Cohousing-L Mailing List: Cohousing as an Affordable Housing Resource

[Diane Simpson (dqs]

Here they are! Hot off the computer! My (rough and unpolished) notes from
the CHAPA lunch forum which took place in downtown Boston at Fleet Bank. I
waited to post these notes until I had sent them to Matt Kiefer (one of the
panelists) to correct any gross inaccuracies. (footnoted explanations
courtesy of Matt) I am sending them to the list to promote discussion of
the ideas mentioned at this forum, especially the part nearest and dearest
to my heart, resident participation in design vs. affordability. I still
have to wonder: if New View had not allowed unlimited customization would
they have their common house built today? Where's the cutoff point on
affordability vs. resident design? Also, any ideas on what constitutes
"pure  cohousing?"
I hope the ideas generated in the ensuing discussion will provide a lively
antidote to "Cohousing List Tailing Off"

----Diane:.)



CHAPA LUNCH FORUM
WEDNESDAY MARCH 19, 1997 12-2
THE COHOUSING MODEL:CAN IT BE EXPANDED IN MASSACHUSETTS?

"Citizens Housing and Planning Association (CHAPA) is the non-profit
umbrella organization for affordable housing and community development
activities throughout Massachusetts. Established in 1967, CHAPA is the only
statewide group which represents all interests in the housing field,
including non-profit and for-profit developers; homeowners; tenants;
bankers; real-estate brokers; property managers; government officials; and
others. Its mission is to encourage the production and preservation of
housing which is affordable to low-income families and individuals. CHAPA
pursues its goals through advocacy with local, state, and federal
officials; research on affordable housing issues; education and training
for organizations and individuals; and coalition and consensus building
among broad interests in the field."


Panelists: Michael Barber, Development Consultant: Founder of Kennebec
Valley Cohousing in Maine
Robert Engler: Principal, Stockard & Engler & Brigham; development
consultant to New View Cohousing
Matthew Kiefer: Partner, Peabody & Brown; legal counsel to several
cohousing groups
Mary Kraus: Co-architect and resident of Pioneer Valley Cohousing in Amherst

Moderator: Bob Van Meter, Executive Director, Allston-Brighton CDC and
resident of New View Cohousing community in West Acton, Mass.

The flyer for this event said:
"Cohousing is a new form of housing development that is gaining attention
nationally as a response to the lack of community many people experience
today. Initiated in Denmark over 25 years ago, cohousing features
independent units coupled with common space for meals, outdoor areas, and
opportunities for sharing tasks. Cohousing is designed, planned and managed
with extensive resident participation.

Massachusetts has three completed cohousing communities-including Pine
Street Cohousing in Amherst, which received a national award from HUD  for
innovations in home ownership. Several other developments are in the
planning stages across the state.

Speakers will provide an overview of cohousing design, finance, and
development, and will explore the potential of cohousing as an affordable
housing resource."

Bob Van Meter, the moderator, started off the discussion by remarking "In
the past cohousing has relied on resident-driven models. Now it's time to
discuss applying the concept to private and public housing development
projects."

Mary Kraus, co-architect for Pioneer Valley gave a slide presentation aimed
at introducing newcomers to what cohousing is all about. She remarked that
"clustering has benefits in terms of:
1. Land conservation
2. Increased neighborliness

She showed slides of Pioneer Valley Cohousing (a.k.a. "Cohousing at Cherry
Hill," and "Pulpit Hill Road Cohousing") as well as Southside Park, Doyle
Street, N Street and Windsong.

