Who wants to live in a council house? It's hardly the middle-class dream, but it's increasingly a good option for the young of all classes, junior bankers excepted, as they find themselves priced out of private home ownership.

State-subsidised housing is opening up as the Government recognises that it needs to help more young people, not just housing benefit claimants, onto the property ladder. Avoiding the obvious solution - raising the stamp duty threshold - it has instead announced plans to build 70,000 new “affordable” homes a year.

The Housing Minister, Caroline Flint, was recently criticised for proposing restricting social housing to those who work or are trying to. Yet most interested parties agree that the way to stop new state-funded housing becoming the crime-ridden sink estates of tomorrow is to empower residents and encourage them to form an old-fashioned community, where neighbours help each other and teenagers have respect for their elders. An impossible task?

One community in central Coventry thinks not. The Starley housing co-operative was formed in 1978 and has just completed a £5 million development of 56 new affordable homes. Like all co-operatives, it is owned and managed by its members, the residents, who, according to Peter Smith, the chairman, include “professional single people, families, vulnerable people with learning difficulties and elderly people. About 25 per cent of the estate receive housing benefit, but we have no long-term unemployed”. The new homes in Starley are now occupied by tenants drawn from a waiting list, but all councils should be able to provide details of other housing co-ops in their area.

In Starley, as in a typical co-op, residents cannot own their individual home, but have a £1 share in the whole estate which reverts to the co-op when they move or die. Rents cover the mortgage and maintenance, and are lower than those at conventional housing associations (Smith pays £280 a month for his two-bedroom flat) because there are fewer overheads. Instead of there being a salaried chief executive, the staff are made up of volunteers.

All residents are required to attend community meetings and encouraged to get involved in running the estate. Jon Stevens, the director of Birmingham Co-operative Housing Services, part of the Accord Housing Association which advises Starley, says that the sense of responsibility this fosters replicates a sense of ownership, despite the lack of an equity stake. “Members have a community stake. They have control in the same way that owners do, and thus a vested interest in taking care of it.”

Antisocial behaviour does not exist on the estate. According to Smith, “if someone does something wrong, we'll discuss it in a meeting, which is always mixed in terms of age, and try to thrash out a fair response. That's unique to a co-op.” Stevens says: “The starting point for any problem is ‘how can we sort this out among ourselves', not ‘let's call the police'.” He believes that Caroline Flint is approaching the problem wrongly. “It's a fact that people who live in social housing are marginalised and disempowered. But co-op models give people life skills, so they become more confident in terms of getting jobs. Our ethos is about getting on with things and not feeling hopeless.”

It is no surprise that David Cameron's Conservatives are keen on this caring, sharing approach. Grant Shapps, the Shadow Housing Minister, says: “It is clear that innovative schemes like housing co-ops are really important in the current climate”. Stevens believes that the Government “ought to be looking more seriously at these models”.

A crucial factor is size. “Small is beautiful”, says Smith. “We're small enough for everybody to know the chairman and approach him on the street - it's not faceless in the way that a larger organisation inevitably is. I'm convinced that groups of up to 200 houses produce a happier estate, and I don't see why housing associations couldn't be split into smaller groups.” However, the trouble with small, asset-poor organisations is that they face problems securing funding from banks and may need help. Accord had to buy the land for the new development on Starley's behalf, “which was easy because we already borrow hundreds of millions of pounds from RBS”, says Stevens. Now that the new houses are built, Starley is seen as less of a risk and will be able to borrow against its existing properties to pay off Accord. This funding set-up needs to be simplified if co-ops are to flourish.

The future success of the co-operative movement also depends on allowing tenants to buy a real stake in their homes. “It is a bit limiting to pay rent year in, year out, and get nothing at the end,” Stevens admits. “With equity-sharing you can get the best of both worlds - your stake increases in value and you still have the community benefits of a co-op.”

Affordable housing now affects everyone: in 2001 the average house cost four-and-a-half times the average salary; today it is seven times. If we are to avoid past errors and build successful affordable communities for the next generation, we could do with a bit of co-operation.

CASE STUDY: 'A SAFE HAVEN'

The Starley housing co-op was a refuge for Alicia Barros, 24, a shop supervisor, her husband, Nicanor Villalobos, 23, and son, Estebán, 5. Their experience of housing estates had not been good. “Neighbours would get drunk and bang on our door at 3am,” says Barros. “Everyone had music blaring out day and night. We got nowhere when we complained to the council.”

When she visited her grandmother on the Starley estate, the difference was clear. “My son made lots of friends and I knew they'd look after him and that made me feel safe.” Barros applied to the new development and moved there in 2005. “Here, if you have a problem it's dealt with immediately. The tenancy agreement states that you must attend local meetings. Only co-ops have that clause, and it's really important. It means everyone can be heard. In other places people are too scared to speak out, but here all problems can be aired and we avoid conflict.”

CASE STUDY: 'I NEVER WANT TO LEAVE STARLEY'

Everyone at Starley knows Frances Skyte, 75, a retired sales executive for the Coventry Evening Telegraph and former chair of the co-op. “I've lived on Starley Road for 22 years,” she says. “The idea of a co-operative always appealed to me - and I've been very involved in managing it ever since I moved in.” Skyte, who is widowed, lives in “what we used to call a bedsit but we now call a studio flat”, and pays £45 a week.

She is evangelical about the virtues of co-operative living. “When I read in the papers about the terrible things that happen to other people, I always think, ‘That could never happen here'. We take in all sorts of people who have no quality of life, but we are all very supportive and we all get along. You never see neglect or cruelty, because other people wouldn't let it happen.”

Skyte describes a tolerant, supportive community. “We do have single mothers, but they set a very good example - the dads see their children regularly and are very good parents. We have a homosexual couple who live together and are accepted for who they are. They're getting married this year and having their reception in the co-op meeting room. We also have a man with dementia, who would usually have to go into care, but we won't let that happen, because we will all look after him.”

Skyte attributes this community spirit to the co-operative ethos. “I honestly think if there were more co-ops there'd be less youth crime. If there's any problem people sit down and talk about it. I think it's great for the young and old to be together. We get a great deal from the youngsters, and I think they do from me. They know that I'll tell them off if they're naughty, and they know that I'll also stick up for them at a meeting.”

Councils and the obsession with homeownership receive short shrift: “People tell us that councils treat them badly and never carry out any repairs, but here everything is done very promptly. I feel sorry for young people who feel they have to be homeowners. If I won lots of money tomorrow I'd stay put. I am going to have my ashes scattered in Starley. I shall never leave.”

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