Co-living and housing equity
The authors present the RSA’s concept of housing equity. Drawing on insights from the essay collection, they question the financialisation of housing and propose a new type of relationship to our homes — one that sees them as sources of community wealth and enablers of participation and flourishing in society. Co-living as part of a mixed economy of housing can contribute to this. It can also help us to confront growing challenges, such as loneliness, facing younger generations as they come to live independently for the first time.
By Jonathan Schifferes, Associate Director for Public Services and Communities at the RSA, and Atif Shafique, Researcher for Public Services and Communities at the RSA
“Living is inescapably collective, and no one can now believe that collective life, for instance in something called ‘the market’, takes a natural course. It is, even if only by default, directed.”
Geoffrey Hawthorn, ‘Introduction,’ The Standard of Living, The Tanner Lectures 1985, Amartya Sen
The essays in this collection have implied that the growing interest in co-living is in part linked to a rising tide of disaffection relating to many people’s experiences of housing. The search for new solutions and alternative models is a response to mounting evidence that our housing system is at best inflexible to changing social and economic needs, and at worst dysfunctional or ‘broken.’ The dysfunction doesn’t just relate to a lack of supply (a preoccupation for many policymakers), but also to issues around the quality and flexibility of stock, diversity of tenure, design, land, security and links to the wider economy.
In this essay we argue that the potential of co-living is best measured against the extent to which it can contribute to greater housing equity. We question the ways in which homes have become commodities and speculative assets, and make the case for a different type of financial, economic and social relationship to our homes. A mixed economy of housing — which includes alternative models such as co-living and community-led housing — is presented as a key ingredient of a new approach. We caution that co-living advocates need to work hard to avoid recreating the inequalities of the dominant home ownership model, and present some key policy implications and questions to consider.
The importance of housing equity
The RSA recently launched its Housing Equity programme. It aims to identify practical solutions to the challenges faced by citizens and communities in the UK’s housing system. The term ‘equity’ is used deliberately because it describes two key facets of Britain’s approach to housing. Equity is both a financial concept that captures housing as a form of wealth, and a socio-economic concept that encompasses efforts to promote fairness by ensuring that everyone has access to housing and to the benefits that it provides. The problem is that in both its financial and social dimensions, our approach to housing has been narrowly skewed towards particular models. These models are failing on two primary grounds. First, they are not meeting the evolving needs and aspirations of families and communities, and are indeed entrenching inequalities. Secondly, they are undermining the potential for housing to play a key policy and place-shaping role in the social and economic transformation that Britain desperately needs. We propose a different approach (see Figure 1) that redefines housing equity and what we mean by a ‘home.’ There are two shifts that are central to this.
The first is shifting our approach to financial equity from one that sees homes as speculative assets to one that recognises homes as sources of collective and community wealth. Housing speculation is deeply integrated into our economy, our financial system, government policy and the choices we all make as citizens. Individuals and families purchase property with the expectation that the value of their home will rise and their wealth will therefore accumulate. It allows them to spend more (for example through equity release), store wealth for retirement and ensure it is transferred upon death to their children with a very low burden of tax. Consumer confidence and the ‘wealth effect’ of house price growth promotes consumer spending, which is a major contributor to economic growth in the UK.
Financial institutions in the UK made £250bn in new residential loans to individuals in 2017, and this effectively represents the largest source of new money entering the UK monetary system. Even when banks lend to small and medium companies, one third of that portfolio is secured with a personal guarantee against personal residential property. Housing is also impacted by international capital flows and the speculative activities inherent within the global financial system, seen most acutely in the subprime mortgage crisis that triggered the 2007–08 recession. Indeed, many argue that the housing crisis is not caused by inadequate housing supply, but by an oversupply of money within the system.
While financial institutions have played a key role, so too has government. It has done so through a combination of financial deregulation and a decades-long commitment to policy and financial support for private home ownership. Indeed, we spend £33bn annually to support the private market, compared to £8.6bn of support to affordable housing provision. Policymakers have seen house price growth as highly useful for short-term economic and fiscal objectives. But it has also been seen to serve two key social policy goals. One is supporting broad-based wealth accumulation through widespread home ownership. The second is the promotion of individualised ‘asset-based welfare’ (or ‘wealthfare’) and financial security. In Britain, this has been promoted in the context of a decline in traditional state support, and either explicitly or implicitly as a way of shifting welfare responsibility onto private households, particularly in terms of leveraging property equity for retirement.
