Re: Questions about Reserve Amounts
From: Ann Zabaldo (zabaldoearthlink.net)
Date: Sun, 8 Jul 2018 15:42:01 -0700 (PDT)
Hello all —

I mostly agree w/ all that Sharon has written about the reserves especially 
around the importance of keeping the built environment in good working order.

This email may take the discussion in another vein but it does have to do with 
allocating expenses and resources which, for financial expenditures, comes via 
HoA dues.  A few people in this thread have already broached the subject of 
what goes into the formula for calculating HoA dues so I’m jumping in on that 
part of the discussion.

I think any formula you decide to use to calculate HoA dues — which include 
contributions to capital reserves — will have attributes which may or may not 
favor some homeowners.  It’s really important to run the numbers to show how 
each proposed formula will affect each unit’s HoA dues.  Then, people can make 
an informed decision.  This is something we did not do when we were deciding on 
the formula we adopted (1/2 on s/f and an equal share of the remaining half).

Allocating expenses on a formula of half the cost based on square footage and 
an equal share of the other half does, in fact, mean that the large units in 
our community pay proportionately less than smaller units.   

Here’s an example:  there is a 3 BR 2 BA  2-story unit with a full basement, 
back yard, front porch and 2 decks/balconies.  I have a 2BR 1BA flat no deck or 
balcony and because I’m on the 3rd floor no back yard. (Fine w/ me — no weeding 
…)  The owner of the 3BR unit pays just $156 per month more than I do although 
the owner has almost twice the home I have.  So I’m actually subsidizing that 
unit.  And the 3BR owner pays just $193 more than the smallest unit even though 
it is almost 3x’s the size of the smallest unit.

How many people in a home has little bearing on how much the roof or other 
major common systems cost to replace.  Larger unit = larger roof regardless of 
who lives under it.    And I don’t mind that some households use the CH much 
more than other households.   (Please use the CH a lot!)  I care more that 
people who buy a home within their budget are allocated HoA dues in proportion 
to what they bought.  I bought a medium size unit because that’s what I could 
afford.  People who could afford more bought larger units.  Some people bought 
the smallest units.  Yet, the larger units do pay proportionately less than 
smaller units because you are averaging the expenses.

I don’t know that there’s a perfect way to devise the formula.  Just important 
that residents understand what the criteria are for the formula and how that 
formula affects all the households in the community now and into the future— 
and that everyone can align on the formula.  Whatever you decide … document, 
document, document.  That goes for all decisions … :-)

Best --

Ann Zabaldo
Takoma Village Cohousing
Washington, DC
Principal, Cohousing Collaborative, LLC
Falls Church, VA
202.546.4654

Genesis: 
And God promised men that good and obedient wives would be found in all corners 
of the earth.
Then he made the earth round.
And He laughed and laughed and laughed …

> On Jul 8, 2018, at 2:05 PM, Sharon Villines via Cohousing-L <cohousing-l [at] 
> cohousing.org> wrote:
> 
> To respond to Philip’s question based on Joe’s excellent figures — the costs 
> of maintaining, repairing, and replacing the commonly owned elements are not 
> particularly related to how many people live in a unit. The cost of the unit 
> should include an evaluation of the reserve funds. Healthy reserves, higher 
> prices. Low reserves, lower prices and greater risk.
> 
> The reasoning behind the condo fee 50/50 split was that some elements are 
> equal between units — we all have one parking space, for example. Parking is 
> expensive. It is unlikely that a large unit would use the CH more than a 
> small unit — the guest rooms are more likely to be used by small units.
> 
> But in fact, our large units do not necessarily have more people in them. We 
> have a 4br with a full basement with 1 person, and a 3br with a full basement 
> with one person. For years we had a 1 bedroom with a single parent and child. 
> And a one bedroom with a single parent and 2 children.  Size of unit is not 
> necessarily related to the number of people living in the unit. Most of our 2 
> bedrooms have 1 person.
> 
> Another way to look at the reserves is to divide by the number of units — 
> $93,000/43= ~$180 a month per unit. It seems like a lot but it also covers a 
> lot. It has been a great comfort not to have to worry about replacing the 
> HVAC system or replacing the roof when we were able to add solar panels.
> 
> Having a reserve study with a graph of expenses at least 50 years out—ours 
> goes 100 yrs—makes it much easier to convince residents that we need to have 
> that much in reserves.
> 
> Sharon
> 
>> On Jul 8, 2018, at 11:44 AM, Joseph Wheeler <wheeler76 [at] gmail.com> wrote:
>> 
>> We contribute almost half of the annual income from condo fees to our
>> replacement reserve ($93,000) or maintenance reserve ($22,000). In our 18
>> years of operation, we have never had to ask members to pay a special
>> assessment.
>> 
>> With 43 units of varying sizes, our monthly condo fees range from $357-638
>> with the average being about $455. Of that average fee, about $223 would go
>> to reserve accounts.
>> 
>> We have commissioned a reserve study every 3-4 years and those studies
>> inform our budget process. Our most recent study recommended continuing to
>> increase reserve contributions about 5-6% per year to avoid risk of special
>> assessments.
>> 
>> The basic formula for calculating our condo fees is that 1/2 is split
>> evenly among all the units and 1/2 is variable based on square footage of
>> the unit.
>> 
>> -Joe Wheeler
>> Takoma Village Cohousing
>> Washington, DC
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