Re: Financial structure advice needed for forming group
From: Tom Hammer (
Date: Sat, 25 Nov 2006 10:26:18 -0800 (PST)

Thanks for your thoughtful response. My question for
you and anyone else is below.

Tom Hammer

> Message: 1
> Date: Mon, 20 Nov 2006 07:52:04 -0500
> From: Sharon Villines <sharon [at]>
> Subject: Re: [C-L]_ Financial structure advice
> needed for forming
>       group
> To: Cohousing-L <cohousing-l [at]>
> Message-ID:
<e78a22ee55251a5e5c07fd863403586f [at]>
> Content-Type: text/plain; charset=US-ASCII;
> format=flowed
> On Nov 19, 2006, at 8:14 PM, Tom Hammer wrote:
> > Some folks reason that we will attract more equity
> > members if we maintain our different levels of
> > financial commitment to encourage more to join,
> > especially families with young children. Others
> say
> > that we would be better served if all equity
> > households made equal financial commitments and
> all
> > answered cash calls up to some pre-determined cap.
> The reality is that not everyone will be able to
> meet cash calls. 
> Households with young children, particularly, do not
> often have money 
> just sitting around to invest. All their available
> funds are probably 
> invested in the homes they now have -- if they own.

> If not, they 
> probably have only what they afford for down
> payments. This will be 
> very dear money and not something they can risk at
> any level. Certainly 
> not for unpredictable amounts of time.
> Even when you have a construction loan and very
> clear timelines for 
> construction, some households may not be able to
> afford more than the 
> minimum to hold a contract until they actually sell
> the house they are 
> living in and are ready to move into the new home.
> Many people just do 
> not have float money.

We have gotten around this problem by offering 
families with home equity an equity line of credit
from a motivated bank that wants our business.  Their
are no payments required on the line of credit until a
given time, like 20 years, or until the construction
loan is obtained, whichever is sooner.  So, those who
own a home (almost all the limited equity members)
could, if they wished, devote some of their home
equity to the project and make payments just like
everyone else is.

I understand that young families are putting up a
larger amount of their ready cash, but they stand to
reap a much higher benefit: a very much longer period
of their lives living in the community.  I would have
given almost anything to raise my children in
cohousing, and I may have only a 15 year lifespan to
live in the community based on actuarial tables.  In
contrast, a young family is receiving an incredible
experience for their children and a chance to live in
the community for 40-45 years.  In my mind, this
advantage for the young families balances out the
higher percentage of their available funds that young
families need to contribute.  

Since we have so few "full" equity members at this
point, the two-tiered system puts a huge financial
burden on those who have to meet calls.

A quick response is needed since our next meeting on
this topic is tomorrow.

Many thanks to all contributing to helping us,

Tom Hammer

> I would suggest that you think of your problem in a
> different way. 
> Instead of putting all decisions into one pot,
> divide them.
> Developers are people who make the upfront
> investment in the land and 
> develop it and earn an income (called profit) for
> doing so. The 
> subgroup that is taking the financial risk should
> also profit. You 
> build this into the business plan.
> The land can usually be sold at a profit and once it
> is improved and 
> rezoned, it certainly is more valuable so the
> developers are not 
> sacrificing their money to the will of the rest of
> the group. They are 
> making wise business investments in addition to
> developing a community 
> they want to live in.
> Form a second group that includes anyone who plans
> to live in the 
> community (including the developing members) and
> makes a different 
> class of decision like those that involve the ins
> and outs of living 
> together. Planning the community layout and
> features, etc. But nothing 
> that would put the developing group's money at risk.
> The two tiers of risk may remain, but with different
> membership, once 
> you are moved in. At Takoma Village we have Class
> One and Class Two 
> decisions. Class One are decisions that determine
> financial commitments 
> and Class Two are all others. Only home owners can
> make Class One 
> decisions because the homeowners are the only people
> who are required 
> to pay the monthly association fees to support
> common elements.
> A person who is renting or is a significant other
> thus cannot decide 
> that I as a homeowner have to invest in a water
> slide for the green. 
> They can participate in the decision that we want or
> do not want a 
> water slide and they can contribute to purchasing
> one, but they can't 
> decide that I have to pay for it.
> It is possible to be fair and inclusive at the same
> time.
> Sharon
> ----
> Sharon Villines

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