Cohousing-L Mailing List: Re: Large Increase in Capital Reserve requirements

[R Philip Dowds (rphilipdowds]

Chris —

I certainly don’t have any slam-dunk answers, but I have background info that 
can contribute to context:

Cornerstone Cohousing is also 32 units, configured in a range of three- and 
four-story wood-frame townhouses and apartment buildings, about 24 years old.  
Four of 32 units are officially designated as “affordable” — but in Cambridge, 
MA, “affordable” is relative.
For quite a few years now, we’ve been looking at reserve set-aside collections 
in the $50K to $75K range.  This level of collection and savings is evolving 
from a matter of concern to a matter of controversy.
Some rules of thumb:
In America, households that spend roughly a third of their income on housing 
are seen as “typical” or “normal”.  This one-third, appx, covers rent or 
mortgage, basic utilities, insurance, and property taxes.  AND ALSO CONDO FEES, 
although this a wild card that includes the basics plus (in many cases) reserve 
savings for future maintenance and replacement … which are NOT usually factored 
into the one-third rule.  (So comparing condo costs to single family home costs 
can be peaches to apples.)
Households paying well below one-third often feel financially secure, or at 
least stable.  But many US households are paying 40% to 50% for housing, and 
they usually feel financially stressed.
Meanwhile, back on the ranch, the prices for residential maintenance and 
remodeling have exploded upwards since COVID and 2020.  Just a couple days ago, 
the Boston Globe estimated regional construction costs have increased appx 9.4% 
annually over the last four years.  Basically, this means all of our capital 
reserve plans are taking some big hits, and need a re-think.

At Cornerstone, our capital replacement reserve was founded on a premise that 
project costs (e.g., the costs of roof or boiler replacement) would inflate at 
about 3% a year.  Wrong.  So our comfort with, and our commitment to, our 
detailed and carefully reasoned reserve plan is breaking down under the 
pressure of exploding costs.  And Yes, we are increasingly concerned about 
community friends and neighbors who whose financial boat might be starting to 
sink beneath the inflation waves.

We don’t yet have any good answers, but my personal advice is:  Don’t get 
angry.  Don’t start bickering.  Keep working the numbers, and try to replace 
general anxiety with real information, and with candid dialog about household 
circumstances and practical choices.  In a national culture bifurcated to the 
extremes of flaunting preposterous wealth versus deep secrecy about household 
finances, this won't be easy.

Thanks,
RPD

> On Jul 8, 2024, at 10:38 PM, Chris Hansen <itschrishansen [at] gmail.com> 
> wrote:
> 
> Hi everyone
> We in Burlington CoHousing are a widely mixed-income group of 32 households
> with 9 affordable units for people on lower incomes quite a number of
> others on low or limited income and some of much more comfortable means
> We have just undergone a Capital Reserve Study which has necessitated a
> very steep increase requiring us to raise $50k-$60k each year for the next
> 9 or so years.
> Needless to say, this is daunting, especially for those on lower incomes.
> I'm wondering how other communities have handled similar situations?
> Have any of you successfully created 'sliding scales' or means-adjusted
> ways of enabling people to pay what they can afford?
> Any other creative solutions or suggestions?
> With thanks!
> 
> 
> -- 
> Chris Hansen
> 32 East Village Drive
> Burlington
> Vermont 05401
> USA
> 
> Ph 603 3988730
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