Cohousing-L Mailing List: Re: Affordable cohousing

[David L. Mandel (75407.2361]

Geoff Mamlet of the Commonweal group in Mass wrote:

>We've been planning a community of 30 units, all at market rate.  We've been
>given to understand that the town where we are buying land to develop has a
>strong interest in gaining more affordable housing.  The idea is to offer to
>add units that will qualify as "affordable" in return for being able to 
>increase the density of our development (we are already having to go through
>a rezoning process just to be able to cluster units, instead of being subject
>to the existing "snob" zoning of 1 unit per acre).  So instead of a community
>of 30 market rate units, we would become, say, a community of 30 market rate
>and 5 "affordable" units.

>If we price the "affordable" units based on the incremental cost to us for
>adding them (e.g., we were going to put in the road, septic, common house,
>etc. already, to service the market-rate units), we should be able to get the
>price low enough to qualify.

>How does this sound?  Have other groups explored similar ideas?  I 
>particularly like the minimal red tape, compared to other "affordable 
>housing" alternatives I've heard about. We're not interested in adding more 
>delay to our development process.

I'm replying via the list because I think this is of general interest.

Yes, it would minimize red tape, and it's definitely an admirable idea, but 
I'm skeptical as to some of the practicalities and the potential effect on 
group solidarity. Here are some issues that occur to me:

1. How to calculate the incremental cost of adding the units? My experience 
when similar questions arose here (not in connection with affordability 
issues) is that it's much more complicated than you'd think. Hard to quantify 
what the "pure" infrastructure costs are, since they're inexorably linked at 
many points to the specific units.

2. Even if you do come up with a well-developed estimate of these pure 
infrastructure costs, I'm very doubtful they'd add up to enough for five more 
units.

2. No matter how you calculate it, the bottom line in the scenario you 
describe remains that some members will be subsidizing others, now and for as 
long as everyone is paying mortgages. This embodies a potential for 
resentment, guilt, and so on. True, the market-rate buyers may be convinced 
they're paying the same as they would if the affordable units weren't there, 
but a real estate appraiser would conceivably value these market units lower 
due to the resulting higher density. Even if you don't mind the effect of 
higher density, it could lower resale values, if you're concerned about that 
type of thing, and most of us are, given the realities of the housing market 
under capitalism. And if your costs run up higher than first estimated (most 
projects find this occurring), carrying the subsidized units could put your 
costs over these (possibly lower) appraised values. Then you'd be up a creek 
in getting mortgages unless everyone can afford a bigger down payment.

3. Will the affordable units be otherwise identical to the others in size, 
amenities, etc. (allowing for standard variations in number of rooms)? For 
reasons of group cohesion, I would strongly advise against creating two 
classes of units. 

4. A related question: In most projects, certain individual options are 
available -- for a price. Will the low-income buyers be able to include these?
If not, and if you have significant options of this sort available, again 
you're creating two classes of residents from the get-go.

5. You'll need to have clear criteria as to what constitutes low-income. And 
will it matter whether a buyer is slightly or a lot below that line? Will the 
level of subsidy be the same for all? Getting more complicated, isn't it?

6. When a low-income buyer sells a few years hence, will she/he reap a 
windfall by selling at full price? How would you feel about that? Or will you 
institute some way of keeping the unit affordable by requiring the person to 
sell only to another low-income buyer? Is that legal in your state? Even if 
so, it will involve complex legal documents. ... So there would be some red 
tape after all.

5. The bottom line, if you indeed to this route, is that the fact of an 
internal subsidy needs to be made entirely clear to all involved, the market 
buyers and the low-income buyers. In addition, you should work through all 
these long-term issues before committing yourselves to the plan. Recruit the 
low-income buyers early and make sure they're involved in all aspects of 
design and development.

6. Finally (and this applies to any community with large disparities in 
income, whatever the source of the subsidy, if any), think of the impact of 
such disparities on future financial issues. Will homeowners' fees be 
identical, regardless of income? When most residents want to have a special 
assessment to add some common improvement, will a low-income resident have to 
block consensus simply because she/he can't afford it? How will you deal with 
that. As a mixed-income community here, we are already dealing with these 
types of issues. It's a challenge, but one we anticipated.

        The last thing I want to do is discourage the ability to add some 
affordable units. But perhaps if your town is truly interested in encouraging 
it, it has a scheme in place or can create one in which the subsidy is coming 
from the outside. We accomplished that for 11 of 25 units through silent 
second mortgages from the city housing authority, scaled according to level of
need and with provisions for maintaining affordability upon resale for at 
least some time.
        Yes, there was a lot of red tape and complication as a result, but 
with all sides eager to achieve this, we were able to do it. If this is a 
potential solution for you or any other group, we'll be happy to share our 
legal and financial documents.
        There are also many other potential ways of obtaining outside subsidy,
as you're aware if you've been following this thread. MCCs, state-backed loans
for first-time buyers, Affordable Housing Program grants through the Federal 
Home Loan Banks, private donations, developer mandates. All of these have been
done by cohousing projects. ... And I'm sure there are other sources that 
haven't occurred to folks yet. Also, if you choose to build in a neighborhood 
that itself is very low-income, these and other doors may well open wider.
        Hopefully, the more these are done, the easier they'll be to apply to 
cohousing and the red tape factor should diminish.
        
        Please do let us all know how you decide to proceed. While, skeptical,
I am very curious to see how it will work if a group does undertake a major 
internal subsidy -- transfer of significant resources from some members to 
others. Has anyone tried it yet?

David Mandel, Southside Park Cohousing, Sacramento.