Why is there a Lack of Affordable Cohousing? Reflections on Cost-Effective Housing

I am often asked about “affordable housing”. People want “affordable cohousing”. I want to share with you what this is all about and why I believe this country lacks “affordable cohousing”. I also want to tell you about a good book by Andrew Heben “Tent City Urbanism (From self-organized Camps to Tiny House Villages)” which documents some solutions. I’d also like to share some ideas for solutions I have.

Change is needed and it seems to me that awareness is the first step toward achieving desired change.

What is “Affordable Housing”? To any real estate professional “Affordable Housing” is when the government (HUD) provides rent subsidies to qualified individuals who otherwise cannot afford to pay market rent. There is an entire industry around this and there is often opposition from existing neighborhoods (NIMBY: “not in my back yard”) whenever new “Affordable Housing” is proposed to be developed.

To avoid confusion I encourage everyone to stop using the term “affordable” (unless government paid rent is in fact actually what you are referencing) and instead use the term “Cost Effective Housing”.

Most if not all existing traditional cohousing communities in the USA today are not cost effective and are out of reach economically for most people. One reason for this is that cohousing construction is typically superior to traditional home construction; so it costs more. Superior construction is necessary to achieve many of the Green and Sustainability goals that are typical with cohousing construction.

Additionally, each homeowner “owns” and pays for a pro-rata share of common facilities which tend to be extensive (common house, grounds, maybe a large swimming pool, garden areas etc.). This additional cost of shared common improvements further increases the allocated “cost per sq.ft.” of a typical coho home as compared to traditional stand alone home construction.

That being said, it should be acknowledged that while the initial “acquisition cost” of a coho house is higher compared to other traditionally built homes, the ongoing operation costs are significantly lower. Cost savings come from reduced energy consumption (better built energy efficiencies), lower maintenance costs (superior construction using sustainable building solutions – like a roof that does not need to be replaced after 15 years) and there are other documented savings that result from the benefits of living in community (typically less needed travel away from your home to participate in desired activities, benefits from “sharing” resources like only needing to have one shared step ladder or lawn mower). Economically, long term cohousing is without a doubt the best economic solution to lower cost living, and we have a lot of people who need lower cost living. These situations result in coho homes typically costing more per sq.ft. when compared to other area traditionally built homes. Because the real estate and bank lending businesses are trained (and required by government regulations) to primarily evaluate home values based on “sale comps”; this industry norm creates challenges with getting mortgages for coho homes because lending institutions often do not understand how to properly value coho homes.

If there are people who want to live in a cohousing community but cannot afford to pay what these better built homes cost what can be done?

Before I try to offer suggestions let me share some other challenges why building more cost effective homes is difficult. Where I live (North Dallas), the path of growth continues north toward Oklahoma into various suburban cities. Right now if you want to move your family into one of these locations (which are perceived to have superior school districts), your choice of housing is largely limited to a big “McMansion” that costs $350K - $450K+ (for Texas, this is on the high-end for middle class homes). There are few, if any “smaller” homes at a lower cost being built. Why? Simply put, the existing systems in place make it difficult to build anything else and building big houses are more profitable for builders who have to meet various minimum building code requirements that drive up costs. To make a living, builders have to make up for these municipality imposed costs via profit margins that can only result by selling bigger homes.

Also, according to feedback I’ve received from builders who have attempted to build smaller homes, many cities prefer to have big houses because they believe this is the best strategy to maximize Real Estate Tax revenue (primary source of taxation in Texas since there is no income tax), and the fewer people who live in any given city, the better, because that results in the lowest level of support services the city must provide.

Another factor is that suburban municipalities may at times have a citizen driven agenda for ensuring only “higher wealth demographic” people reside in town. By setting the home purchase price high, you can keep “lower income demographic” people out.

Where does this put us? Let’s acknowledge that there are a lot of desirable citizens who can afford a big house, but who simply want to live more simply and responsibly in a smaller home. Let’s also acknowledge there are a lot of people who are challenged to afford anything but a smaller house. We need to be allowed to build a greater variety of housing types. We need the government to get out of the way and change things so cohousing and other housing solutions are encouraged and allowed to occur without obstruction.