There are significant problems with the financialisation of housing. The idea that home ownership in the context of a speculative housing system can promote widespread financial security, increased welfare and more equitable wealth accumulation belies the reality that property wealth is highly concentrated among wealthy and privileged groups, and indeed, home ownership levels have declined despite high levels of government support. Housing speculation is therefore entrenching rather than addressing economic inequality and insecurity. Similarly, the sensitivity of economic growth and public finances to the performance of housing markets simply underscores the imbalanced nature of our economic and financial system. Maintaining rising house prices becomes a policy goal, competing for government’s attention alongside the growth in wages, productivity and investment (including in affordable housing). For individuals and families, speculation privileges the status of homes as commodities, obscuring their fundamental value as places to live, build connections and participate in society.
For these reasons, we argue for a shift in the financial relationship to our homes. It is possible to explore alternatives to private home ownership linked to housing speculation. Models such as Community Land Trusts (CLTs), co-housing, co-operatives and mutuals can give people a financial stake in housing that is personally meaningful but also mutually shared with their community, while also protecting against speculation. Notions of wealth and equity in our housing system are understood far too narrowly. They tend to mean individual ownership of a financial asset, the value of which is determined by the market. It is possible to broaden this understanding to encompass the benefits of having a stake (financial, social, personal) in the success of the community in which one lives and contributes to. Separating the ownership of land and buildings, recognising that they have very different economic properties, is a good start.
The second proposed shift is in our approach to social equity, from seeing homes simply as shelter or units of need, to promoting homes as key forms of social, economic and community infrastructure that enable people to participate and flourish in society. Much of the current debate on fairness in housing focuses on increasing the supply of affordable homes. Proponents often look to the golden age of housebuilding in the middle of the 20th century for inspiration. But as Duncan Maclennan notes, despite its achievements, the era of mass housebuilding also represented a missed opportunity. Housing policies were based on a relatively “narrow, quantitative approach to shelter provision and justified [on] social or fairness grounds.” Large-scale housing investments and programmes were generally managerially driven and paternalistic, tending not to engage and empower communities, or build social capital. Developments often failed to create socially mixed neighbourhoods, and poorer households were disconnected from the emerging labour market and social and cultural opportunities. Links between housing and health, productivity and social participation were under-explored. In short, housing policies and programmes for promoting social equity have tended to have a narrow focus on providing shelter, often failing to activate housing as a platform for building people’s capabilities and connecting them to social and economic opportunities.
A more forward-thinking approach could adopt a broader understanding of social equity as “just and fair inclusion into a society in which all can participate, prosper and reach their full potential.” This would prioritise citizen or resident engagement and participation as a driver of housing interventions, challenging the paternalism of traditional approaches. It may also help to focus efforts on creative solutions instead of palliative actions, with more integrated place-based approaches that strengthen the role of homes as connection points into the community, economy and social infrastructure, and link housing policy to agendas such as economic and social mobility, work-based progression and lifelong learning. The Local Government Association’s housing commission recognises this wider potential. The Heart of Hastings project described by Jess Steele and the Multi-generation home initiative presented by Manisha Patel are both practical examples of this broader vision for what a home can achieve.
A mixed economy of housing and an integrated policy approach can help to promote housing equity. Mono-tenure and socio-economic residential segregation is unlikely to build the diverse communities and talent pools that places need to flourish, and that cities need to be successful. Meaningful quality, security, flexibility and choice across all types of tenure can support mobility and allow people to access the housing they need at different points in their lives and in response to changing circumstances. If we recognise that housing equity is as much about place-shaping as it is the provision of shelter, an integrated policy approach is vital. This would coherently link housing to a range of people and place-based services, from health and social care to industrial strategy, labour market support and education. The links between housing and macroeconomic and fiscal outcomes also underline the importance of an integrated approach.
