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					OPTIONS FOR THE FINANCE AND DEVELOPMENT OF THE BUILT COMMUNITY
MODEL
Housing Association as partner who provides the site-finding: funds for land and construction; Project Management, architectural and other professional advice related to building. HA sells the owner-occupier properties and shared facilities either to the Company or direct to owner occupiers (see models of ownership). Company or HA may or may not wish the HA to remain the owner and landlord for the rental properties. OWCH are using this model

ADVANTAGES
      we get lots of advice and professional guidance “for free”; minimal financial risks for the Company up to the end of the construction phase; if HA remains landlord, rents will qualify for 50% grant – makes rented property much more affordable; likelihood of complete project failure is minimal; we can focus our energies on design and community issues we can use OWCH as a source of help and advice;

DISADVANTAGES
o o o o o o if HA remains landlord, would we lose control over lettings/who could rent? could we offset this loss of control in any way (eg by terms of tenancy)? if the Company buys the rental properties, we would need to borrow the money from somewhere... would HA or Housing Corp lend us the money at preferential rate? impact of interest charges on economic versus affordable rents. Would Housing Corp give us the 50% grant if we agree to house from priority list? how offset loss of control over lettings

Commercial Developer as partner who provides the site-finding: funds for land and construction; Project Management, architectural and other professional advice related to building. Developer sells the owner-occupier properties, homes for rent and shared facilities either to the Company or direct to owner occupiers (see models of ownership). CoHousing groups in the USA are using this model

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we get lots of advice and professional guidance from someone whose job this is; because they are used to developing, we minimize delays and cost over-runs; minimal financial risks for the Company up to the end of the construction phase; with housing market as it is, we may an attractive proposition to a developer who has a piece of land banked which needs to be used; our mixed tenure model offers developer a ready made chance to meet any Section 106 requirements attached to a piece of land; complete control over who we can rent to; likelihood of complete project failure is minimal; we can focus our energies on design and community issues

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we would need to be careful not to lose control of the design.. developers tend to want to do things quickly and cut corners, they may not be sympathetic to green/environmental issues; if we offer to help meet Section 106 requirements , how do we avoid being given the worst part of the site? we would pay a premium of about 15% for developer’s profit and to cover his funding costs; BUT experience suggests this is less than the additional costs of muddling thro as our own developers! we would need to borrow the money to buy the shared and rental properties ... would HA or Housing Corp lend us the money at preferential rate? impact of interest charges on economic versus affordable rents. Would Housing Corp give us the 50% grant if we agree to house from priority list? how offset loss of control over lettings this is not a well known model in this country – no accessible source of advice from another community.

MODEL
Self financing. Members with assets invest these in the Company by buying shares, the Company’s capital is then used for land purchase and construction. The Company is the developer. Members investing need to be paid interest or dividends on shares. Risk sharing needs to be considered in the event of the project failing Additional funding may need to be borrowed from commercial sources if there is a shortfall from within the membership willing/able to invest. Springhill and Lewes communities used this model

ADVANTAGES
   complete control over design of the site, buildings and shared facilities; complete control over who we can rent to; allows the Company to negotiate lowerthan-commercial interest rates with lending members (but would anyone consider offering this?); may be the only way to get the project going if no other partner is interested; we could get good advice and support from Lewes and/or Springhill.

DISADVANTAGES
o o o o o o o o o o o o o this will mean some of us selling our houses before the build starts.. is anyone prepared to do this? interest payable on the money loaned may not be payable until units begin to be sold… can any of us wait this long? what premium/additional cost for delaying the payment of interest (paying interest on interest) ? this is a high risk/high stress approach, are we up for it? we would need to buy in all our professional advice… would we get the right professionals? we would need to be our own developers… do we have the skills, are we prepared to put in the effort and energy to play this role? if one or a few of us become the key drivers, does this undermine the principal of equality and consensus, and build resentments? less energy for design and community issues? likelihood of project failure is enhanced; costs and time over-runs are very likely; who bears the losses if the project fails during site purchase or construction? impact of interest charges on economic versus affordable rents. Would Housing Corp give us the 50% grant if we agree to house from priority list? commercial lenders are not likely to lend if there is no investment from the Company – they would expect evidence of significant risk sharing (usually at least 30%): commercial lenders not likely to offer a lower rate of interest, so might be more expensive than memberinvestors; we would need a list of committed buyers before commercial lenders would be interested; what premium/additional cost for delaying the payment of interest (paying interest on interest) ? we would still be our own developers – see list of disadvantages above! no example of this model to learn from.

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Commercial borrowing . The Company borrows all the capital required for site purchase and construction. The Company is the developer. We might find a developer who puts some of the capital in, making Company more attractive to a commercial lender and adding professional expertise. Every member will need to make a minimal investment in the shares of the Company, to cover expenses and show some willingness to share the risks. No known example of this model

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no member has to sell own property to fund development; interest charges on loan can be delayed until first sales begin; complete control over design of the site, buildings and shared facilities; complete control over who we can rent to; may be the only way to get the project going if no partner is interested or there are no willing member-investors.

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