One large challenge our country now faces is the retiring baby boom generation. The median net worth of USA citizens over 50 is only $150K, while the median house price is $250K. In generations past, a 20 year-old would get a job, buy a house with a mortgage and 30 years later have his house fully paid for by the time they were ready to retire.

Because of:

a).changing economic realities

b).the mobility of people

c). new “home equity” mortgage products (that result in increased consumer debt).

d). a media and tech-toy driven consumer culture

e).and ultimately poor discipline and planning on the part of many individuals

as a country we are now faced with a large aging demographic whose net worth is less than the cost of a median priced home. Most people need cost effective housing because that’s all they can afford.

Are there quality cost effective homes being built? Does the technology now exist to do this? Yes. There have been great advances made in home building technology. Pre-fabricated home construction is an example. There are other proven alternative home construction. What is preventing innovations from occurring? Simply put, a big part of the problem is unintended consequences of government oversight. Zoning and building codes are designed to ensure proper planning and that only smart growth occurs, and that housing is safe (properly built). This is beneficial and keeps people safe. However, local government jurisdictions (zoning, planning commissions) often are reluctant to allow anything that is not “tried and true - proven to work”. Many government employees are risk adverse (they may subject themselves to criticism if they were to approve doing something different like cohousing; there may be no benefit to being innovative, only risk) and will not allow new ideas.

What are some solutions to having more cost effective home construction?

Check out Andrew Heben’s book “Tent City Urbanism”. This book is largely about how to solve the housing challenges faced by the homeless population, but it is also about so much more. Andrew Heben does a great job of explaining how we got to a point where “affordable housing” is no longer available. He also addresses cohousing, eco-villages, tiny house villages and aspects of living in community and sustainable living.

Among the things I gleaned from this book are examples of how much more preferable sanctioned tent cities are compared to the practices most cities follow in dealing with their homeless populations. The author points out that if an individual is living in a tent, they are not “homeless” (only un-housed). There are many examples of groups of individuals who live together in tent cities who collaborate to improve their living situations by providing such things as security (shared “watch” activity) agreements for behavior (no drugs or alcohol, don’t litter, no food allowed where bugs or critters will be attracted, etc.) and self-management practices like consensus decision making and enforcement of agreements (trouble makers can be expelled if necessary).

Side note to cohousers: many people who are homeless suffer from mental illness challenges. If people who are challenged with these types of handicaps can manage to collaborate and live in community, seems to me others should be able to also do this.

In locations where tent cities are sanctioned by the local municipality and allowed to occur, it has been determined that allowing tent cities to exist costs the tax payer less and has greater benefits (lower crime) compared to the alternatives. It also obviously provides a level of dignity to those who reside in the tent cities which all citizens should value.

What is my point? Living in a tent is certainly a low expense cost effective housing solution, so are tiny houses, so are many other solutions. I’m not necessarily suggesting that people who want cost effective housing live in tents, but I believe this illustrates on an extreme “low cost” basis how housing and living in community can occur. We have the ability to build cost effective houses if the government would allow this to occur. Certainly appropriate zoning and building codes can be adapted that will ensure citizen safety without excluding innovative solutions.

Beyond restrictive zoning and building codes, there are also government imposed restrictions that make financing of cohousing difficult. Existing bank regulations about construction and home loans make financing of coho homes difficult. Lenders are reluctant to deviate from the “standard way of doing things” because of difficulties complying with government imposed requirements. The unintended consequence of various government regulations intended to protect the financial systems is that the sources for coho financing are limited.

I’m not a politician but seems to me that awareness is the first step toward achieving desired change. Maybe everyone should call someone, like their congressman, or hire a lobbyist or do whatever it is you do to get things improved.

Ty Albright – Dallas Texas
Housing and Community Solution Artesian
Board of Director Member - The Cohousing Association of the United States

Disclaimer: I acknowledge that I am too busy these days to spend time “fact checking” everything I say or believe. However, based on the information and data intake I’m currently exposed to, I believe my statements are accurate. If you have additional or contradicting information please share it so we may all benefit from understanding. As Black Elk said: “The power is in the understanding” - as Jesus the Christ said “the truth shall set you free”.

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