Figure 1 — Shifting our thinking on housing equity
Can co-living contribute to housing equity?
The essays in this collection, as well as wider evidence, suggest that co-living, as part of a mixed economy of housing, can contribute to both financial and social equity in housing.
Financial equity. Co-living can offer a new financial relationship to homes, giving communities a stake in housing and improving diversity in the overall market. This includes highly flexible rental contracts (particularly in the Build to Rent sector) but also ownership models which share profit communally and insulate against speculative interests. The Heart of Hastings project, mentioned in Jess Steele’s essay, is an illustration of this. Similarly, the LILAC ‘eco’ co-housing community in Leeds has developed a new model of mutual home ownership in which residents pay a collective rather than individual mortgage, gaining an equity stake using a national income based formula rather than property values. Co-living also has the potential to broaden and diversify what we mean by ownership in a housing context. Rather than the right to sole use of the space between four walls and under one roof, residents in co-living may aspire instead to own shares in small businesses based in their residences, might own machines or equipment that is rented to neighbours or shared on a reciprocal basis, or might own a share in the co-living business or enterprise instead. Co-living can also potentially serve a financial sector that is diversified beyond a property fixation. It can offer the sort of communities needed to serve the growth of initiatives such as peer-to-peer lending, microfinance and the regrowth community savings banks.
Social equity. Co-living can support access to affordable, good quality homes for groups that tend to be under-served by housing markets due to their income or employment experience. It can be more flexible in responding to changing patterns of work, living and social interaction. More broadly, as the essays in this collection have highlighted, it can support people to flourish by promoting social capital, community building, environmental and personal wellbeing, self-help and enterprise, and increased participation in social, economic and cultural opportunities. By fostering a sense of community, co-living can strengthen both formal and informal economies of sharing, encouraging a more collective exchange of resources, skills, knowledge and caring responsibilities. The role of co-living in addressing loneliness is under-appreciated; young adults and those living alone tend to experience loneliness more commonly — millennials in London report they are more often isolated than over 55s. This is as serious public health concern — and the design and daily life in co-living facilities can combine privacy with informal social structure. If it can successfully develop communities of place as well as communities of residency, co-living can help to forge new links between housing and public health, labour market progression and learning, training and skills.
It is important to caveat this by stressing that co-living in the UK is still in its infancy. Some of the suggested benefits reflect what co-living models can potentially achieve, rather than what is clearly evidenced currently. The benefits may also be influenced by the form(s) that co-living takes. Co-living encompasses a range of models with diverse motivations, from co-operative co-housing communities tackling affordability and displacement problems, to private companies catering to single professionals in expensive housing markets. What brings them together is the central notion that greater communality is good for society and for the economy. They therefore face a shared challenge in demonstrating that they can create inclusive instead of exclusive communities that contribute to the development, vibrancy and wellbeing of the wider place in which they reside.
Implications for policy and co-living practice
There is broad agreement that the housing system in the UK is dysfunctional and fails to meet the needs and ambitions of large sections of the population. For policymakers, civic and community leaders, and housing developers and institutions, a focus on housing equity as we’ve described it in this essay could provide an opportunity to reconsider the ways in which we develop solutions to housing challenges. Each of the essays in this collection have described a society undergoing social and economic change, but a housing system that is often too slow to respond, especially to the concerns of younger generations coming to live independently for the first time, in unprecedented housing market conditions.
Contributors have hinted at the importance of moving towards a mixed economy of housing that not only addresses issues of supply, but also encourages us to think creatively about tenure, quality, space standards, design and housing needs across the life course. The essays have also stressed the links between housing and the wider social, civic and economic infrastructure of places. Although co-living is in its infancy in the UK, it has the potential to contribute to this agenda because its rise is linked directly to the failure of mainstream housing to capitalise on opportunities for reform. Policymakers and key stakeholders would benefit from exploring its potential with respect to key policy objectives, but also influencing it as it matures so that it promotes greater equity in our housing system.
- Read more from the RSA on co-living: The fundamentals of a home and how we can design for wellbeing by Manisha Patel
- Download the RSA Co-living and the common good report (.pdf)
- Follow the RSA on Twitter @theRSAorg
