by Gabi Bohnet
I am living in northern NSW, in the hills near Mullumbimby and keen establish an affordable group housing project. I am personally interested in an ‘urban living space’ – within one of the local townships in the Byron Bay, Murwillumbah to Lismore region. Living in a walkable, cyclable environment where everything – schools, work, community garden, local shops, and cultural activities are close by seems to make perfect sense to me, especially for reducing the carbon footprint. I like to explore the possibilities to purchase Council land for affordable housing projects as cited in the ‘Affordable Housing Strategy’ of the Byron Shire Council, however I would also be supportive of rural initiatives.
My back ground is in architecture, town planning and sustainable design. I have looked at many communities and housing projects for inspiration. “Why re-invent the wheel?” if we can tap into an existing, functional organisation that is successful and offers support, not only politically, but also practically, legally and financially.
The Tenant Syndicate
The Tenant Syndicate was born in the late 1980s in Germany. Despite increasing economic wealth, or just because of it, there is a growing gap between rich and poor, increasing lack of access to living space. All over the world people long for a secure place to live – beyond the fear of loosing their homes, being pushed out by rising rental prices or property sales.
The overall idea of the Tenant Syndicate is to acquire property – land and buildings, to remove permanently from the speculation market, keeping these places available as affordable rental living space forever. The Tenant Syndicate was formed to be the platform and network to support the wider political struggle for affordable self–managed living spaces with an open and growing number of individual housing projects. In August 2009 the syndicate decided to support projects globally if there is the request for it. What a wonderful opportunity!
Many of us, here in Australia and in other countries, wish to collectively purchase land and dwellings and live in a self-organised, self-determined way. Each group has different ideas on how they wish to live together, however they all share the need for secure and lasting property tenure. This is the fundamental link between the projects, and the goal the Tenant Syndicate set in its statutes from 1992: “To support and politically push for the development of new self-organised house projects: Humane living space, a roof over the head, for everyone.”
How does it work?
On one hand we have autonomous house projects or groups of people who wish to live together. They might know a property or dwelling already, yet they lack the finances and legal expertise to get set up.
On the other hand there is the Tenant Syndicate that has established a legal framework to support and tie the individual projects together. The syndicate is not an umbrella organisation but a member of every house project with each project set up as a legally autonomous “limited liability company” (ltd).
Together with the Syndicate, the future tenants of a House project establish a limited liability company which then buys the property. The tenants pay rent to the company, but are simultaneously responsible for all aspects of running the company, financing the purchase, and administering the building. In this way, affordable living space is preserved, and the building protected from exploitation by real-estate speculators.
The ‘limited liability company’ was chosen for the legal set-up of the Tenant Syndicate as it lends itself to protect the syndicate’s main goal: Keeping affordable rental property perpetually available. Each House project Ltd. is made up of 2 directors: one is the director chosen by House association (all tenants) and the other is chosen by the Tenant Syndicate association. Both directors have exactly one vote. The Syndicate only has a say in fundamental questions, such as the sale of the house, a conversion into condominiums, or changes in the partnership agreement and the sale of shares in the company (no unfriendly take-over by financial investors). Tenants cannot unanimously decide to sell their property for profit. Here, the house association has exactly one vote, but the control organization, too, has exactly one vote. Therefore, in these fundamental questions, a change in the status quo can only be made with the consent of both organisations.
Neither the house association nor the control organisation can be outvoted.
In other matters however, the Syndicate has no input, e.g. the running of the House projects.
The House association carries the sole responsibility for the daily management: Who moves in? How are loans obtained? What modifications are going to be carried out on the house? How high is the rent?
These are things that belong entirely to the self-organised responsibilities of the tenants. The Syndicate has no say in these matters.
In its role as “control organisation,” the Tenant Syndicate is a partner in every individual House Ltd, simultaneously linking together all the House Ltds and maintaining the solidarity network. This set up is indeed solid and enduring, since a limited liability company cannot be dissolved unilaterally by one partner.
Project financing and Solidarity transfer
It seems to be a common thread that the desire to form a house project is combined with poor financial standing of its members.
In regard to the required financial means, the initial capital the various project could raise was of symbolic character at best.
For the purchase of real estate, the house association has to borrow hundreds of thousands of Euros / Dollars. About sixty percent of the purchase price can be borrowed as a loan from the bank. Forty percent however has to be available as equity capital, but often it isn’t. This is in Europe.
Here in Australia we will have to come up with much less, if anything. If this is a good thing is doubtful as in this case the bank loan and interest payments will be much higher.
Establishing a new House Ltd. in Europe requires a nominal capital of 25 000 Euros. The house association’s share is 12 600 Euros and that of the control organization, the Syndicate, is 12 400 Euros, however the size of the capital contingent has no impact on the voting rights.
Membership fee is 250 Euros or more. People become members because they want to support the aims of the Syndicate. This is a one off joining fee with no on-going fees. Each House Ltd is a member as well. The membership fee is like a credit which can be cancelled within the agreed period of notice and returned to the lender, however it is interest free. At the end of 2007 the Syndicate had 270 members and credits of approximately 200 000 Euros. The Syndicate always needs more members in order to be able to take on and financially contribute to new House projects.
Closing the gap between the 25 000 Euros and the 40% equity capital needed, is generally done by means of so-called direct loans: These are loans that come directly from people who find the project worthy of support and who deposit their savings there, without the participation of the bank. For this a contract is agreed upon between the lender and the House Ltd. It specifies the amount of credit (above 500 Euros), the interest rate, which is agreed upon – from 0 to 3 % and the timeframe and the period of notice.
Acquiring these loans is not an easy task. However this has been very successfully organised in all existing 33 house projects.
“….better 1000 friends at your back than one bank at your neck….”
Most projects will require loans of banks as well, and these continually cost money, namely, interest charges, which often amount to more than three-quarters of the rental income. If the rents are supposed to be socially acceptable, the leeway is extremely small. This means that the project can only be financed if the interest rates are low. The initial phase, in which the interest charges are the highest, is like a financial high-wire act for every House project.
However with an overall large number of House projects, they are not all simultaneously in the difficult initial phase. A comparison of the early and late phases led to the idea of creating equalization between the different situations of the various House projects in form of a solidarity fund.
The established projects can transfer their surpluses to help new project initiatives – using their economic leeway ethically instead of for themselves, e.g. for renovations or rent reductions. Through the gradual amortization of their loans, established projects face a considerably lower interest burden than new projects.
Such equalization between house projects with different situations does not come about by itself, it must be organised. Above all, a stable relationship and good communication has to be established between the projects to make the transfer of resources possible. This is mainly done through the structure of the Tenant Syndicate. All members of all House projects make up the Syndicate Association. The solidarity fund is looked after by the Tenant Syndicate. In order to keep it growing every tenant of a new House project pays 10 Euro cents per square metre rental space additionally to their agreed rent into the solidarity fund. This contribution increases up to 25 cents as the mortgages become smaller. The solidarity fund makes it possible the Tenant Syndicate to do publicity work, give political, legal and even financial support to new potential House associations.
This amazing and quite revolutionary idea has been successfully implemented thirty three tangible projects, with another 25 in the process- that’s in Germany alone. They are also developing in Austria, France and Spain, and hopefully one in Australia soon….
Please contact me if you are interested and would like to know more.
Also does anyone have the legal knowledge and would be willing to assist setting up a ‘limited liability company’?
Gabi Bohnet firstname.lastname@example.org ph 6684 0209