Most people who have experienced the boom and bust of the last 25 years are now finding that a lot of myths of time Thatcher now been well and truly laid to rest through their own experience. How many of us were convinced that buying a home was in the long-term interest of our family? How many fell into the trap of believing that an endowment policy linked to investment funds was going to pay their mortgage early and give a nice lump sum to help them finance their marriage daughter? We believed that myths that financial advisers said to us, because that was what we wanted to believe-so we knew that it must be true.

But really we post those myths to rest? Or we are still advising our children to take huge loans to protect them and give them and our safety grandchildren in the future? There is no alternative to purchasing the House in order to have control of their housing needs in the years to come?

I believe that housing cooperatives offer that choice. Purely from a financial point of view, I mean. I leave the emotional, social benefits and environmental for later.

In order to test my theory that I compared the three options in front of young couples looking to solve their housing needs for the next 25 years. The first would be buying a House by taking out a mortgage of £ 100,000 more than 25 years. The second would pay rent to a private studio apartment. The third would be how to become a member of a cooperative housing and rent a double room with shared communal space. I've put together a spreadsheet that shows the costs of home ownership, including repayment of interest and principal, life insurance, home maintenance, legal and estate agency expenses both buying and selling at the end of 25 years. For the rented apartment there were none of these bills, no insurance, no maintenance, no estate agents fees, only a lack of control over the increase in rents over the same period of time. Who would have suspected 25 years ago that rents have risen to such figures as they are today? Very few people earned in a year what couples are invited to pay to rent a month in a small Studio these days. It is impossible to guess what that figure will be in 2034. Who knows?

Then I looked at the relative stability of rents in a housing co-op. basically co-op has take out a mortgage from a construction company, just as a couple. But the rent covers maintenance costs, the costs of real estate agents, legal expenses. No one needs to take out life insurance since the cooperative can never die. The House never need be sold because members are to live for a while, then die, or leave and new ones are and stay there. Once the mortgage is paid the rent to be paid only to cover ongoing maintenance on the House. So long term rents go down, not up. Yes, of course, if interest rates climb, then rents may have up to reflect that, but at least people who lives in the House have control over what the rent increase will and is not subject to a requirement for any desire of the landlord to earn an income off the rent. They can also lengthen the mortgage decide on long period instead of pull on rents. No one can profit from a housing cooperative. It is against the rules administered by the Financial Services Authority.

Anyhow, to cut a long story short, when I looked at financial comparisons after 25 years I was staggered. I, of course, built in assumptions in my financial model-that all the money that the couple would have spent on capital repayment mortgage, interest payments, life insurance, legal expenses, home maintenance and Realtors Commission instead would be saved and invested-that would have been sold the House, the couple bought in 25 years time for a price of £ 250,000-a conservative growth rategiven the experience of the current decline--that the average rate of interest over the next 25 years would be 6%-could it ever get up to 10% still behind, one wonders?

And the figures that I arrived? Well, the couple who bought the House for £ 100,000 has come to pay a total of £ 228,290 in the repayment of principal, interest, insurance etc. So after their sale were left with only £ 21,709 for all their efforts.

The couple who has rented the apartment studio ended up paying £ 124,918 rent over 25 years-assuming only a 2% increase in rent each year. If you saved all the money that would have paid in mortgage, interest, insurance etc. so now have a tidy capital worth £ 54,688.

The couple who went in the housing cooperative, however, would be sitting pretty with all their loot invested. Because the rent would not go to the profits of the landlord now would be able to take some travels around the world to visit all their grandchildren-now living happily in their homes-cooperatives with their total savings of £ 111,806.

It seems to me that, even if they don't end up with a House to sell of their own, the money that your children might save by joining a cooperative housing-not having to keep up with all those extra payments for their entire life-more than compensate the family when it comes to their inheritance. I wish I'd made myself, years ago.




Tony Haslam is a member of the walnut tree Housing co-op in Lancaster, United Kingdom. See their website [http://www.walnut-tree.org.uk].