Cohousing-L Mailing List: RE: Membership Buyout: Income issues, diversity stuff

[Rob Sandelin (Floriferous]

Creating a clear succession of unit selection is really smart. What happens is 
that people WILL drop out as the real costs become known and the financial 
requirements are drawn up. Or they will simply get disgusted with the process, 
the people, or the plans (or all three). You want to have a very clear 
succession process, so that when people leave, new people can join, or if you 
are lucky, your waiting list can be triggered.

My advice if you have already designed and selected specific size units, and 
one comes available, I would first offer that specific sized unit to the whole 
existing list of bought in members first, starting at the top. For example, 
the first person to put their downpayment in is first pick, the next person, 
etc. etc. Then, if everyone on this list says, no thanks, then offer it to the 
waiting list one at a time. In my opinion, having a defined order of choosing 
really keeps things from getting murky. If I was the 14th person to put my 
money into the project, then I get fourteenth pick. If the group defines the 
project, and I am assuming a captial project model here, then when my turn to 
pick a unit comes around, and I want a one bedroom, but the group only created 
3 one bedroom units, and none are available, then I have to pass or take 
whatever is available on my pick.  Then, if later a one bedroom comes 
available, and nobody else ahead of me wants it, then I get it. Or I drop out. 
or more likely, I pick a two bedroom unit, then when or if a one bedroom comes 
available I grab it.

What I observe happening is that one bedroom, cheaper units, are upfront often 
the most sought after, and the four bedroom, most expensive units, are the 
ones that sell last. Often the person who buys the four bedroom, does so, not 
because that is what they really want, but because its whats available and 
they can afford it. And I have seen a fair number of downsizing of units 
within the first couple of years of the project as people move into the 
smaller unit they wanted but wasn't available.

In my opinion, groups get themselves into all kinds of problems when they 
"play favorites" or try to engineer opportunties to meet ecomonic constraints 
and though I have yet to hear of any lawsuits resulting in this, it can be 
very messy. I have heard of groups who made significant tradeoffs to keep one 
or more members who were income constrained in the project, and then find out 
during bank review that those members NEVER really had a chance to be 
homeowners anyway, they dropped off the project, and the project was left with 
the constraints.  The bank does NOT care how nice, what great members they 
are. All the bank cares about is the economic criteria they have for a 
mortgage.   Face it folks, homeownership, via bank mortgage has some major 
income and job stability requirements. Not many $20,000 a year incomes get 
approved by banks for home mortgages of 100K or more without significant 
outside  wrangling via low income subsidies. The rule of thumb for most all 
banks is that the maximum mortgage they will approve is 2.5 times your annual 
income.  There are programatic exceptions to this, via HUD and other low 
income housing funding, but without those, you need a $40,000 a year income to 
qualify for a $100,000 mortgage. You also usually need a signficant 
downpayment in cash, such as 10%.  

I did once get an earful from a woman who was a lesbian, who had a place in 
the line of a group, and who got bumped because the group said, we want 
someone with kids........She took it as discrimination. She called me as to 
advice about her "rights" and  I was able to talk her out of a lawsuit, 
although she may never have followed through with that anyway.

One issue about membership and membership buyin that you might want to be 
careful about is how you deal with peoples time involvement in the process. If 
someone joins, pays the downpayment, and is third in the line, and then is not 
seen at another meeting for 9 months, then, just as you finalize the hundreds 
of hours of planning work, they show up to pick their unit. Should they get 
priority over someone who has put in hundreds of hours but paid their 
downpayment 3 weeks later?

I would advise you to set a minimum participation requirement to keep you 
place in the unit selection line. If you do not, you can still select a unit, 
but you go to the bottom of the selection list.

It should be taken as a given, (one of Robs laws of cohousing) that people 
will drop out of the project.  Be prepared for that, over recruit to have a 
waiting list, financially qualify your members before the bank does, so you 
KNOW where you stand. And also remember that once it's built, people will move 
and sell and new folks will buy in. So if you have less than the amount of 
kids, elders, lesbians, left-handed blind musicians, etc. that you want in 
your initial project, you can still get them in the first couple of years 
after the project is built depending on how you advertise units for sale. 
Folks who would never consider being part of a startup group, are often very 
happy to buy in later, once all the creation madness is over. 

And, if you are dependant on low income financing for members, consider that 
to be critical path for your project: it will be the one thing that will hang 
up everything else, and so be prepared for that. If you are in the position 
where you are going ahead with planning while "hoping" to get a grant or other 
financial subsidy, be sure to play out the question: What if we don't get 
this? You can sometimes restructure what you are doing if you plan ahead 
enough, but if you don't, and that funding does not come through, you may be 
hosed.

Also don't get faint hearted after all this rambling. Many groups HAVE 
successfully pulled off low income projects, HUD seems to be interested, and 
there is a track record of success to work from. 

Rob Sandelin
Northwest Intentional Communities Association
Sharingwood