Cohousing-L Mailing List: Re: common costs

[David L. Mandel (75407.2361]

Heather Sullivan-Catlin asked:

>  -What ARE common costs?
>   -How did your group divide them?
>   -What was your rationale behind the decision?

> We are also interested in how the monthly or yearly fees are handled in those
> communities that are up and running.  

You'll find lots on these questions in the archives, if you can find the
archives. I still haven't gotten past e-mail.

But to answer briefly:

Common costs start with very little -- mailings and meeting expenses for your
initial organizing. Later they get very big: the likely hundreds of thousands of
dollars your group will have to come up with collectively as leverage for land
purchase and construction loans. Other medium "pre-development" costs come in
between.

For the initial first costs we assessed a non-refundable flat fee ($25 a year, I
think) to anyone who wanted to participate regularly in organizing meetings.
Then as our core group developed, we still charged that to people who were
considering joining, only the $25 went to a separate cohousing umbrella
organization that may yet spawn other groups in addition to ours.

For any costs that went toward our specific project once we had our core group
and especially once we picked a site, full core group members invested what they
could and whatever amounts they put in were credited to their accounts with the
promise that if it ever really happened, that amount would go toward their down
payment when it came time to actually purchase. At one point after we had
secured our site, we formed a formal limited partnership into which previously
invested sums were rolled over. We also set target investment amounts of 10
percent of anticipated unit cost, 5 percent for low-income members. But in
reality, some invested next to nothing -- because that's all they had -- and
others put in far more than the target amounts. Once the partnership was formed,
we also invited some outsiders to be partners. These were mostly relatives and
friends. We promised a good rate of return on investments (different rates for
different categories) and set priorities for repayment in case of fiasco,
knowing that it was highly risky early on but that the project wouldn't happen
unless we collectively invested around $450,000, about 14 percent of our total
development cost. Others who don't get the extra help we had from our local
housing agency would probably have to come up with more.

The rationale, if not clear already, was that we had to come up with that money
and wanted to regularize its flow as much as possible while keeping as high
priority the inclusion of low-income member who had virtually nothing to invest.

In the end, everyone got their principal back; outside investors and large
investors got most of their promised return. Members who invested less than or
up to the target amount will in the end get less than half, due to last-minute
extra costs and a major screw-up by the mortgage lender.

Our fees are set according to a pretty standard condo budgeting methodology,
adjusted to include more common activities and accounting for the fact that we
do our own maintenance and management. Larger units pay more, but not strictly
proportionally more than smaller ones since some line items are figured on a
per-unit basis while others are allocated by size. We have a small special
assessment for capital improvements that's takes income into account as well.
Fees for meals, laundry and a few other small things are handled separately.

David Mandel, Southside Park, Sacramento