For the last year or two, I have been working on something provisionally called the Sindicato de la Tierra, or Syndicate of the Earth – a legal structure modeled on the German Mietshäuser Syndikat, that is designed to permanently take land and real estate off the market. The German Syndikat grew out of the squat scene in the 1990s, and currently has about 180 housing cooperatives under its umbrella. As it has proven its resilience, I am trying to set up something similar in Spain in collaboration with lawyers Rafael Anido and Ania González from the Despacho office (www.despacho.eu).
The objectives of the Sindicato de la Tierra are:
-To prevent speculation with land and housing.
-To secure a low rent that cannot be raised arbitrarily.
-To provide people that cannot get a mortgage access to some form of home ownership.
-To allow tenants to make decisions about their buildings and communities (just like owners).
It works as follows:
One person or a group of people wants to buy a house, but is not interested in speculating with this property; they just want to live there and secure a low rent for the next generations. They approach the Sindicato. The Sindicato helps them to set up a Limited Liability Company – a Sociedad Limitada or SL in Spanish – that will hold the property.
In theory, the company (SL) is a capitalist entity, but in this case, it is a sort of hack in which it is used to free space from capitalism. The company has two owners, both of which are (non-profit) associations, each owning 50%. One is the tenant’s association formed by the people that plan to inhabit that particular building. The other is the Sindicato, composed of representatives of each project that functions under this legal umbrella and whoever else wants to become a member. The purpose of the SL is to rent the building to its tenants. Internal decisions about the house (what to renovate, who lives there) are made by the tenant’s association. There is one important decision they cannot make, however: if they want to sell, it will be blocked by the other owner of the company: the Sindicato. This structure guarantees that the property can never be sold, as the incentives never align: the people living in the house have no interest in losing their house (and either way, if an association sells its property, the members of that association don’t receive anything), and the sole purpose of setting up the Sindicato is to prevent property being sold.
Before buying the property, the people interested in living there set up a finance plan. We still have to figure out the numbers, so what I’m writing now involves a lot of guesswork, but to have some sort of idea of the advantages of this structure let’s give an example. Let’s say a house in Galicia costs 75 thousand euros and needs 25 thousand euros in taxes and renovations, so the tenant’s association needs 100 thousand euros in total. If there is no down payment whatsoever and the interest rate is 2.7%, this would come down to about 405 euros per month on a 30 year loan. A house also requires maintenance, so the monthly rate for the home would be more like 500 euros (divided by the number of tenants). This rent is fixed: no one can simply increase your rent once your lease runs out. But unlike a private homeowner, you keep paying this rent once the loan is paid off (in the year 2053). Assuming rents keep going up, by then your rent will be far under the market price, but it is used as a solidarity transfer to kickstart other projects within the Sindicato. This guarantees that the Sindicato keeps growing and secures low-cost housing for more and more people.
Of course, these finance plans work better with a down payment. If you have some savings and some friends and family that support you, perhaps you can organize 50 thousand yourself; in that case, the monthly loan payments would be about 200 euros, so the monthly rent (including maintenance) might be around 300 euros. The finance plan is made by the prospective tenants together with the Sindicato, and if it is viable, the “company” will be able to get a mortgage that the “tenants” would not be able to get as private individuals.
The advantage of using a capitalist structure – the Sociedad Limitada – is the ease of shared ownership, the increased access to credit, and the limited liability this structure allows. Companies can get a loan more easily than people, and if a company goes bankrupt, its owners are not personally liable. That means that if the roof falls down and the tenants cannot pay their rent, the SL simply declares bankruptcy, and no one is hurt. This is unlikely to happen, because rent increases everywhere, so if the finance plan is viable in 2023, it will be more viable in 2033 or 2043: houses within the Sindicato will be relatively cheaper and cheaper over time. If a house does fail, it is simply sold by the bank, and the tenants walk away, without being hurt financially. If the price the bank gets for selling the house exceeds what’s left of the loan, some money will go to the Sindicato, but they can never decide to sell by themselves, and that money can only be used to support other Sindicato projects.
The next step in building the Sindicato is to set up an association with a group of interested members. These members provide security to the whole structure. If a cooperative owns a building and all members decide to sell, no matter how anarchist or communist they were at the beginning, there is nothing that can be done to prevent real estate from reentering the market. The Sindicato can prevent this, because both Sindicato and tenant’s association need to agree to sell, and their incentives are never aligned. But this structure is more resilient if the Sindicato has more members that understand and agree with the aims of the project.
While you do pay a monthly rent for living in a Sindicato home, nowhere in this structure is anyone making money out of you for simply being alive and having a roof over your head. You pay less than you would pay on the free market and have the long-term security that home ownership offers without needing the capital to buy your own home. In Galicia, with a small rental market but many houses for sale, this can help people get access to homes they would otherwise not have access to. The disadvantage of buying a home this way is that you cannot sell, so the Sindicato will mainly be interesting for people that would normally rent their home. But isn’t speculation precisely what we want to end, because land and housing are human rights, not something to make money with?
On Friday the 10th of February at 19.00 there will be an informal meeting about the Sindicato at the Foundry, in which I can try to answer some questions. Especially people who would like to join the association are encouraged to participate.