Developing a Cohousing Community

David Oesper
 

The difference between cohousing and a typical development is that cohousing communities either develop the project themselves or co-develop it with an industry professional.

Often, a core group of 6 to 12 individuals or couples is responsible for the development of the community. They find the site, hire the architect, and seek other interested people who would like to live in the community. Typically, all of the houses are sold or rented before construction is completed.

milky_way All housing units at Mirador will be rented. milky_way

Cohousing developments utilize a variety of financing mechanisms and ownership structures.

milky_way The one for Mirador should probably be “rentals owned by a non-profit organization.” milky_way

In addition to seeking a sense of community, some groups emphasize ecological concerns, such as solar and wind energy, recycling, and organic community gardens.

milky_way Mirador will certainly address a number of ecological concerns, especially preserving a pristine view of the night sky, and a natural nighttime environment. The community will generate most of its energy through the solar panels and wind generator on the energy campus. Recycling, xeriscaping, and other other environmentally sustainable activities will be important features of Mirador Astronomy Village. milky_way

The core group will sometimes collaborate with a developer, but even then, the residents play a key role.

milky_way The complexity and uniqueness of Mirador Astronomy Village will probably require working with a private developer. But not any developer will do. They must have demonstrated experience with development in a non-urban desert environment and sustainable building practices. milky_way

Requiring members to sign an agreement, even in the initial stages, clarifies who is able or willing to commit to the project, thus sorting out those who are serious from those who are still curious observers. Becoming a legal entity also inspires confidence among members and consultants alike.

When the group is ready to purchase property and/or hire consultants (architect, lawyer, etc.) for extended services, a more extensive legal agreement is necessary. At this point, the group typically incorporates as a building association, which functions through the construction phases. It is at this stage that members are generally required to invest a minimum amount toward the down payment on their house.

If lending institutions question the feasibility of the project, residents risk their own assets to convince the bank to give them the construction loan.

Prospective members usually pool their equity and form a Limited Liability Corporation, or LLC. The LLC assumes the role of developer, negotiates with the lender, buys the land, and hires the architect. When the project is completed, each individual resident then “buys” their house from the LLC, and assumes responsibility for their own mortgage.

milky_way A significant challenge for Mirador will be that we are not asking future residents to risk their own assets. They will be asked to provide a rental deposit equal to one or two month’s rent, but no other financial commitment will be required until move-in date when each resident begins paying monthly rent. So, who will accept the financial risk and have the financial standing to secure the construction loan? milky_way

milky_way How is new rental housing financed in comparison to homes that are sold, one by one? milky_way

Bylaws are needed for the building association or development partnership, and are drawn up with the assistance of an attorney, and generally include provisions for

  • The group’s general intentions
  • Membership requirements
  • Decision-making procedures
  • Financial liability (individual and joint)
  • Who can legally represent the association/partnership
  • Members leaving the group
  • Settling financial accounts when someone withdraws
  • Amendment procedures

milky_way If the building association or development partnership joint ventures with a developer, the development agreement will reflect the nature of that relationship. Once construction is completed and the construction loan is transferred to the Mirador operating authority, a permanent residents’ association and its bylaws replaces all previous legal arrangements. milky_way

References

The Senior Cohousing Handbook, Second Edition, by Charles Durrett (2009): Chapters 1 & 2, Appendix C

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