Bob Engler came next, and he said it was his mission to talk about
affordability. He noted:
*Cohousing is NOT less expensive
*You can save money by hiring your development consultant at a fixed rate
and then take 3 years longer than you planned to do your development:.)
*Sometimes you need to consider a "density bonus"
*More units on the site, the more you can share in fixed costs
*At least 25% of the units have to be permanently affordable to qualify as
an affordable housing development
*Under the Initiative 40B program you MUST do outreach--you cannot come in
with a fully self-selected group
*You can make sure people accept the cohousing concept when they buy in
*Deed restrictions on affordable units can ensure that people cannot sell
them for more $$ than they paid.
*Lenders are being more flexible about accepting rentals within ownership
*Can use a low-income tax credit; create non-profit sponsor owner that
would own all the units and the residents would be the members. You could
create a lease-back coop in which you could get tax credits
*Customization kills!!! This is the main thing that causes costs to skyrocket!

Matt Kiefer was up next, and his goal was to talk about development
strategies and where they fall on the affordability spectrum.

He drew a mental picture of a spectrum with "wanting to create
efficiencies" on one end of the affordability spectrum, and "wanting to
participate in all aspects on development" on the other end of the
affordability spectrum. New View fell on the far end of the spectrum, that
of "wanting to participate in all aspects of development"1

Matt then talked about four development strategies and where they fell on
this spectrum.

1. Self-Managed with Consultants
New View is an example of this. They used group member professionals to
reduce "soft costs."2

2. Developer-Managed Cohousing
Cambridge Cohousing is an example of this. This is a 41-unit community. The
group entered into an agreement with their development-member partners. The
group is acting as the owner.

3. Turnkey Development
Cornerstone Cohousing is an example of this. Also Commonweal.
--developer goes out; buys the site; builds the units, then sells them to
the members.
Matt said the jury is still out on how much of a lag time this group will
have in developing a sense of community.

4. Developer-Initiated Cohousing, or "Cohousing on Spec"
--developer goes out, buys the site, builds the cohousing, then tries to
find a group to sell it to.
--Matt is working with 4 investors in a Virginia group that are trying to
do this as a sustainable community.

As for ways to reduce costs in the construction segment of the project,
these included:
1. Fixed-price construction contract
2. Strict limits on unit customization
3. Modular construction
4. Sweat equity

Financing economies included:
1. Taking advantage of unit pre-sales to reduce costs
2. Seeking nonprofit or other separate funding mechanisms for the Common House
3. First-time home buyer programs
4. Rental units owned by the group
5. In-law apartments
6. Internal subsidy of affordable units
7. Co-buying
8. Incorporating retail or other commercial use to produce an income stream.
Matt said that pure cohousing3  will always be a very small market segment.

A few questions followed Matt's segment:
Q: Why doesn't the PUD legal form work?4
A: "Mostly nonprofit development company buys the land rather than selling
off individual lots."

Michael Barber was up next, and he described his problems in trying to
develop an affordable cohousing project (Kennebec Cohousing) in Maine.

They decided they needed to get an external subsidy. They went to Farmer's
Home and got a 1% loan. They also obtained operating subsidies for those
that were income-eligible.

They bought a site with a $1,000,000 loan. They had a 16-home operating
subsidy, and a $200,000 federal grant. The award was made in the national
office of Farmer's Home, but they had problems at the state level.
Evidently some local opposition to the cohousing community sprouted, and
the local board didn't want to deal with anything that was the slightest
bit controversial, so they ditched the project. Then they lost their grant
and their members.

Michael then repackaged the plan as a low-income housing tax credit
development. he got a subsidy again, but he couldn't find a developer to
act as a partner.

Other points Michael made were:
*The section of Maine where they were developing was not in a thriving area.

*"Only use public subsidies if you have to--they're a pain in the neck!"

*Emphasize to the banks that you're creating something that costs less in
the long run.

*The process not only has to be affordable--it has to be accessible!
(i.e.-ordinary people have to be able to comprehend it.)

*Separate community-building from house-building.

*"Form a regional non-profit whose sole purpose is to do cohousing!"
Doesn't have to be purist cohousing in order for it to work (ex: Pomeroy Lane)

*Tenants can organize to buy a distressed mobile-home park and create
cohousing this way.

