BUILDING SOCIETIES.

Lyttelton Times, Volume I, Issue 19, 17 May 1851, Page 6

BUILDING SOCIETIES.

In another column we, have adverted to a society established in the settlement of Otago, for the purpose of affording, to the labouringpopulation principally, the means of investing their savings to advantage in house or land property. So convinced are we of the incalculable amount of good brought about by these societies, when properly managed, that we have ventured to suggest, for the consideration of our leading men, the establishment of such a society here, as one of the best methods of benefiting those classes, or rather of giving them the opportunity to benefit themselves.

We would however, lay great stress on the parenthetical observation, when properly managed. The machinery of these societies differs greatly—and in many cases, from some radical defect, the benefits that should flow equally to each individual member, have been diverted into some other channel, and the design of the association completely frustrated.

The following article from the Family Economist, will at once exhibit the principle of these societies, and the errors to be guarded against in their foundation.

" The societies, with whose title we preface our remarks, originated in one of the social movements so eminently characteristic of the present period—that of co-operation —the desire with which all men are more or less imbued of bettering their condition. The inadequacy of individual means to accomplish any object requiring an outlay of capital, would naturally suggest to some minds the advantages to accrue from the uniting of a number of small sums; railways serve as an example of what may be done by association for a definite object. The house in which a working man lives is, generally speaking, one of the principal objects of his care and attention, —the tradesman wishes to have a house suitably situated for business, —the working man likes to have a healthful comfortable home. Now it is clear that in most instances a tenant paying a steady rent during a period of fifteen or twenty yeaf!*, will in that time have move than paid the full value of the house he occupies, for the mere privilege of residing in it. This is so universally the case as to be considered a matter of course, which cannot be altered ; but in the case of the working classes more particularly, the fact of living in a house for twenty years leaves them no substantial benefit at the end of that period, It occurred to some persons that by a little co-operation they might retain in their own hands, some of the benefits which had been the exclusive property of the landlord. A scheme was drawn up in* which it was shewn that the yearly rent might grow iilto_ji__fuii_djfbr.. the actual purchase of the house in a certain number of years. The project met with sup-

porters ; an act of parliament was obtained, the preamble of which declared;—" That certain Societies, commonly called Building Societies, have been established in different parts of the kingdom, principally amongst the industrious classes,-for the purpose of raising, by small periodical subscriptions, a fund to assist the members thereof in obtaining a small freehold or leasehold property, and it is expedient to afford encouragement and protection to such societies, and the property obtained therewith."

The act referred to was passed in the reign of William IV., since which period Building1 Societies have greatly multiplied in every part of the country; not a town of any importance, either SS regards locality or manufactures, that does not contain one or more ; some have accomplished their object, others are flourishing, others again-, have proved to he frauds upon the shareholders. There are, it is said, more than one thousand societies in London and'the provinces, contributing in monthly subscriptions, no less a sum than 2,100,000 annually,—an amount of capital, which, if judiciously laid out, must manifestly benefit the subscribers. From various prospectuses now before us, we quote the professed objects of Building Societies:— I. To raise a fund by small monthly subscriptions, to afford to the people increased facilities for the erection of houses, or for the purchase of freehold or leasehold property. 11. To enable the occupiers of houses to become the proprietors, by periodical payments of purchase money, in lieu of rent, their subscriptions being advanced upon mortgage of freehold or leasehold securities only.

