Affordability in Cohousing

Achieving Income Diversity in Cohousing

Define Affordable

30%Achieving income diversity in cohousing communities requires understanding what is affordable at a range of income levels. Starting with the average price of area housing is not the place to start unless a household also has the average income in the area.

The word affordable is applied to housing in all markets. A $1 million house is affordable in a neighborhood of $10 million houses. Even using HUD standards a price of $320,000 is affordable in an area with an average home price of $400,000.

This is not what most people think of as affordable. The standard that economists and financial planners use for affordable is using only 30% of income for all housing costs—mortgage payments or rent plus utilities and maintenance. A household that can find housing in that range is housing-stable instead of housing-insecure.

So the workable definition of affordable starts not with the average home price but with average household income.

Set a Target Based on Income

What is your target number? It is easier to meet a target if your conversations begin with we need this [bathroom, flooring, wiring. etc.] to be at or below this amount. Otherwise, the question that will be answered is how much do most people pay for this in new construction. Once you have that figure and that feature in mind, it is hard to forget. The banker or contractor has started the conversation in a place you were trying to avoid.

A good starting point would be 30% of the median income for your area. Then move down to the incomes of the people in your cohousing group or in the population that you want to include.

Every cohousing group starts with the goal of income diversity. They plan for units to be available to households with a range of incomes. Few reach that goal. Construction is expensive and the best materials and most capable stoves and complex faucets are hard to resist for people who can afford them.

The housing-insecure are asking for guaranteed access to a home with a roof, walls, floor, running water, a working toilet, a cooking appliance, and a refrigerator, preferably working. They want to be safe, for the premises to be hygienic, and to be able to feed themselves and their children.

One reason it is hard to focus on housing at this level is that banks won’t finance housing lower than their own standards of what they consider desirable. A bank in Florida refused to finance one-bedroom units because there was “no demand for them.” But most of the people who wanted to join the community needed one-bedroom units. “No resale value,” was the banker’s reply. Banks earn more money financing larger units and almost none from small units.

Town planning boards raise home prices by restricting multi-household communities, houses below a certain size (-1,200 SF), and lots smaller than a minimum. And they enforce them. All construction plans have to be approved by the planning board. Zoning as well as construction requirements can easily increase the cost of construction.

Competing with the $400,000 Home

The $400,000 home has all the typical things that middle and upper-middle-income households expect, particularly if they are building the homes themselves. To build at a price that is affordable for the other half means carefully evaluating the cost vs the value of those things.

  •  Initially, bathrooms and kitchens are the most expensive per SF to build, but the total SF of other rooms will be more expensive forever for heating and cooling and maintenance. A three-bedroom house has more roof than a one-bedroom house. More walls, more light fixtures, more sprinkler heads, etc. Down the line, the larger total space becomes more expensive.
  • Minimum requirements for a kitchen may be the ability to cook and store food, running water, and waste disposal. But dishwashers, large refrigerators, stone sinks, and granite countertops are often considered the minimum in a new or fully rehabbed house. A stainless steel sink can be had for $100 and a quartz, marble, granite, or slate kitchen sink for $1000+. Multiply that for a 30 unit cohousing community and the range is from $300 to 3,000+.
  • Flooring in bathrooms is ceramic tile because it protects the flooring structure from water. Ceramic tile costs 20-40 cents SF for plain white. “Traffic Master” tan costs 50 cents. More decorative tiles $5.00+. A 5′ x 10′ SF floor, just for tiles, might cost $15 to $250. For 30 bathrooms, that would be $450 to $7500. And if larger units have 2 baths or 1 1/2 baths, it will cost that much more.
  • Wallboard, electrical wiring, outlets, ductwork, the number of windows, flooring, sprinkler heads, stairways, closet doors — all increase the cost of constructing larger units. Zoning might require a sprinkler system for attached units. A small unit may have 7 sprinkler heads and a large unit 27. Those all have to be inspected and replaced from time to time. The ongoing cost is much greater for a 4-bedroom with a basement.
  • It’s very hard to keep costs low enough for a household income of $50,000, the approximate median wage in the US. A household earning $10 an hour will be able to afford $6240 annually for housing costs to be housing-secure.

It’s very hard for people who have higher incomes to hold down costs so lower-income people can afford units. The average construction cost is $154 per SF. The average size of a newly constructed house is 2,776 SF and the average construction cost is $427,893.

Can homeowners wanting all the amenities and finishes expected of a $500,000 housing market keep prices in cohousing to a level that a low-income household can afford?

Customization vs Standardization

Most cohousing groups think the obvious solution is to design units for different income levels by making them different sizes and with different fixtures and finishes. But customization itself is very expensive. Cohousing communities lower costs with standardization. Putting less expensive fixtures in one unit is customization the same as using granite in one unit.

When a multi-household building is under construction, electricians, plumbers, construction workers are all running around at the same time trying to remember if this is the unit that gets green tile and 2 sinks or the one with a bidet and red tile. The one with one outlet in each room or the one with three. Or is it four? When only the studs are up how can you tell which space is the kitchen, and where is the bathroom?

If all the floor tiles are the same and all the sinks the same size, the job can be done much more quickly, with less supervision, and fewer mistakes that have to be corrected. I once moved into an apartment in a complex of 7 buildings with only one finished by the deadline. The other apartments in my building were still occupied by itinerant construction workers. After a few beers in the evening, the stories they told about all the mistakes they had made were a mix of hilarious and alarming. That’s why only one of the seven buildings had been finished by the deadline.

It took three months of additional construction days for a crew of 20+ workers to make up for the time spent correcting mistakes that had been caused by errors in construction drawings and deliveries of the wrong materials.

Achieving Income Diversity in Cohousing

How many hours can a group spend trying to reach a compromise between building $100,000 units and $500,000 units? The range in cohousing communities is generally much narrower. How wide can the range be before it cancels out the advantages of standardization?

It’s like starting with the number you can afford instead of the number a bank or contractor expects. It takes much less time and energy to work within narrower price ranges. So far communities have not been able to do that so cohousing remains predominantly at or above the average market price.

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