The Deals Beneath II: Co-partnership and the Garden Suburbs
Updated: Jul 22, 2020
“Co-partnership is … profit sharing full bloom” Charity Organization Review, 1913
Linked to a previous blog on the subject of The Deals Beneath, I have continued my reading and research into how historic property developments were structured and funded. This has brought me to a fascinating part of the Garden Suburb movement that I feel has been woefully under-reported and studied – the Co-partnership housing model. Please dear reader, if you think I am wrong I would be delighted to be proven so and directed towards the writings.
Co‐partnership was a unique form of housing tenure, combining features of a tenant co‐operative and a limited dividend company. Popular at the turn of the twentieth century, it would appear to have fallen out of use after the first world war when the government assumed a far greater role in direct housing delivery than it had prior (under the “Homes for Heroes” agenda).
Stories’ interest in the Co-partnership model stems from its potential alignment to our ambition to create housing that can meet local need and allow tenants to accumulate property wealth (I know there are a few people out there thinking about this subject). This was an ambition shared by the pioneers of the Garden City movement.
“In regard to houses yet to be built, the simplest and surest way of reconciling the interests of landlord and tenant is to provide means by which the tenant of a small house can, if he is willing (and there are a great many who are willing), gradually acquire the value of, or a substantial interest in the house he lives in.” J.S. Nettleford, 1908, “Practical Housing”,
The system for co-partnership was described as follows
Secure an option to purchase or lease suitable land. [Stated in 1908 to be at a capital value of £300 per acre, or less if possible (£36,360(!) at 2019 values)]
Having secured the option, convene a meeting of possible members of the future society. Names are taking of those wishing to “get healthy housing with cheerful surroundings” which they can gradually buy by small monthly payments. The promoters of the scheme are able to judge whether the demand is sufficient.
Land is “planned out as a whole in accordance with the hygienic, artistic, and economic principles of Town Planning, as far as the local bye-laws will permit”
Prospectus issued explaining the objects of the society, to which subscriptions for loan stock and share capital are invited. Share capital is raised with a capped dividend of 5%. Where there was a shortfall between the share capital raised and the costs of the scheme, loan stock was then raised at 4%, paid from the date of receipt of the money. Mortgages were also taken against the land/portfolio. Any further profit, after payment of fixed costs (mortgages/loan stock, then share dividends to a cap of 5%) was applied in furthering the objects of the society or as a payment of a bonus to the tenants of the society who were also shareholders.
In many ways then this was a combination of modern day co-operative housing and crowd-funding and an extension of the earlier Victorian era “5% philanthropist” model – more of which another day.
In a description of the operation of the Sevenoaks Tenants ltd co-partnership (from c.1913) it was reported that prospective tenants had to buy £5 or £10 worth of shares (£600-£1,200 in 2019) and commit to building this up to £50 (£6,000, 2019). This financial commitment would have been in addition to rent or by converting dividend receipts in to shares. Having paid rent to the company, and the company having serviced its debts and other obligations the tenants could then expect a dividend on their shares.
A broadly similar approach was seen in Hampstead Garden Suburb (reported in 1907). Non-tenants, as well as tenants, were able to become shareholders with dividends capped at 5%. Shareholders had voting rights on the management of the company. No individual, whether tenant or not, was able to hold more than £200 worth of shares and each tenant-investor was obliged to ultimately obtain loan stock to the amount of £50, or two years' rent of the house occupied, whichever was the greater. Tenants were able to pay this at the outset, or through installments or via interest or share dividends. Once the tenant had reached £50, or the equivalent of two years’ rent, they were able to receive their interest in cash. Written accounts from 1907 stated that that dividends on shares were paid at 5% and a further rent dividend to tenant-investors in that year at some 2.5%.
This system was described in 1908 has preferable to that of relying on a mortgage as the mobility of labour, under a co-partnership model, is protected. The tenant can move and either retain their shares (and income) or sell their shares. It also had the benefit of sharing rental uplift (and/or growth in the size of the company) with the tenants themselves, thereby aiding affordability.
In 1911, the Co-partnership Tenants Limited (an umbrella organization) listed 15 co-partnerships operating in England.
Some key differences between then and now are that the property and development finance industry is more sophisticated than it was and also the 1947 Town & Country Planning Act went on to create the modern era “planning risk”. A pre-acquisition/pre-consent offer of 5% on equity is not going to be received well in the market.
But the principle of “social investment” (i.e. capped equity) in property development and creating capacity for tenants to become financial stakeholders is something Stories will be looking in to. We’d be happy to hear from anyone doing similar thinking.
If you would like copies of the source material for this blog then do contact us.