Public Finance for the Future We Want

While working to build a regional financial infrastructure for cooperative housing, MOBA collaborates with other initiatives that seek financial solutions for social needs – and combat anti-social finance.

What if our money, tax and finance systems could be radically transformed? It’s not only possible, in some places, it’s already happening. Find out more in the new book, co-published by MOBA: Public Finance for the Future We Want. On the launch page you can find  7 interesting infographics, the executive summary and the complete book!

The chapter 7, Building bottom-up finance solutions for cooperative housing in Central and South-Eastern Europe by Agnes Gagyi, speaks about the institutional framework that MOBA is building offering a model for systemic transformation of local housing markets everywhere.

The book was edited by Lavinia Steinfort and Satoko Kishimoto, and published by the Transnational Institute, in collaboration with The Democracy Collaborative, Change Finance, Focus on the Global South, New Economics Foundation, Fairfin, Tellus Institute, and MOBA Housing Network.

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(Re)inventing the culture of finance for collaborative housing

During the International Social Housing Festival in Lyon, on 5 June (14.00 – 17.30) – European collaborative housing day – MOBA Housing Network and urbaMonde organise together a round table and workshop “(Re)inventing the culture of finance for collaborative housing and city-making”.

MOBA Housing Network, La Borda Housing Cooperative, HSB, ABZ, Affordable Housing Institute, FMDV, Housing Europe, World Habitat, UrbaMonde

ROUNDTABLE & DISCUSSION One of the main obstacles for creating and scaling permanently affordable and community-led housing is the lack of financial resources for these initiatives. This roundtable will look on what we understand by “enabling frameworks” and in which ways they determine future permanent affordability and accessibility of housing, and analyse the financial needs of collaborative and cooperative housing projects that are not being met. A particular focus will be given to the Central and South-Eastern European context and European-level finance. Speakers will include established cooperative housing networks, larger commercial and non-commercial (EU-level) financial actors who have an interest in entering this field of housing-related investment, alternative banks and funders with experience in financing this niche sector, as well as project initiators that have overcome barriers to finance their projects by establishing partnerships at different levels and combining funding sources.

WORKSHOP The roundtable will be followed by a workshop, which will focus on Central and South-Eastern Europe – particularly case studies from Hungary and Serbia, which are part of the MOBA Housing Network. MOBA was launched in 2017 as a collaboration of emerging cooperative housing initiatives from Belgrade, Budapest, Ljubljana, Prague and Zagreb. MOBA aims to bridge the gap between housing needs and housing finance in this part of Europe, which is facing the absolute lack of social housing, by creating channels for affordable financing – construction, purchase and repurposing of buildings – for a new generation of housing cooperatives. The initiative of transforming MOBA into a European Cooperative Society as a financial intermediary for cooperative housing initiatives in the region, will be presented and confronted with expert opinions.

Budapest: moving into a new co-operative house in spite of all odds

Text by Zsuzsi Pósfai, originally posted by World Habitat

Zsuzsi Pósfai is a member of the Rákóczi Collective (RC) in Budapest, Hungary. Members of this collective have been working for around seven years to establish the first collectively owned, rental-based housing co-operative in Hungary. 

At the end of January, we moved into the first co-operative house set up by members of Rákóczi Collective – which will hopefully become a precedent for many similar houses in the future.

It was the result of many years of effort and organisation to arrive in this sunny and peaceful house in the Zugló neighbourhood of Budapest. Seven of us are now living here, with much more space and better living conditions than were had before. The housing situation has become increasingly difficult in Budapest, with house prices and rents rising sharply – some have nearly doubled in the last five years. Renting is also risky as it is under-regulated and tenants are not protected from landlords – you can be evicted at short notice or subjected to any rise in rent.

Collective ownership of our new house means that we share all decisions and responsibilities collectively. There’s no landlord, and this housing can become stable and secure in the long run – which is a relief for those who’ve been moving almost every year between different rented places. The rules we’ve established mean all residents contribute both time and finances.

We encountered a number of difficulties along the way – many because this kind of housing doesn’t exist in Hungary. Collectively-owned housing is practically unknown here, so municipalities, financial institutions or any other external party believe it’s too risky.

