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Co-op Policy Blog #15: Win for housing co-ops in Budget

Budget 2020 includes a very welcome announcement for private rental housing co-ops. They will no longer have to pay punitive taxes aimed at deterring the corrupt practice known as ‘property enveloping’.

Following some great collaboration between Co-operatives UK, Friendly Housing Action, Radical Routes and the Confederation of Co-operative Housing, evidence gathering, detailed submissions (and a period of delay while UK politics imploded), the government has come now through for housing co-ops. With this tax change, shared housing co-ops can really be that affordable and empowering alternative to renting from a landlord, even in places where the cost of housing is sky high.

Housing co-ops are not oligarchs 

For those of you who aren’t part of the corrupt global elite, enveloping is when ownership of expensive residential property is placed in a corporate entity (or web of entities), as a means of hiding asset ownership and avoiding taxes.

Unfortunately, as housing co-ops also own property via a corporate entity, they were caught up along with the oligarchs. Government made sure this didn’t happen to social landlords and legitimate property related businesses but, as is so often the case, co-ops were not properly considered.

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Big rent rises

At the moment housing co-ops that are not social landlords have to pay an additional tax of at least £3,500 a year on properties with a value over £500,000. Some co-ops have faced putting up rents by 39 percent to cover this.

Furthermore, any newly forming housing co-op looking to buy a property valued over £500,000 is hit with an additional 15 percent on Stamp Duty, which can only be covered through charging much higher rents.

This has started to make living in a larger shared housing co-op much less affordable, especially in parts of the UK where housing costs are already high, at a time when the mix of affordability, control and community could be so beneficial.

How co-ops can win

Back in early 2018 Co-operatives UK began working with Friendly Housing Action, Radical Routes and the Confederation of Co-operative Housing, to lobby for these co-ops to be granted a 100 per cent relief from these punitive taxes. A combination of great collaboration, evidence, careful lobbying and quality submissions has paid off. 

"If Budget removes housing co-ops from 'mansion tax' applied to single-dwelling residential properties worth over £500,000, Radical Routes co-ops may become a viable option to provide self-managed housing for low income residents  in high cost areas like Oxford, Bristol & Brighton" Radical Routes

Thank you for supporting our policy work through your membership of Co-operatives UK. 

Written by James Wright
Updated: 13/03/2020