*Check references! Don't make all your decisions on an emotional basis!
This is development!

*"The heroic model is not going to open this up to most people."

During the Q&A session that followed David Arnott made the point that
working with a developer can make the community more affordable, because in
the heroic model where the residents to the development work you have to
come up with 25-30% of your total costs up front.

Bob Engler (development consultant to New View) observed that "Them that's
got the gold makes the rules--that's the golden rule!" He also said you
have to look at reuse and resales in other cohousing communities to
convince banks to lend. "Find your lenders early and find out their
concerns!" he said.

Q: Who were the lenders to New View.?
A: Cooperative Bank of Concord was their construction lender. The group
came up with $1.2 million among 24 members. Everyone prequalified for
mortgages. Appraisers tended not to value the common area amenities at
their actual development costs. They are currently having one common meal a
week in someone's home because their common house is not built yet.

Mary Kraus of Pioneer Valley answered that they formed a development
company. She said they had 24 full members when they went to get a loan to
build 32 units. She said they only have 2 meals a week in the common house
because "We all insist on cooking fairly elaborate meals."

Q: What are the total all-in costs per unit and how are you allocating
common-house costs?
A: (Bob Van Meter) "We have a $300,000 allowance for the common
house...total project cost is $6,000,000. We allowed people unlimited
customization which created some serious problems with the construction
schedule and increased the total cost of the project. This increased the
cost of each house by 8 or 9%."

John Schacter of Cambridge made the following comments:
* Look at first-time-buyer programs. There are many that try to help people
with down payments.
* A bank in Cambridge offers 5% down with no private mortgage insurance.
* try to get more than one mortgage for the project.
* Local conditions are very important! (Cambridge is 60% renters right now.)

Q: What can you include in the deed that can make the housing affordable?
A: You can create deed restrictions. If you work with state programs they
will insist on deed restrictions when they give you the grant.
Mary Kraus said Pioneer Valley has 10 affordable units. They tied it to a
percentage of appraised value.

Q: (Ann Bruner) What about handicapped accessibility? (at Pioneer Valley)
What about affordability?
A: (Mary Kraus) "Actually I did some work on Pomeroy
Lane...handicapped-accessibility was not embraced by the group...but we did
decide to make the common house accessible...we made bathrooms large enough
to be adaptable...we're on a sloped site which makes our units less
accessible. In terms of affordability: handicapped accessibility takes up
more room which makes it cost a little more."

Q: (Werner Lohe) Can you make any generalizations about scale? What size
community works best?
A: (Bob Van Meter) "20-40 units works best. We considered using the state's
affordable-housing override to go up to 30 units but people in the group
didn't want to do this."

Q: Is the concept of cohousing being considered by either public housing
authorities or section 8 housing?
A: (Bob Van Meter) "There is a chance Hope 6 money could be used for this.
Hope 6 projects are huge in scale--but there is some chance you could
create a cohousing community within the development."
At some point during the question-and answer period at the end Bob Van
Meter of New View said that in hindsight he probably would not go with the
resident-developed or "heroic" model today, knowing what he now knows. They
thought they had to at the time because their first developer left them in
the lurch and they thought they had no other choice except to go ahead and
do the development work themselves.

                           *   *   *   *   *   *   *

  1. I am not aware of any systematic analysis of the effect of development
structure on cost, but the increase or decrease is certainly not geometric.
I would guess that the range could be 20% or 25% from the most expensive
(self-managed) to the least (turnkey or spec.)

  2. "Soft Costs" are non-construction project costs, such as, particularly
consultants and professional fees.

  3. What constitutes "pure" cohousing is an interesting philosophical
question which perhaps you and I can take up sometime.

  4. There is no reason a PUD would not work for cohousing.  This is merely
a zoning mechanism which allows greater clustering and other flexibility
via special permit.  Although PUDs are allowed by the state zoning enabling
act, many town zoning ordinances do not have PUD provisions.

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