They share tools, toys – and are planning their own hydroelectric plant. But is a new wave of DIY homes the answer to the housing crisis? Oliver Wainwright visits two pioneering northern co-ops to find out

'It's very difficult to walk down the street without bumping into someone," says Jan Maskell, as we stroll down a winding, car-free lane between whitewashed houses and rugged walls. Children play in the road, overlooked by adults preparing the evening's vegan meal beneath the lofty pitched roof of the common house kitchen. Another group sits out in the sun on the riverside terrace, discussing their plans for a hydroelectric plant. The place has the holiday atmosphere and dazzling white streets of a Greek island town, but in fact we're just outside Lancaster. A new co-housing development of 41 homes has just been completed here – and all without a developer in sight.

"One day I realised that I didn't even know my neighbours," says Maskell, who joined the Lancaster Cohousing group three years ago, having lived on the outskirts of Preston for 20 years. We've gone only half the distance to her front door and have already spoken to three other residents: one just back from helping his elderly neighbour, another couple on the way to pick up someone else's kids from school. "I also used to wonder why we all have our own lawnmower, and our own washing machine, and all this stuff cluttering up our homes that sits unused most of the time."

By sharing facilities, the Forgebank community aims to solve these problems, reducing costs and environmental impact. It has its own laundry and a workshop with shared tools. There are two guest bedrooms, freeing up space in individual houses, and a huge kitchen, dining room and living area in the common house, as well as a shared playroom – complete with big box of communal Lego. "It's a great place to bring up kids," says resident Huw Johnson. "We can be in the common house and send our daughter through to our house to collect something. It's a place where she can learn to be independent and interact with adults."

The houses are arranged in a snaking street that follows the curve of the river Lune, and incorporates several existing mill buildings – including an old factory that used to make mechanical elephants, and which the group is converting into rentable office space. The houses range from one-bed flats to three-bed family homes, and are grouped into four terraces, differentiated by pastel-coloured wooden plinths. Rooftops are set at different levels, giving the impression of a hamlet that has evolved over time, while porches and balconies are bolted on with galvanised metal frames, adding an industrial air that fits with the site's history – and indicating this is very much not another Poundbury.

"The ideal plan for co-housing is like a ring of wagons, with all the houses looking into a communal space," says Pete Bailey, a nurse who acts as the project's community director. "But we didn't have a circular piece of land, so we cut out coloured squares and arranged them on a plan along desire lines, with the help of various hippy architecture books." He points to Christopher Alexander's Pattern Language and a book by Californian co-housing evangelists Katie McCamant and Chuck Durrett on the common house shelves, which provided inspiration for their architect, the Kendal-based practice EcoArc.

The buildings are designed to the Passivhaus standard, which aims to reduce energy consumption. There are huge amounts of insulation and triple glazing; heat and power is provided by a central biomass boiler, solar panels on the roofs and, soon, a hydro plant. All of this should make the energy bills around 10% that of an average home, with plenty of surplus to sell back to the grid.

With all this high spec and desirable riverside location, the houses are no cheaper than the equivalent in the local village: a three-bed is priced at £250,000. But it is the shared, eco-focused lifestyle that has proved the biggest attraction. "It's an opportunity to live in an almost extended family context," says Maskell. "Our children grow up surrounded by people of different ages and from such different backgrounds – and they have friends on tap."

The communal kitchen in the Lancaster co-op. Photograph: Gary Calton for the Guardian

Across the Pennines on the outskirts of Leeds, another self-build co-housing project shows how the model can prove cheaper than conventional housing, and remain permanently affordable. Among the redbrick terraced streets of Bramley, set back from the street on a raised brick plinth, the Low Impact Living Affordable Community (Lilac) comprises stacked blocks clad in cedar boarding and white render. On the site of a former Victorian school, it looks a bit like a prefab school extension – which is exactly what this building method is more usually used for.

Developed by Bristol practice White Design, the structure is a prefabricated system of timber frames packed with straw bales and sprayed with lime render. Residents helped pack the straw off site, before contractors assembled the panels on site. JCBs are still digging out the pond in the central communal garden when I visit, but you can't hear a thing inside the houses: the straw keeps the heat in and the sound out, absorbing everything from rumbling trains to high-pitched sirens.

While the architecture might not win awards, Lilac's legal and financial model is nothing short of revolutionary. This is the UK's first Mutual Home Ownership Society, a setup popular in Scandinavia, whereby residents all pay 35% of their net income into the trust and receive a corresponding number of equity shares in the project – meaning those on salaries of £15,000 can still get a rung on the housing ladder.

"People can sometimes get trapped living in co-ops, because they can't afford to leave," says Tash Gordon, a GP and founding member of the Lilac group. "This way, everyone has equity in the project, so you can realise that if you decide to move on."

The community of 20 households ranges from single people in their 20s to retired couples in their 70s, and spans university lecturers to teachers, a bouncer to a professional storyteller. As at Lancaster, there is a common house with shared kitchen, laundry, workshop and meeting room, while the grounds include 25 allotments and space for almost 50 bikes: the aim is a zero-carbon lifestyle.

The initial funds came from several sources. At both Lancaster and Leeds, the capital build cost was covered by a loan from eco-friendly Triodos bank. Lilac acquired their site at a reduced rate from the council, and received a grant from the Homes and Communities Agency to support the planning application process.

The Low Impact Living Affordable Community (Lilac), on the outskirts of Leeds. Photograph: Finlay White

Is their model of community self-build the future? Ted Stevens, chair of the National Self Build Association, points to a whole new generation priced out of the housing market. "Self-build always used to be about retired couples building their dream Grand Designs home," he says. "But now young people are coming together and finding it's cheaper to do it themselves."

The government has championed self-build, perhaps seeing it as yet another way of relinquishing its responsibility to provide housing, and has released pots of money to help cover initial costs. But is it enough? At present, only 10% of UK homes are self-built, compared to 80% in Austria, and 60% in Germany, where communities have been allowed to bypass commercial house builders. In both countries people tend to rent for longer, and then get their own place built. The route to ownership is so common it's not even referred to as "self-build".

As a culture, self-build has never really taken off in the UK – stifled by a combination of lack of available plots, the high levels of planning regulation, and little in the way of finance and mortgage products for first-time self-builders. "The biggest hurdle is still getting the land," says Stevens, "as well as defining a common brief between residents. Sometimes it can be like dealing with an octopus with 20 heads and one leg."

But this could be about to change. When surveys show that more than half of us don't know our neighbours, and that one in three people now live alone, there is plenty of room for growth. In Barnet in north London, the Older Women's Cohousing Company (OWCH) recently received planning permission for a group of 25 new homes, while parts of the Olympic site are set to be earmarked for community self-builds of up to 100 homes. In Middlesbrough, an area of the Middlehaven docks has been allocated for a competition for innovative self-build solutions; in Cornwall, regeneration company Igloo has launched a plan for 70 custom-build homes.

These may be niche projects for now, and often geared exclusively towards shared-lifestyle communities – but they do begin to point to an alternative at a time when conventional house-building cannot keep up with demand. The UK is expected to see annual growth of an average of 232,000 new households for the next two decades – yet only 146,420 homes were built last year.

In Lancaster, resident Pete Bailey is certain that co-housing is the future. "Throughout the history of human evolution, we've always spent time in big social groups," he says, pouring out multiple mugs of tea for the assembly in the common house. "It seems so unnatural that we've all come to live in isolated boxes behind privet hedges." Judging by the community spirit evident in Lancaster and Leeds, he may well be on to something.