A draft briefing note for organisations that own, or want to own, a building for community use: work in progress.
29 October 2026
Social cost-rent is a simple way to run a community-owned building. The building carries no debt and pays no dividends. It is let to organisations that serve their local community, and they pay what it costs to run and look after the building, and nothing more. Charges are set by published formulas, the books are open, and any surplus is returned to tenants or reinvested in the building.
This note sets out the model so that others can use it. It is free to adopt and adapt.
A note on the name: “social rent” has a specific meaning in housing. “Social cost-rent” is used here for workspace and community buildings, to make clear that rent is set by cost, not by the market.
Community groups, charities and co-operatives that own a building, or are raising money to buy one
Organisations taking on a building through community asset transfer
Funders and philanthropists who want their money to lower costs for community organisations permanently
Groups of organisations that want to share a building on fair, transparent terms
No debt and no dividends. The building is paid for up front, so tenants never pay for a loan or an investor’s return.
Charges are set by published formulas. They change only when costs change.
Shared costs are charged at cost. Tenants pay their own utilities and cleaning directly. Shared costs, such as insurance, maintenance and administration, go through a service charge that is estimated in advance, reconciled every year, and any underspend returned.
The reserve is capped. Typically six months of running costs, raised up front and kept topped up. Anything above the cap comes back through lower rent.
The repair fund is ring-fenced. Contributions follow a costed lifecycle plan for the building and stop growing once the plan is funded.
Open books. Budget, actual spend, reserve and repair fund balances are published every year.
Surplus goes back. Any surplus is returned to tenants through lower rent the following year, or reinvested in the building. Ideally, tenants decide which as members.*
Space for the wider community. Ideally one space or floor is given rent-free to a local community organisation.
No reliance on voluntary labour. The work of running the building is paid for, either through the service charge or through tenants’ own overheads.
An asset lock. The building can never be sold for private gain.
* Ideally, the owning organisation’s governance allows open membership, so that tenants can become members and vote on how any surplus is used. Whether this is possible depends on the legal structure and governing documents.
To keep things simple, tenants take on as much as possible directly, and only shared costs go through the owner. Tenants pay three things:
Their own costs, paid directly. The lease makes each tenant responsible for its own space: metered electricity and heating, cleaning, phone and internet, and business rates. These never pass through the owner.
A service charge for shared costs. Insurance of the building, communal areas (lighting, heating and cleaning), shared maintenance and safety checks (lift, fire alarm, heating plant) and administration (accountancy, financial administration and legal fees). It is paid monthly on an estimated budget agreed before the year starts, then reconciled against actual costs at the end of the year, with any underspend returned.
Rent covers only what the building needs to save for the future: contributions to the repair fund and to keeping the reserve topped up.
Service charge per m² per month = estimated shared costs ÷ (lettable m² × 12)
Rent per m² per month = (repair fund + reserve top-up) ÷ (lettable m² × 12)
A building with 500 m² of lettable space:
Item | Per year | Per m² per month |
Buildings insurance | £8,000 | |
Communal areas (lighting, heating, cleaning) | £7,000 | |
Shared maintenance and safety checks | £15,000 | |
Administration (accountancy, financial admin, legal) | £15,000 | |
Service charge | £45,000 | £7.50 |
Repair fund | £15,000 | |
Rent | £15,000 | £2.50 |
Service charge and rent | £60,000 | £10.00 |
Six-month reserve, raised up front | £22,500 |
Tenants also pay their own utilities and cleaning directly, so what each pays depends on how it uses its space.
Running costs, and administration in particular, can vary a lot from one owner to another, especially where an owner manages several buildings. These safeguards stop tenants being overcharged:
A defined list of what can be charged. The lease should list the costs that can go through the service charge. The owner’s own organisational costs, such as fundraising, programmes and general overheads, are excluded.
Insurance in the open. The insurance policy schedule, the premium and how it is split between tenants are shared with tenants, and the insurance is retendered regularly.
