This action might not be possible to undo. Are you sure you want to continue?
There's been a lot in the news lately about home ownership, but not much real hope on the horizon for first-home buyers. At the same time, retirees worry about their investments, if they have any, and find it harder to make ends meet. This little story offers a solution to all their problems. If you'd like to know more about this solution, the Co-operative Home Ownership Pool, see our contact details below.
A Tale of Five Households
by Sonia Corbett Jane and her friends, Tom and Sue, all in their thirties, are in the enviable position of living in their own homes, mortgage-free! Jane's parents and their friends are enjoying life in their own homes, with no worries, and a caring community around them. Back in 2012 it was a different – and very typical – story. Jane had a problem. As a solo mum, she was supplementing the DPB with part-time work when she could get it, living in a small flat in a run-down neighbourhood. Her ambition was to educate herself enough to get a well-paid job and buy her own home, but her dreams were evaporating as the rent went up and her work opportunities went down. Jane's parents, Jack and Jill, also had a problem. Recently retired, they were still living in their spacious family home and wanted to downsize. They once had a substantial nest egg, but most of it had vanished in 2009, and they were nervous about their remaining savings with a “low-risk” investment company. They had thought of modifying their house to provide a secure home for Jane's family, with a smaller flat for themselves, but they were reluctant to take on the necessary debt, knowing that Jane would never be able to repay it. Jack and Jill's friends, Bob and Mary, had similar concerns. Bob was about to retire, their mortgage was paid off and they had been looking forward to a more relaxed lifestyle. As part of their retirement savings plan, 20 years ago when they were both earning, they had borrowed to buy rental properties. The plan at the time was to sell the rental properties when they retired and re-invest the capital gain, but by 2012 the houses were “worth” less than Bob and Mary had paid for them, both in need of maintenance, and the rent barely covered their costs. So much for a retirement income! Bob's colleague Tom, and his wife Sue had two pre-schoolers, juggling a large mortgage on one moderate income. Sue was studying part time, dreaming of a well-paid job, a bigger house, holidays with the children ….. Another colleague, Fred, on the other hand was 40-ish, single, on a good income, and owned his luxury apartment – with mortgage. With no dependents and plenty of time and disposable income for his interests, he was secure, right? Well, there were mutterings about downsizing in their department, rates were going up and he was a tad worried about the 8-fold increase in the insurance premiums on the apartment block! The long-term future was a concern for all five households. Their conversations would inevitably turn to “the economy”: the likelihood of rents and mortgage interest rates increasing, investment companies collapsing, benefits and superannuation being reduced, jobs vanishing, and prices of food and everything else increasing beyond their means. They wondered what effect climate change would have on their food supplies and way of life? These friends had also talked about their feelings of isolation, a vague sense of helplessness, and an awareness that life could be more fulfilling. At a holiday gathering they laid their worries on the table, were surprised to discover a great deal of common ground, and then started asking: “What if we pool our resources?”
“Could we provide debt-free accommodation for everyone - without loss of our independence?” “How much would we save? What could we do with that money?” “Could the retirees realise the benefits of their life savings?” When they added up their resources, the friends found that they could indeed accommodate all five households, with a house to spare, without any debt and with greater security for the retirees! Over the following two years, the five households set up a co-operative company, and agreed upon a set of principles which they wrote into a working agreement. Bob and Mary, Jack and Jill, and Tom and Sue all sold their homes into the co-operative, in exchange for company shares to the agreed market value of their houses. Fred sold his apartment, Jack and Jill cashed up their investments, and all the proceeds were contributed to the co-operative, again in exchange for shares. The cash was sufficient to pay off Tom and Sue's mortgage, and to start modifying Jack and Jill's house to accommodate Jane and her children. Fred moved into one of Bob and Mary's rental properties, and started renovating it. Jane, Fred, and Tom and Sue continue to buy shares in the co-operative, by contributing what they would have paid in mortgage repayments and rent. Rates, insurance, maintenance and renovations are paid for out of their contributions. Two years later: Jane has a comfortable home. She has completed her studies, and she has discovered a satisfying new interest in gardening, supplying vegetables for her family and her parents, with produce left over to swap for help from other co-operative members with jobs she can't manage herself. All her contributions, whether cash or produce, increase her share in the co-operative, as well as her sense of security and self esteem. Jack and Jill, are enjoying their continued independence, close to their grandchildren, having avoided the upheaval of selling their home and moving away from their neighbourhood. They no longer worry about their long-term security – their savings are now invested in the homes of friends, and they are able to sell some of their shares in the co-operative at any time if they need to top up their superannuation. When Bob and Mary sold their rental properties to the co-operative, they didn't have to find cash to pay Fred for the renovations and, as a part owner of the house, Fred looks after it! For his part, he has enjoyed doing the renovations and he is about to start work on the other rental, which has been offered to potential new members of the co-operative. Bob and Mary have access to some extra cash whenever they need it, without any of the risks – and hassles – associated with rental property management. Tom and Sue are profoundly relieved to be free of their mortgage – and they didn't even have to move house! Their shares in the co-operative are increasing rapidly now that they are not paying any interest to the bank. The co-operative is retrofitting all their houses with extra insulation, solar water heaters and efficient solid fuel heaters with cook tops, something that Sue could only have dreamed about two years ago. By simply sharing their resources, five households have solved problems that seemed overwhelming at the time. Not only are they all financially secure, they also acknowledge improvements in their family lives now that they are free of the worries they were all carrying. It took a change in mindset, and considerable courage to proceed against the conventional wisdom, and to push through the doubts they all experienced at times. Now, they look back and wonder why they didn't do it years ago! They'd certainly encourage anyone with any of their old problems to find out how they did it. Transition Towns in Lower Hutt is offering a workshop on the Co-operative Home Ownership Pool. To register interest, email us at: email@example.com