Cohousing-L Mailing List: Re: Developer Model of Co-housing

[Sharon Villines (sharon]

> On Sep 9, 2015, at 3:25 PM, Kathryn McCamant <kmccamant [at] 
> COHOUSING-SOLUTIONS.COM> wrote:
> 
> People seem to think that developers are either: 1) evil money grabbers,
> or 2) designing how we should live. But in reality, developers are just
> business people (problem solvers) providing what they think the market
> wants. The power is totally with the consumer. If consumers wants
> something different, they need to be willing to pay for what it actually
> costs to create (including people¹s profit), and put their money up to
> prove they will really be there as buyers.

To clarify “profit” which many people hear as free or unearned money. Profit is 
equal to salary for a developer. If a developer earns 10-15% on a $10 million 
project over 3 years, that represents the developer’s salary for those three 
years. Projects typically overlap but the salary may not be received until the 
end of the project. And as my friend Ann Z says, bad things happen. Developer 
are more likely to get 10% "if they are  lucky."

When you consider that many groups take longer than 3 years to get built and 
may not get built at all, you can see the risk the developer is taking. Their 
income has to pay for all their time, not just the time spent on completed 
projects. Developers have to have a lot of money in the bank and reliable lines 
of credit to develop cohousing projects.

A $1 million fee, usually paid at the time of final sales, has to cover not 
only the developer’s living and professional expenses but provide savings for 
the next project, and cover losses on projects that failed. The engineers and 
architects the developer has to hire may not be willing to wait 3 years until 
they are paid or willing to work on spec. Real estate development is too iffy. 
They want to be paid no matter what. 

$1 million reduces to ~$340,000 a year over three years to run an office, pay 
staff, rent, utilities, etc. and raise a family. Just health insurance will 
take a huge chunk of that. The normal expectation for employee benefits is 30%+ 
of salary. The developer has to employ experts and support staff, or hire them 
paying an hourly fee. Lawyers charge what? $400+ an hour? All that comes out of 
$340,000 a year. What did you pay for having a will made and buying a house? 
The developer pays that for selling each unit. Probably at a bulk discount but 
it adds up.

Liability insurance. You don’t even want to go there.

This is something I didn’t understand before I got involved in cohousing and 
studying sociocratic organization. I was used to salaried jobs and regular 
paychecks. I thought profits were what rich people “took" for sitting around in 
resorts or eating fancy lunches.

Better to think of profit as salary and professional expenses.

Sharon
----
Sharon Villines
Sociocracy: A Deeper Democracy
http://www.sociocracy.info