A cap on administration. The lease sets a maximum for administration costs, as a fixed amount per m² or a set share of the service charge, rising only with inflation. Anything above the cap is paid by the owner, not the tenants. Set the cap high enough to pay for the work properly, so it does not fall back on goodwill.
Shared costs split fairly. Where an owner runs more than one building, accountancy, legal and management costs are split between buildings, for example by floor area or time spent, and each building is charged only its share. The method is published.
A budget agreed in advance. Tenants see the budget before the year starts, and any increase above inflation is explained.
Fixed fees, not percentages. Management and administration are paid as fixed, agreed fees rather than a percentage of costs, so there is no incentive to spend more.
Actual costs only, reconciled every year. Every charge is backed by an invoice, tenants can inspect them, and any underspend is returned.
Independent checking. An accountant certifies the annual service charge accounts.
Declared interests. If the owner, a tenant or a related organisation is paid to provide a service, this is declared and tested against at least one other quote.
Benchmarking. Compare service charges with similar buildings each year, and explain any large difference.
Agree the purpose and who the building is for. Write down the eligibility criteria for tenants, such as charities, co-operatives, social enterprises and community groups delivering local services.
Choose a legal structure with an asset lock. For example, a community interest company, a charity (or a SCIO in Scotland) or a community benefit society. Take advice on which fits.
Cost the building properly. Collect actual or estimated running costs, get a planned maintenance quote that includes reactive repairs, and commission a costed lifecycle plan for major replacements.
Calculate the service charge and rent using the formulas above, and check them against the safeguards in Keeping costs fair.
Take VAT and rates advice early. If rent carries VAT, tenants who cannot reclaim it pay about 20% more. Many tenants may qualify for charitable or small business rates relief.
Raise the money. The ask has three parts: buying the building or clearing any debt on it, the opening reserve and, ideally, an endowment to start the repair fund.
Write it into the governing documents and leases. The rent formula, tenants’ membership and voting rights where the structure allows it*, the reserve cap, service charge reconciliation and the repair fund all need a legal basis.
Let the space openly. Use published criteria and a light-touch community benefit agreement with each tenant, setting out what they will offer the local community.
Agree who does the work. Set out in writing who handles lettings, contractors, the service charge reconciliation and publishing the accounts, and what happens if whoever does it moves on.
Publish everything. The formula, the budget, the accounts and the balances, every year.
When | What happens |
Before the year starts | Budget shared with tenants; service charge and rent set by the formulas and published |
During the year | Building managed; monthly accounts kept; repairs paid from the service charge or repair fund |
After the year ends | Service charge reconciled and any underspend returned; accounts published |
At the annual review | Any surplus returned or reinvested, decided by member vote where tenants are members*; lifecycle plan and reserve reviewed |
Every five years | Condition survey and full update of the lifecycle plan |
Every pound has a visible effect. Without debt, tenants pay only for running costs and saving for repairs, so the money raised keeps costs low for good.
A repair fund endowment goes further. Money given to start the repair fund lowers what tenants contribute in the early years, while the building is new.
No ongoing grants. Once the building is paid for and the repair fund is started, the building pays for itself.
It is transparent by design. Funders can see exactly where every pound goes, every year.
Underestimating repairs. Without a lifecycle plan, the repair fund is a guess. Start with a realistic figure and update it as the plan develops.
Empty space and late payment. With no surplus by design, the reserve absorbs any shortfall. Consider a small allowance for voids and arrears.
Tenant affordability. Charges rise with costs. Test rents with prospective tenants before committing.
Management capacity. Someone has to do the work. Make sure it is paid for and written down, not left to goodwill.
Concentration. Avoid any one tenant providing most of the income.
Work for Change, Manchester. A tenant-owned workspace co-operative in Hulme since 1993. Members set the rent to cover costs, nobody makes a profit, and unspent rent goes towards repairs. Its founders raised enough grant funding up front that it would not depend on ongoing grants.
Cost rent is also standard practice in housing co-operatives, where members set rents to cover costs.