First of all, it was very hard to find a house that would be suitable for what we wanted: where 10-15 people could live together, including large common spaces and ideally a garden too, and that wouldn’t be too far out of the city.

We negotiated with several municipalities, but the deals they offered us weren’t right, so we decided to look on the market. Most houses we found were either derelict and would’ve been too expensive to renovate, or if they were in a good enough condition, they cost too much and we had no way of finding that much starting capital.

In the end we made a compromise on the size and started looking for smaller, cheaper houses for just seven of us – using a larger proportion with the money we’d already raised among ourselves and then only had to find a smaller amount from external resources. This is how we found this house in March 2018 – and we quickly decided that we would try to buy it.

Our next, possibly greatest challenge, was there’s no readily available financial channel for housing co-operatives in Hungary. So, we first tried to take a couple of individual housing loans, but we were refused because our incomes were not high enough, nor seemed stable. Our set-up of several people in a non-family relationship was also unconvincing. We were shocked when we were refused the loan and all our own money had already gone into the first two payments for the house. We had about one month to gather the other half of the money, about 100,000 euros.

Our idea was to collect loans from people around us. In just two weeks we had the money. This was really important for us, as it showed that all the work done in previous years wasn’t pointless, and that we were credible with those people who were willing to invest their savings to make it happen.

Next was the renovation. Our plan was to do most of the work ourselves, as we had very little money left. Some of our members had nowhere else to live when we got the keys to the house, and all the others had expiring rental contracts. So, we had hardly any money and very little time available. We planned for six weeks to complete the work but we finished it in just over ten – with everyone physically exhausted, but with a wide-range of new skills.

One of the best experiences with the renovation was that the essential work – plumbing, electricity, masonry – was provided by members of Gólya Co-operative, which is a bar and political space who are our friends and close allies. This whole renovation process is a great example of how networks with similar aims can work together to achieve so much.

All of the challenges we’ve faced are similar for all pioneering housing co-operative groups in Eastern Europe, which is why we collaborate as part of MOBA. Besides building a supportive network, we also help each other in very tangible ways to overcome these challenges.

Our next challenge is legally registering our co-operative, which means we’ll formally agree on and confirm its principles, and register it with the court. We also need to find the money to refinance the loans we got from our friendly direct creditors. We’re planning a systematic, reliable financial resource that other groups will also be able to use in the future. This is essential for creating a model that’s truly accessible to a wide segment of Hungarian society, who have difficulties paying for their housing.

In the meantime, we are busy creating a home and a community, and not merely a pilot project out of this house that has huge and lasting potential.

MOBA 1st Anniversary

MOBA housing network celebrates its 1st birthday, Budapest, January 2019

In October 2017, during a conference in Berlin aimed to find new solutions to Europe’s housing crisis, several groups from Central and South Eastern Europe met and discovered that they had many things in common while starting their own community-led, cooperative housing projects.

In January 2018, a meeting was set in Ljubljana, Slovenia. The groups started to wonder how to work together as the financial and institutional barriers in neighbouring countries are very similar, and to build a strong network providing support to overcome those challenges.

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First network meeting, Ljubljana, January 2018

The meeting turned out to be very successful and groups have been working together since. Either online or in different workshops, there has been a constant support and a will to strengthen the network with the collaboration of each member.

There have been four large workshops to date, and each of them has helped the network not only to acquire a name – MOBA (coming from “self-build through mutual help” in South Slavic languages) – but to altogether give the network a well-defined structure and a vision.

Along 2018, MOBA has been officially set as a network aiming to be a point of reference for those who are willing to start a community-led, cooperative project in Central and South Eastern Europe, an area where housing ownership is the most common practice (despite its inaccessible prices).

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2nd workshop, Križevci, May 2018

The different workshops have also been a platform to share experiences with initiatives from other countries in Europe, such as the Community Land Trust Brussels (Belgium) or Lilac (UK). Having people sharing their successes when starting their projects has been an inspiration for MOBA. This reflects one of the features of the network, which plans to connect people from different backgrounds, who can work together in the development of CLH. MOBA is a ‘’pool of expertise’’, where diverse skills, experiences and initiatives are reunited in a network accessible to everyone.

