Cohousing-L Mailing List: Re: Financial approach for younger prospective members

[John Pustell (jpustell]

Jane -

We are a co-housing community near Boston whose building just finished and we 
start passing papers and moving in this Week!!  Yay.

8 Years ago we faced a similar situation yet 3 years before we got to now we 
were fully sold and had over 30% invested by the members (Ultimate we got to 
40% member financed) with some age diversity (the issue for us is some had to 
drop out when their jobs changed and when we hit extra construction delays due 
to covid - but that is another story)

How - We were advised to set the minimum investment at 10% of unit price (Class 
A Investment in LLC).  Anything above 10% became class B equity and earned a 
discount (a reduction in purchase price) equal to the following (these are 
annualized "discount" Rates - we calculated monthly)
11% Initial Rate (most risky)
  9% When either permitting is complete of 3/4's of the units have been pre-sold
  7% When the both conditions preceding are met
  Construction loan rate when construction is financed.

This way the older folks with financial resources could help fund the project 
and the required minimum investment was small enough that younger folks with no 
existing home equity could still qualify.

We did have an extensive financial review process before associates could 
become Equity (investing) members.  Everyone had to demonstrate an ability to 
pay for a unit, even those intending just to put in 10% and finance 90% later 
on.

We also allowed the Finance committee the discretion to allow folks to pay that 
10% in over time. (no more than 9 months though and more usually 90-180 days.)

Good luck on your project - I hope you are successful.  I've made a lot of good 
friends as we go through this process.



-----Original Message-----
From: Cohousing-L [mailto:cohousing-l-bounces+jpustell=verizon.net [at] 
cohousing.org] On Behalf Of Mariana Almeida via Cohousing-L
Sent: Wednesday, November 9, 2022 12:21 PM
To: cohousing-l [at] cohousing.org; Jane R. Mueller <jmueller [at] 
wellchosenwords.net>
Cc: Mariana Almeida <missmgrrl [at] yahoo.com>
Subject: Re: [C-L]_ Financial approach for younger prospective members

A very challenging problem indeed. 
Some cities have dealt with this by offering down payment assistance to new 
home owners, and then they get a cut of the appreciation if the buyer ever 
sells. Example: 
https://housing.lacity.org/housing/help-moderate-income-first-home-buyers
Perhaps there are individuals who can do this on behalf of others??  Mariana

PS - do you all have a website?? I'm in Berkeley and would love to know where 
your project will be!
 

    On Tuesday, November 8, 2022 at 01:02:55 PM PST, Jane R. Mueller <jmueller 
[at] wellchosenwords.net> wrote:  
 
 Dear Cohousing Communitarians~

One of the best pieces of advice MIssion Peak Village received as a forming 
community was not to re-invent the wheel. We face a dilemma that many other 
communities have likely faced, and we could use your help. If you came up with 
a good way to deal with this, would you please share it?

We have submitted plans to the City for approval and are now actively 
recruiting new Members. Covering pre-development costs is high priority but so 
is creating an age-diverse community. So far, however, our Members and 
Explorers come predominantly from mature, more established households that 
already own property.

Our current financial structure asks Members to start committing housing funds 
3-4 years in advance of project completion and be 20% invested approximately 
two years before the living space will be available to occupy, which is when we 
will need to qualify for our construction loan. 
Younger prospective members find this particularly challenging. Here are some 
of the reasons:

  * In most cases, young adults are not in a position to buy a home     until 
they have been in the work force for awhile; young adults may     not only be 
saving for home ownership but also focusing on career     development. Also, 
here in the San Francisco Bay Area, they are     likely paying exorbitant rent.

  * Especially for younger households, their conditions could undergo     
significant change during that 3-4 year period, e.g.
      o Their employment could necessitate relocation       o Having kids could 
reduce family income and increase expenses

  * If they should need to change plans, our financial structure ties up     
their housing funds and makes them inaccessible until we have sold     out our 
project, approximately 2026.

We would love to devise a financial arrangement that covers the Mission Peak 
Village's pre-development costs, qualifies the us for needed loans, requires 
real Member commitment to the project, and yet fairly accommodates the needs of 
younger Members whose plans may change unavoidably.

How's THAT for a challenge? Have you found solutions?

Jane Mueller

Mission Peak Village

Fremont, CA


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