|Affordable Cohousing: Sections 7 - 9||<– Date –> <– Thread –>|
|From: Chris ScottHanson (cscotthansonmac.com)|
|Date: Wed, 11 Mar 2015 11:05:39 -0700 (PDT)|
A SELECTION OF IDEAS FOR CREATING MORE AFFORDABILITY IN YOUR COMMUNITY [submitted to cohousing-l in weekly installments, for comment and input.] The strategies outlined in the series to follow have been collected over the past 20 years of doing cohousing projects across the US and Canada. Many of the strategies outlined below are what I call Internal Banking. These “internal banking” relationships are magical when they happen, and it would seem they can only happen when there is a strong sense of community, and trust. _____________________________________ 7. Maintenance Reserve Reinvestment All home owner’s associations need to establish a maintenance reserve fund to prepare for the cost of maintenance and repairs in the future - roofs, hot water heaters, etc. Hopefully you won’t need that money for 10 or 15 years since you chose to build a high quality, durable building. The reserve fund comes from an initial contribution by first buyers followed by monthly additional contributions. This fund, which can run as much as several hundred thousand dollars, is normally invested in bonds, or other safe interest bearing securities. Some of this money (NOT ALL OF IT) can be re-invested in your own community. By establishing a relatively large reserve fund up front you can make 1) internal subsidies (investments) are possible, and 2) lower monthly contributions to the reserve fund, lowering home owners dues. Some communities will invest a portion of this fund in its own members, through a buy- down subsidy. Your community can buy a portion of a unit (or, buy down the price of a unit) for a qualified member. Then, the member can repay this subsidy when his/her income allows, or when the unit is sold. Since the units will be resold at market price the value of the original subsidy/ investment rises with the value of the property. When the investment is returned, the community can either re-use this money to subsidize other qualified households, or simply repay the reserve fund. The finance committee will have to determine whether to co-own the subsidized units, or simply subsidize them and the decision will need to be balanced with the prudence of tying up the resources from the reserve fund, evaluating long term liquidity needs. 8. Unit Price Buy Down Members may apply for a reduced price on their unit, financed by a buy-down subsidy provided by the rest of the membership. The price reduction will be determined by need according to certain criteria, including household size, and size of desired unit. At any time, a member can contribute an amount equal to initial portion of market price subsidized and thus buy themselves out of the obligation to return the subsidy upon sale of the unit. Otherwise, the member will return an amount equal to initial portion of market price subsidized proportional to the present market value of unit upon sale of the unit. 9. Design for Affordability - Capital Costs and Operating Costs The project can be designed with affordability in mind. Simplicity and standardization are the goal to reduce capital costs (initial construction costs). In addition, making smaller units available will make your project affordable to more people - once they understand and believe in the value of the common house and how it can fit into and suppliment their lifestyle. These smallest units might be located close to the common house to allow for convenient use of CH facilities as a supplement to the small units. Designing for affordability also means building a durable, low maintenance project. Obviously, you want to reduce long-term operating costs. Of course this competes with keeping capital cost down and a balance has to be achieved. _____________________________________ Chris ScottHanson (206) 601-7802 The list of 13 strategies: 1. Internal Down Payment Assistance 2. Outside Down Payment Assistance 3. Second Mortgages 4. Co-purchase Options 5. First Time Buyers 6. The Reduced Monthly Condo Fee Subsidy. 7. Maintenance Reserve Reinvestment 8. Unit Price Buy Down 9. Design for Affordability - Capital Costs and Operating Costs 10. Shared Units 11. Community Owned Rental Unit 12. Participating Nonresident Owners 13. Purchase of One or More Units by an Outside Affordable Housing Entity
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