distributing common costs of development
From: IAN_HIG (IAN_HIGantdiv.gov.au)
Date: Mon, 17 Jan 1994 11:47:05 +1100 (EST)
DISTRIBUTION OF COMMON DEVELOPMENT COSTS

Here are some more notes on how Cascade CoHousing distributed the
costs of our development between households.  These notes are
most relevant to land and works costs which are substancial, rather
than the initial costs involved in getting started when the group
is not sure the project will go ahead.

In the initial stages I support those who sugest a "split the difference"
method between per person and per household, with a record kept so that
theses payments count towards the household's share of commmon costs.
In this initial stage we made these contributions non-refundable, so
that in the event that the project folds all those who have been involved 
share the costs, rather than just those who are still involved as the project
folds.  (I hope you projects do go ahead, however).

Anyway for what it is worth this is roughly what we did.

1)      Differentiate between "common costs" and "private costs", where common
 costs are for everthing that is shared or cost effective to do collectively
 and private costs the costs of each households private dwelling and associated
landscaping costs.  We included in common costs, land , services to near each
house, legal costs, landscaping common areas, taxes, carparking, the common
house, advertising arcitectural costs to the "planning approval" stage and
the like.

2)      We prepared a budget for the common costs to get a figure called the
 total common costs opf the development. This was revised a few times.

3)      We initially divided the total common costs by 14 to get the cost per
household (we have 14 houses), and agreed to develop a formula for the fair 
redistribution of these cost between households at a later date.  Determing 
this formula was the most difficult task of the cohousing project to date 
(and we don't expect anything as difficult in the future).  We would
advise starting work on this quite early so that no large gap developns
between what households think they will have to pay and what they actually
end up having to pay.

4)      When a household joined (as opposed to being a prospective member 
or friend of cohousing or what ever) they paid the current estimate of their
common costs share.  On top of this each household would have to pay the
cost of building their own house (and any other private costs).
We approached  builders for a quote for building a number opf houses
and asked them to  give both a total cost and a cost per house.  Thus we 
would easily know how much to each household would pay for theit private house.
As it turned out it was cheaper to build using small builders on a time and
materials basis rather than fixed quotes with a large builder.  So we ended up
with a number of small independant builders on site.  We took on organising
the common works such as sewer, power and water, and bought in contractors
to do these works.

        I would imaging if all houses were built to the same standard by the
same builder then paying for houses in direct proportion to size would seem
a fair thing.

        When a household joind they do so by buying a share in the development,
to leave the group they must sell their share.  The group as a whole has
no obligation to buy the share of someone wjo wants to leave.
        When we fisrt bought land and some aspects of the project were still
 very uncertain we had a "sunset clause" in our legal agreement.  This said
that if we did not get city council approval to build within 12 months
that a household had the right to demand that land be sold to repay their share.
This had the advantge of allowing people to take a risk and put thier money
in without having it tied up for years if the development failed to go ahead.
Of cousre having put their money in everone worked hard to make sure we
would not have to sell up at the end of a year.

COMMON COSTS FORMULA
We use the following formula for the distribution of the common costs of the
Cascade CoHousing development between 14 households.

Household share = (0.25/14 + 0.75*log(housesize-40)/24)*total common costs.

Where house size is measued in square meters (you could convert to square feet).
24 is the sum of log(housesize - 40) for the 14 estimated house sizes.  We don't
plan on cahnging the 24 even if the size of some peoples houses changes.

In words we split the total common costs of the development between house holds 
such that 25% of the costs were split equally between households and 75% of
the costs were split in proportion to the logarithm (base 10) of house size 
minus 40, where house size is measured in square meters.

This seems a complicated formula to choose, but if you plot a graph of the
formula for a range of house sizes you will see house it works.  Our 
'typical' house size is about 95 square meters (just over 1000 square feet). 

We felt this funtion best meet our multiple and competeing objectives
described in my previous correspondence (ie fairness, user pays, encourage 
families, discourage large houses, not disadvantge very small houses and
the like).

Anyway we know have seve house complete and the common house well underway.
With seven households living on site we are now experiencing something
of what cohousing is about. We enjoy organised common meals once per week
(plus informal or spontaneous meal sharing) , and the kids love living on site.
We now have formal metings only once per month !! And are starting to reap
the rewards of our work.

Good luck and more importantly good humour in developing the "fair"
distribution of costs amongs households.  I hope this contribution
helps your debates.

Regards

Ian Higginbottom
Cascade CoHousing
2 Saunders Crescent
South Hobart
Tasmania     7004
Australia

(Ian_hig [at] antdiv.gov.au)  

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