CoHOP BACKGROUND and HOW IT WORKS

Background
INVESTOR'S
NZers have traditionally tended to invest their long-term savings in property, to increase their capital (no capital gains tax, and on the assumption that property values rise over time) and as a supplementary income from rent. Since the property market collapsed in 2008, high capital gains have not materialised, and rents are swallowed up in mortgage repayments on the property. Over the same time many managed investment funds have collapsed, leaving investors without the security they hoped for in retirement.

MORTGAGOR'S
People with a mortgage over their home (most families) are vulnerable to interest rate increases and increasing job uncertainty. With house prices falling, mortgages can be “worth” more than the house, and interest paid to the bank is far greater than the capital borrowed.

RENTER'S
People in rented accommodation are effectively paying off someone else's mortgage, and they are unable to save to buy their own home.

All three of these scenarios could be addressed by a COLLABORATIVE HOME OWNERSHIP PROGRAMME (CoHOP), which offers increased security to retirees, families and single people of any age. None of their money is going into mortgages or rent; instead all assets and contributions add to the total value of the CoHOP and probably stay within the local community.

Start something that lasts for generations!
Pay-it-forward – instead of “paying back” a lender, invest your savings in your own and your family's future;
Never pay Interest again – reduce the effective cost of your home by half to two-thirds!
No exposure to banks or finance companies;
No risk of increased interest rates;
No risk of foreclosure;
Increase Security – for Retirees, Young Families, Single Members.

How it Works
The Collaborative Home Ownership Programme (CoHOP Ltd) is legally set up as a collaboratively managed, limited liability company, so that it can be managed democratically by and for the members.
Members of CoHOP Ltd form an Incorporated Society to manage their particular project. This may be a new cohousing initiative, reconstruction of a city warehouse, or simply buying members' houses to be managed collaboratively by the company.
Any member may be a net contributor (i.e. they contribute more than the value of the house they occupy) or an occupier, or both.
Members deposit money and/or assets (house) into the CoHOP, as their contribution to the co-operative company. In the case of assets, the owner sells the property to the CoHOP, in exchange for the same value of CoHOP shares.
The CoHOP uses liquid assets to pay off any mortgages, so that all its assets are freehold.
Members who own mortgaged properties may decide to sell the property and contribute the proceeds to the pool, to facilitate freeholding of more desirable properties. They have guaranteed occupancy of a CoHOP house.
When the CoHOP has sufficient funds, it may renovate or retrofit its houses, or purchase additional houses.
Houses should be suitable for retrofitting for energy efficiency; well-built, able to be maintained with minimal trades input.
All occupiers, including net contributors, each pay for fixed expenses associated with the house they occupy – rates, insurance (if any), levy for maintenance.
Occupier members continue to buy CoHOP shares as they can afford them.
All occupiers' contributions increase the pool, thus satisfying the “reciprocity principle”*.
Some members may be relying on income from rental properties. They may withdraw some of their contributions in lieu of rent, within the provisions of the reciprocity principle.
Any members (net contributors or occupiers) may make “sweat equity” contributions, e.g. carpentry, plumbing, gardening, legal work, accounting, which is for the benefit of the whole CoHOP. Such contributions are accounted for at the appropriate market hourly rate for the work done.
The CoHOP may operate its own currency for members to trade among themselves.
The CoHOP must keep a percentage of its cash in reserve for members who may need/want to withdraw from the company.

Important Principles
CoHOP Ltd is a limited liability company, with a constitution that allows it to be collaboratively managed by its shareholders.
The company holds Type A shares, with a dollar value; and Type B shares that confer decision-making rights on the member.
All assets are freehold – no interest is paid to banks (or other members).
All members have a secure home, regardless of the size of their share in the CoHOP.
All members' contributions of property, money or sweat equity add to the total value of the CoHOP.
All members retain ownership of their assets, in the form of CoHOP shares, which may be redeemed upon withdrawal from the CoHOP.
*Reciprocity Principle: Reciprocity means balanced giving and receiving. A member's share represents his/her contribution, or “giving” to the CoHOP. A member may withdraw some of his/her contribution at any time, by selling shares back to the CoHOP. In addition, a member may apply to use (“receive”) some of the CoHOP's resources. The member will then satisfy reciprocity by entering into an agreement with the CoHOP to increase his/her contributions until those resources have been returned to the CoHOP.

The Effects
1.For net contributors (investors):
By putting their major assets (home, rental properties) and/or savings into a CoHOP, contributing members are making their wealth available to family or friends without losing any equity;
They know where their money is being used – it is safe and being used completely ethically; they have control over their money/assets;
They have access to practical and financial help if they need it;
They avoid the risks of owning rental property – falling house prices (shrinking capital gains), unsatisfactory tenants, property untenanted, cost of maintenance;
Their investment retains its value as shelter for themselves and members of their CoHOP, regardless of fluctuations in the “value” of money or the property market;
The CoHOP grows as occupiers make contributions;
The cost of maintenance and improvements is shared by all CoHOP members;
Family members and friends with a stake in the property make ideal “tenants”!!

2.For occupiers (residents):
Safe, secure tenure;
Sense of ownership as they are building up their own equity in the pool – they take pride in, and care for their home;
Affordable “rent”;
“Rent” contributions are actually a share in their home and the assets of the CoHOP;
Contributions are adding to the value of the CoHOP, not going to a bank to pay someone else's mortgage;
CoHOP contributions can be used to up-grade/retrofit existing houses or buy more, thereby increasing the occupiers' stake in the CoHOP, as well as the effectiveness of the CoHOP.

3.For communities in general:
Mortgage interest money saved by home-owners stays in the community, supporting local businesses;
“Rental” properties are well looked after – property values are maintained;
Fewer mortgagee sales;
Fewer families and retirees living in poverty.

Sonia Corbett, 2015.