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3rd workshop in Belgrade, July 2018

Since the beginning, MOBA has been characterised by the strong commitment of their members and “not losing time’’ attitude. Work has been distributed regularly and when workshops weren’t feasible to do, smaller groups had been set with the objective of working in different important aspects of the network, such as: securing financial support, meetings to discuss funding opportunities, organisation of the network, consideration of business plans and finance setup of each of the hubs or how to access funds.

During this year, many achievements have been accomplished, among others: Zadrugator (Ljubljana) won tender to lease public land from local authority and 50% of necessary sum from the national housing fund, Rákóczi Collective (Budapest) had their first tenants moving in, formal registration of Housing Cooperative Pametnija Zgrada (Belgrade), support of various financial and international organisations (including World Habitat, FundAction, Heinrich Böll Foundation), development of project portfolios, design of website and logo for MOBA, among others.

Each organisation is at a very different stage of their project, where some of them have already bought a house or land, and others still fighting with the rigid institutions. This has been a positive feature of the network, where mutual support is granted, the success of each group is celebrated, and lessons learned are exchanged.

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Visit to Rákóczi Collective House during 4th workshop in Budapest, January 2019

MOBA has high expectations, for example: working towards offering a vast database, where all the ongoing and finished projects will be registered, facilitating the identification of actors, objectives and giving details about their structure and functioning. It will also inform about the financial resources, funds or grants available to community-led, cooperative housing projects, helping people to identify where and how to apply for funds, another big challenge in the current panorama.

Although MOBA doesn’t have it easy, for reasons beyond its control, is moving fast towards becoming a point of reference in the region. The network’s ambition is to connect all of us, people, interested in seeing community-led, cooperative housing spread as a model, responding to social and housing needs. Despite the challenges faced, if we take into account the progress achieved during its first anniversary, the potential of the network speaks by itself.

by Lorena De Ferra (World Habitat)

Coops and (co)-investing – a balancing act

One of the key decision to be made in setting up a new housing project, is around financial participation of the residents in the assets (the building). When delving into this question, a range of choices seem possible: from mimicking individual ownership (through a members’ full share of an apartment) up to mimicking a clear-cut rental model (through a model entirely based on monthly contributions, but not requiring a collateral deposit from members). For contribute equitably reasons those two extremes are unlikely candidates. During the recent MOBA meeting (25-27 January 2019 in Budapest) the discussion around this question has brought up a few insights.

First of all, the very format of a cooperative – due to adherence to the 7 cooperative principles, a set of rules that have guided this movement for over 175 years – assumes the direct economic participation of the members. This means that they contribute equitably to, and (democratically) control, the capital of their co-operative. In practice, this starts often with requiring new members to bring in their own capital (equity) in a certain percentage of the total investment (say 10-20%). While a large share of member capital brought in helps massively in securing additional capital (because it counts in as ‘collateral’), it obviously also is a barrier for access, as not everyone will be capable of raising that amount of capital.

On the other hand, a clear-cut rental model would not bring such barriers, but as we have seen the requirement of equitable member participation excludes it as such, and the necessity of forming a pool of own capital (as ‘collateral’) makes the approach very unpractical. Some (more significant) form of investment and co-ownership by the members thus looks like the way to go.

MOBA exercises: virtual share-holding

Doing a round along the approaches envisioned by the MOBA members, not only the size of this initial investment is crucial in this discussion, but also the question whether members through their monthly contributions over time increase their share in the cooperative. Imagine that through a monthly payment a member contributes to repayment of the loan that the cooperative took to finance the building. While the loan thus gets repayed, the ‘investment’ of the member increases. Through a model of virtual shares, it is possible to link the built-up equity to the members. And when a member leaves the co-operative, that equity could (if chosen so, and to a degree set) be returned to a member. There a pro and cons to this. If implemented, the co-op has to reserve a pot of capital to pay out members, and a new member (likely helped by the co-op) will have to finance the amount of capital taken out – obviously a burden to the coop and a new member. But on the positive side, it is a savings scheme that gives security to members and ensures that even upon leaving the co-op there is at least some capital to make a start in the tricky world outside. Or, in other words, it may prevent you from getting “locked” into the co-op, as you can financially not afford to step outside of it.

Finding a balance that provides easy access as well as long-term security will be something that MOBA will be undertaking in the time to come.