Your questions answered

Photo by Gary Butterfield @garybpt on Unsplash

We appreciate you getting in touch so we can help clarify some of your questions.

Firstly we must emphasize that every project will be different in some ways, most importantly the financials. Your questions will mostly be answered with reference to the Auckland case study completed in 2020.  The case study is detailed in our blog post: More spice less vanilla housing please. This mahi took the form of a desk-top analysis for a potential pilot development on Council owned land in inner west Auckland. 

How does it work?

FAH is solving the housing gap for those who are working yet are struggling to afford market rent. 

We are drawing on proven international approaches to achieve a forever affordable outcome. Through the structuring and financing approach along with removing continuous capital gains, affordability can be achieved. We do this by a Cooperative structure for the built form and a Community Land Trust for the land.

What is a Co-operative?

A limited profit shared ownership company that is collectively governed.

These shared ownership companies are common in Aotearoa in the agricultural sector. Typically shareholders work together to achieve a benefit that is shared between the members. There are no profit returns to outside shareholders required. Housing co-operative members contribute a share-buy in. Occupants are shareholders and their benefit/return on investment is a home along with some dividend return. For more details on the financial structure see the Auckland case study.

Member pooling (e.g. shares) enables efficiencies of scale and provides opportunities for participation in governance. This model delivers ongoing affordability.

What is a Community Land Trust?

An entity that holds land, commonly via ground leases which prevents capital gains.

A Community Land Trust (CLT) is a private non-profit organisation that holds title to the land for an extended period. The Trust provides stewardship and protection of land from being disposed to the market. A CLT Board is made up of current and future occupants, members of the community and representatives of various public entities/organisations who are stakeholders. 

Who is FAH for and who will live there?

Those who are working, stuck in private renting and are struggling.

There is a growing number of us who will never be able to buy a home and are even struggling to pay market rent. Policy wonks call people in this part of the market the ‘intermediate housing market.’ Other terms include the ‘missing middle,’ economically trapped and working poor.

Commonly those ‘missing middle’ are young families on 1.5 or less full-time income equivalent. They could be key and essential workers, along with older women who have separated and lost their asset base/ previously shared home.

Why does FAH exist?

The Aotearoa New Zealand housing market is failing to provide affordable homes beyond the first occupant. At the same time, demand for affordable housing is rapidly rising. 

While the FAH method is scalable and replicable, along with proven internationally, there is slow uptake of this forever affordable housing solution. FAH exists as a start-up social enterprise to facilitate FAH development projects focused in Auckland, Tāmaki Makaurau.

What are the benefits of a FAH?

There are MANY advantages to this form of living, contrasting starkly with standard developer profit driven housing.  So many that we have written a blog post about them.

Excluding the ones below in the bubble diagram, in summary these include:

• The initial investment can be recycled to create more

• The FAH method is scalable and replicable

• It can provide a step out of and also before of social housing need

• Once established little to no government support is needed as long as access to low cost lending is available

For more on details one these benefits see our Homes with benefits blog post.

How is it the same /different from private renting?

Note the figures used in this example are taken from the Auckland case study undertaken in 2020. These values will depend on an array of factors that are individual for each project.

* Amounts are taken from the Auckland Case study (2020) and will change depending on the location of the development, land price, interest rates secured etc.

What will it cost me?

Less than market rent, forever! The above table gives an indication of what to expect.

Occupants will be required to pay an equivalent of weekly ‘rent.’ They will also buy a share of the Co-operative Company that owns the building. These figures will vary depending on various factors such as location, land area size needed and building costs. A case study was undertaken for a potential development in a middle ring suburb of Auckland in early 2020. Initial weekly ‘rents’ were 5-10% below market rates. The variation depended on the building form and height. The share buy-in for one of 53 apartments is $55,000.   This is the same amount for each household. 

How do I get into a place?

Sign up for our newsletter for detailed project updates. 

The FAH team are currently working on and prioritising projects in Auckland. By getting in touch with us early, we get a better idea of what is preferred and where (a broad sector-wide survey is coming soon). As the FAH method includes co-design, future occupants are actively involved in the very early stages. The commitment level required from you will increase as the project gets closer to the build.

How secure is it?

Very, much more than private renting with costs known in advance.

The method used offers more rights and security than if you were renting. It also has some responsibilities as though you owned it. Co-ownership is granted through a licence to occupy.  The level of responsibilities will depend on whether the occupants together choose to undertake body corporate responsibilities or outsource this function. As an occupant and shareholder of the company that owns the building, you are a part of making the decisions (governance). Rules around being good neighbours will be developed collectively. Dispute resolution processes will be put in place.

Am I eligible?

FAH housing is focused on the economically trapped who may also identify as working poor.

This form of housing is targeted at those on lower incomes who will never be able to afford to buy and/or be eligible/service a mortgage. This is detailed in our ‘'Who for’' section of our website. 

How much of my time will it take?

Expect 1-3 hours per week.

Occupants will need to be active shareholding members of the co-operative company that owns the building. If an occupant is also part of the Community Land Trust, that will also be a time requirement.

Occupying a forever affordable home requires a time commitment. As a cooperative member, this time could be across an array of tasks to help design, maintain and operate the building/s.  The amount of time will depend on how the group of occupants decides to make decisions and operate the building (eg. pay for a type of body corporate).  The more households there are, the more people can undertake required tasks. 

The Community Land Trust is intended to expand to include more developments over a greater area. It has a defined governance set-up to form its Board which will include other community members, investors and stakeholders (eg. local and Central Government). 

What if it is no longer viable? 

This is unlikely to happen but legally planned for just in case.

This development will establish two legal entities with different defined roles and responsibilities for occupancy. The cooperative will be responsible for all things relating to the building and paying ground rent to the Community Land Trust (CLT). Its functions will include collecting ‘rent’ from the co-operative company shareholders/ occupants of the building. The co-operative will have income from all of the occupants as well as the commercial parts of the development (eg. the case study proposed a childcare centre and cafe). 

The CLT will mirror the function and operation closely of the Waikato CLT where relevant. That CLT was established by the Hamilton City Council and is now a few years old. It is intended that the CLT will continue to expand and replicate developments.

What are my rights/responsibilities as a resident?

You will have a right to a secure forever affordable home with the responsibility of helping it continue functioning. 

Occupants as a household are in effect company shareholders, responsible for managing the operation of the company (the building). The FAH structure includes initial support for education and guidance to help establish the co-operative. 

What kind of housing types does the FAH method work in? 

All, but dense works best to maximise benefits.

The FAH method can be applied to any type of housing type however density generally has the best affordability outcomes where the development is mixed use (most commonly commercial). Density also fits best too with respect to proximity of amenities, public transport, employment access etc. The Auckland case study proposes a mixed-use development that has commercial uses on the ground floor. These were proposed to be an Early Childhood Care Centre (known to be in short supply around Avondale), a cafe and a space the occupants could choose themselves (eg. a co-working space). 

The benefits of a mixed-use development include:

• Ground level activation with broader public interaction which increases safety

• Diversity of income streams which is considered favourably by lenders

• The income from the commercial areas reduces housing costs

• Potential employment and/or services for the occupants. 

If the above resonates, then we encourage you to get involved.

Do get in touch if your question have not been answered here. Feel free to add to the comments below or drop us a line to kiaora@foreveraffordablehomes.co.nz