Can Swiss housing cooperatives introduce their approach in developing countries?
GENEVA — Can pooled community resources make a dent in the world’s housing deficit? A group of Swiss housing cooperatives believe it can, providing an alternative to ailing public investment and what they see as the questionable motives of multinational private banks.
Starting this year, partners of a group called the Social Production of Habitat Platform plan to put their money to work in Senegal and Nicaragua through what they’re calling a “financial solidarity mechanism”. The move builds on the collective action that has made Switzerland a world capital of housing coops.
“The idea is that you have these networks from five continents and they really want to join forces,” said Cyril Royez with urbaMonde, a Geneva-based NGO that is coordinating the platform.
Royez described the role of the platform, which was created last year in the aftermath of the U. N.’s Habitat III conference on sustainable cities, as that of an “impact investor”. The plan is to start by supporting a Senegalese federation of savings groups, and next year try out funding for a Nicaraguan federation of housing cooperatives.
Royez was reluctant to speculate on actual dollar amounts, but he believes that scaling up is a possibility. “The pilot phase will be quite small, but the potential is huge,” he said, noting that traditional housing finance has proven inadequate. “There is huge amount of money at financial institutions, but it’s not going where it needs to go.”
The United Nations estimates that a billion new homes will be needed by 2025, which will cost an estimated USD 650 billion each year to construct. The majority of that need will be in the rapidly urbanizing countries of the developing world, where existing models of housing finance have largely failed to keep up with the demand.
The private sector, for instance, often is unwilling to invest given the lack of functioning mortgage markets in poor countries. And even with foreign aid assistance, the public sector tends to lack the capacity to adequately manage a large-scale public housing programme.
Enter the “social production of habitat”. This is the idea that individual communities should build their own housing and neighbourhoods to their own specifications, rather than rely on the caprices of the private market or the preconceived notions of top-down housing planners.
Advocates for this approach believe “social production” ultimately has the potential to offer the best livelihood to a community, whether they are middle-class cooperative dwellers in Zurich managing shared common space in four-story apartment buildings or slum dwellers outside Johannesburg working to upgrade their township from dirt roads to paved streets.
Last year, countries around the world agreed to promote the “social production of housing” at Habitat III, which took place in Quito, Ecuador. There, they adopted a 20-year vision document called the New Urban Agenda.
Housing activists cheered this outcome. When the United Nations subsequently called on NGOs to join in the effort to turn this voluntary, non-binding 20-year urbanization strategy into reality, they made a commitment to the cause using the Social Production of Habitat Platform, which had been created in 2014. The initiative currently stands as a joint effort of six housing groups from different regions of the world, coordinated by urbaMonde.
The new financial solidarity mechanism is a significant tangible outcome of this effort, which previously has focused on organizing meetings and awards.
Where is this funding coming from? For decades, the two main Swiss cooperative housing federations have maintained “solidarity funds”, taking a small sum from individual co-op buildings that goes into a larger pool. Co-ops can then access this revolving loan fund to finance new construction, repairs or land acquisition.
This concept has fueled Switzerland’s co-op boom. In the early 2000s, nearly a quarter of all new housing units in Zurich were part of co-ops. And in 2008, as the world plunged into a global financial crisis sparked by risky moves in the private mortgage market and real estate projects worldwide ground to a halt, housing cooperatives built 1,000 units in Switzerland’s largest city. A co-op consortium in the city won this year’s World Habitat Award.
And in Geneva, a non-profit housing developer known by the French acronym Codha has raised USD 3 million from co-op residents. Organizers say that’s an investment that will produce 600 new affordable units in one of the world’s most expensive cities.
The Social Production of Habitat Platform ultimately hopes to harness these approaches.
So what are some other examples of social production of housing? The idea spans several approaches. Here are three types:
- Community land trusts
A community land trust (CLT) is a not-for-profit organization that owns land with the purpose of maintaining permanently affordable housing on the site. Typically, a CLT is structured so that ownership of the land is separate from ownership of the buildings — namely, houses — sitting on the land. That way, individual owners may buy houses, but they only lease the land.
Taking the price of land out of the equation significantly reduces the cost. Moreover, when an owner goes to sell the house, the ground lease in place restricts the owner from selling on the open market. Instead, the owner must sell to another low-to-moderate income household at a price predetermined by a resale formula contained in the lease.
With this approach, owners have no incentive to view their house as a financial investment to turn a profit, but only as a place to live. Like traditional private homes, owners can still finance the purchase with a mortgage, can improve the home as they see and must still pay property taxes. They also can serve on the CLT’s board to help make decisions about how the land trust is run.
CLTs are most common in the United States. The largest, the Champlain Housing Trust in Burlington, Vermont, is home to over 1,000 families and holds USD 300 million in assets.
- Housing cooperatives
A housing cooperative is a democratically run organization, usually not-for-profit, formed to own and manage housing. Unlike a CLT, members do not own their own housing unit. Rather, they own shares in the co-op, which entitles them to their unit for as long as they own the shares.
Typically, co-ops are multi-family buildings with individual flats and shared common spaces. Owners can sell their shares on the open market, but acquiring a loan for a co-op share can be more challenging that getting a traditional mortgage, which sometimes depresses the cost of co-ops to below market rate.
Zurich’s housing co-ops, for example, tend to rent at prices of an average 70 to 80 percent of market rate. The democratic governance structure fosters collective decision-making about issues such as maintenance, rules and financial matters. Switzerland and Uruguay are the world leaders in cooperative housing.
- Self-built or incremental housing
In the developing world, the urban poor often find public housing unavailable but lack the capital to buy a house. Instead, they must resort to building their own homes — self-built housing, often done slowly over time, or incrementally.
While such houses can be individual efforts, communities around the world have found that a mutual aid approach makes it much easier. Combining resources allows for the bulk purchase of construction materials and a larger labour pool when it comes time to pour a foundation or raise a roof.
In Brazilian favelas, this collective effort is known as mutirão. While informal in nature, NGOs such as Slum/Shack Dwellers International work across Africa, India and Latin America to organize communities — for example, to form savings groups to finance long-term improvements and secure legal tenure to their land, so that years of hard work cannot be erased in the blink of an eye.
Note: This story has been updated to clarify that the Social Production of Habitat Platform was created in 2014.