111. To enable depositors, or shareholders, to obtain a secure and profitable investment for capital.

The society is managed by the usual staff— President, Vice-President, Directors, Secretary, &c, &c, and starts with the intention of issuing a fixed number of shares, say 1000 at 50/. each, or 500 at 1001. each. " To illustrate," says one of the prospectuses above referred to, " the" working of the principles of the above society, let it be assumed that a member purchases a, property for investment at the sum of 300/.: to raise this amount, he receives an advance of six shares, and heipays to the society liis monthly subscription as follows :— Six shares at 11s. 6d =g3 9 0 Multiplied by months 12 Gives a yearly payment of 41 8 0 And by yeais 10 414 0 0 shews the total payment which he would make to the society for the advance in question. " The benefit resulting to a member by the purchase of his residence may thus be fairly stated. He occupies a house held for a lease, having sixty years unexpired, for which he pays to his landlord a yearly rental of 35/., and which he can purchase at 300/. By the payment, therefore, to this society of 61. Bs. annnually above the amount of his rent, his residence, at the termination of the society (in ten years;) would become his own property at the moderate cost of 64/." This may be taken as an average specimen of the working of such societies ; there are, however, different modes of imparting the benefits. We quote from another prospectus, in which the Directors state their object to be, not to hold out inducements to capitalists, but the mutual advantage of all the shareholders. Subscriptions are required for the purchase of property, and to keep the machinery in motion, but at the termination of the society in thirteen years, a large amount is to be returned to the subscribers. Thus they continue :—" A memberwishes to purchase a six-roomed house ; it lets for 24/. subject to a ground rent of Al. The price is 200 J.; he holds two shares in this society, which secure an advance of 2001. without interest or discount; he purchases the house, paying back to the society in monthly and quarterly instalments :— Subscription on two shares at Is. 6d. per share per week per annum £7 16s. 10 per cent, on the £200. advanced 20 0 €27 16 These sums paid for ten years make 278 0 0 Subscription for the 11th, 12th, and 13th years 23 8 0 Add entrance fee for two shares ... 0 4 0 £301 12 0

During the ten years he has saved or received in net rent 5620. per annum 200 0 Subscriptions returned at the close of the society, £i 9. per share ... 98 0 298 0 0 *' sg3 12 0 He will thus have become possessed of property worth £200. at a cost at £3. 12s , which sum has been expended in the management of the society." It must, however, be borne in mind, that these societies employ a solicitor, and that certain expenses are incurred as Law charges, the amount of which ought always to be specified in the prospectus, instead of receiving only an incidental mention. It is hardly fair to intending purchasers to keep them in ignorance upon this point, and law charges, as is well known, have an unfortunate tendency towards the excessive. Individuals who might wish to avail themselves of the promised advantages of Building Societies, would do well to exercise caution in the disposal of their savings. The loss of the payments of one or two years might be total ruin to a working man ; we have just heard of a society in London which has ceased to exist in consequence of fraudulent management, leaving a sum of £1,500. totally unaccounted for; and this is but one out of many similar cases. In the smaller towns and in rural districts there would naturally be less risk ; there people are acquainted with one another, the whole of the managers would in most cases be known to the subscribers, and the industrious classes might then invest their hard-earned savings with an assurance of a profitable return. In many places the most beneficial results have followed the establishment of these societies. Working-men having- once joined them have exerted themselves to the utmost to keep up their payments, foreseeing the important benefits to follow a few years of steady perseverance. It is not necessary that the purchase should be in every case a house : garden ground, buildinglots, or a small farm may be bought at the pleasure of the subscriber; all that the society require being that the property shall be such as will prove a sufficient guarantee for the advances made. Every week's payment in such a case brings a man nearer to his object, and, if favoured with health he will be the owner of property, —an anticipation that would cheer many a desponding hour. We have heard of an individual who lately purchased a house in the outskirts of London for £500.; it was an eight-roomed house, at a lease of 81 years, and £8. per annum ground rent. Such a buildingwill let at a rental of £45. or £50.; the buyer consequently makes a most valuable return upon his outlay. A £200. house in London lets at from £16. to £24. yearly, and many members of Building Societies finding respectable tenants in occupation of the property they had purchased, have chosen to receive the rents, and defer taking possession until a future day. As far as we can learn, the most desirable Building Societies appear to be those termed Bowkett Societies, from their author, Mr. Bowkett, of Poplar. This gentleman thus familiarly explains the advantages of co-operation : suppose there are 20 men, each of whom can lay by a shilling a week only, out of his earnings ; some of these men are greatly in want of a sovereign, but, individually, twenty weeks must elapse before they will have saved that amount. It is, however, obvious, that if they unite their surplus shillings, there will be a pound for him who most wants it at the end of the first week ; at the end of the second week, another may take his turn, and so on ; and at the twentieth week the last man will not be in a worse position than he would had he saved his shillings one by one during the whole time, while nineteen others will have obtained a real benefit. Give this principle a little wider scope, apply it to a Building Society, and you place within the reach of every shareholder the means of improving; his condition. Bowkett Societies are not for speculation, but for mutual advantage. So economically are they managed, that, we are assured, the actual expense to each member on the dissolution of the society at the end of ten years, will not have been more than one penny per week. Of course he pays for the pro-, perty purchased, but his other subscriptions are only lent to keep the society in action, and are in all cases returned to him."