-operative housing?

The easiest way to explain how a housing co-op works is to compare it to buying a unit or apartment in a complex that has strata. That purchase includes a separate title for the unit, and the new owner becomes a member of a strata group that is responsible for maintaining common areas such as a pool and the building’s exterior, and ensuring the property is insured.

Morrison says a shared equity housing co-op is a similar concept but goes a few steps further.

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A group of people come together and decide they want to build on a block of land but have separate properties. Rather than buying individual property titles, they form a co-op that purchases the title. The individuals then buy a share in the co-op, which can cost anything from $1 to tens of thousands of dollars.

The co-op, as a business, takes on the title mortgage for the property, controls the construction of the homes and has responsibility for maintaining the property.

The share purchased – say, the $1 invested by Seaborn – gives the shareholder the right to live in the property. They also make ongoing payments towards co-op fees and any mortgage the co-op holds.

But co-ops are not run to grow profits, so when a resident leaves, they simply get back their initial outlay for a share of ownership, plus a little interest. A new person moving in would pay a similar amount for their share.

Morrison says that means co-operatives can offer a more affordable buy-in point for people otherwise priced out of the property market.

“One of the purposes of that property is for it to be affordable in perpetuity,” she says.

The downside

The trouble with co-op housing in Australia is that it is so uncommon – roughly 1 per cent of all housing, according to the BCCM – that there are few examples for governments and investors to assess.

One challenge co-ops face is the emphasis in Australia on property as a financial asset, says Michael Fotheringham, managing director of the Australian Housing and Urban Research Institute.

“Places like Zurich or areas with really strong welfare systems and strong social housing systems often have quite a lot of co-operative housing,” he says.

“Places like Australia, there’s not so much social housing and the property market is dominated by the financial framing of property rather than the shelter framing of property.”

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Australians aspire to own land, Fotheringham says.

“When you talk about housing at a barbecue with your friends over Christmas, you’re not talking about how can we set up a shared arrangement, you’re talking about what you can get for what you’ve got or how you can get a foot on the ladder.

“You’ve also got to register as a co-operative society, so there’s an extra step there, but also what the lenders – the major banks – are willing to lend for. We have a fairly concentrated banking system with four or five major banks and that tends to shape less competitive behaviour.”

It’s about security

While co-operative housing can’t be used as an investment vehicle, Morrison says it delivers something vital: stability.

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“It’s housing security,” she says.

“It shouldn’t be a profit-making investment. It should be about meeting people’s needs for a home and shelter. That’s something that all the housing co-op models have in common – it provides a secure home for the people that live in it, whether you’re putting in $1 or $200,000.”

For Seaborn, who has been the senior policy adviser for the BCCM since late 2022, that security meant she could study again. She adds that the benefits of co-op living extend beyond working-age life.

“The security of housing co-ops gives people a secure and stable old age [and] retirement.”

One model working in Melbourne

Tim Riley built his current inner-Melbourne home and the one before that through a terminating housing co-operative, which works as a co-op for the duration of the construction phase before reverting to standard title ownership once the build is complete.

“I’m loving it, it’s been great. Definitely a great thing to be part of,” he says.

Riley says he was first attracted to the idea as an investor and then decided along with friends to build their first co-op in Northcote.

Tim Riley outside the home he built through a co-operative.

Tim Riley outside the home he built through a co-operative.Credit: Justin McManus

He’s now a co-op developer, and his company Property Collectives has 10 projects with about 80 homes either completed or under construction across Melbourne.

A big benefit to a terminating co-op is that it’s cheaper than a standard build because it can cut out the middlemen and access wholesale prices: Riley estimates it works out at least 11 per cent cheaper on average.

The terminating model is not cheap – the investment works out as roughly $1 million per household, depending on the project – but people end up owning the title and can then sell the property on the open market.

“The practical reality is that, you know, people are taking a risk by taking this approach to build[ing] their own homes, and, you know, the reward is they get their home at cost,” he says.

‘If not now, when?’

Morrison says the federal government should invest in co-ops as part of its multibillion-dollar strategy to have 1.2 million homes constructed across the country in the next five years.

In its submission to the government’s national housing and homelessness plan, the business council said the Commonwealth should aim for co-operative housing to make up at least 10 per cent of social housing stock by 2033, and earmark 10 per cent of federal funding – through tools including the Housing Australia Future Fund and the Social Housing Accelerator – for the sector.

“We are missing this middle, and this is the bit that we want to talk to government about: Do you have enough diversity of options and not made-up, fairytale ideas? We’re talking about ideas where there’s already a strong track record, proof of concept,” she says.

“The question more for us is, if not now, when?”

with Olivia Ireland

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