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OPTIONS FOR THE FINANCE AND DEVELOPMENT OF THE BUILT COMMUNITY MODEL ADVANTAGES DISADVANTAGES Housing Association as partner who provides the we get lots of advice and professional o if HA remains landlord, would we lose control over site-finding: funds for land and construction; guidance “for free”; lettings/who could rent? Project Management, architectural and other minimal financial risks for the Company o could we offset this loss of control in any way (eg by professional advice related to building. up to the end of the construction phase; terms of tenancy)? if HA remains landlord, rents will qualify HA sells the owner-occupier properties and for 50% grant – makes rented property o if the Company buys the rental properties, we would shared facilities either to the Company or direct to much more affordable; need to borrow the money from somewhere... would HA owner occupiers (see models of ownership). likelihood of complete project failure is or Housing Corp lend us the money at preferential rate? minimal; o impact of interest charges on economic versus affordable Company or HA may or may not wish the HA to we can focus our energies on design and rents. remain the owner and landlord for the rental community issues o Would Housing Corp give us the 50% grant if we agree properties. we can use OWCH as a source of help and to house from priority list? advice; o how offset loss of control over lettings OWCH are using this model Commercial Developer as partner who provides we get lots of advice and professional o we would need to be careful not to lose control of the the site-finding: funds for land and construction; guidance from someone whose job this is; design.. developers tend to want to do things quickly and Project Management, architectural and other because they are used to developing, we cut corners, they may not be sympathetic to professional advice related to building. minimize delays and cost over-runs; green/environmental issues; minimal financial risks for the Company o if we offer to help meet Section 106 requirements , how Developer sells the owner-occupier properties, up to the end of the construction phase; do we avoid being given the worst part of the site? homes for rent and shared facilities either to the with housing market as it is, we may an o we would pay a premium of about 15% for developer’s Company or direct to owner occupiers (see attractive proposition to a developer who profit and to cover his funding costs; BUT experience models of ownership). has a piece of land banked which needs to suggests this is less than the additional costs of muddling be used; thro as our own developers! CoHousing groups in the USA are using this our mixed tenure model offers developer a o we would need to borrow the money to buy the shared model ready made chance to meet any Section and rental properties ... would HA or Housing Corp lend 106 requirements attached to a piece of us the money at preferential rate? land; o impact of interest charges on economic versus affordable complete control over who we can rent to; rents. likelihood of complete project failure is o Would Housing Corp give us the 50% grant if we agree minimal; to house from priority list? we can focus our energies on design and o how offset loss of control over lettings community issues o this is not a well known model in this country – no accessible source of advice from another community. MODEL ADVANTAGES DISADVANTAGES Self financing. Members with assets invest these complete control over design of the site, o this will mean some of us selling our houses before the in the Company by buying shares, the Company’s buildings and shared facilities; build starts.. is anyone prepared to do this? capital is then used for land purchase and complete control over who we can rent to; o interest payable on the money loaned may not be construction. The Company is the developer. allows the Company to negotiate lower- payable until units begin to be sold… can any of us wait than-commercial interest rates with lending this long? Members investing need to be paid interest or members (but would anyone consider o what premium/additional cost for delaying the payment dividends on shares. Risk sharing needs to be offering this?); of interest (paying interest on interest) ? considered in the event of the project failing may be the only way to get the project o this is a high risk/high stress approach, are we up for it? going if no other partner is interested; o we would need to buy in all our professional advice… Additional funding may need to be borrowed we could get good advice and support from would we get the right professionals? from commercial sources if there is a shortfall Lewes and/or Springhill. o we would need to be our own developers… do we have from within the membership willing/able to the skills, are we prepared to put in the effort and energy invest. to play this role? o if one or a few of us become the key drivers, does this Springhill and Lewes communities used this undermine the principal of equality and consensus, and model build resentments? o less energy for design and community issues? o likelihood of project failure is enhanced; o costs and time over-runs are very likely; o who bears the losses if the project fails during site purchase or construction? o impact of interest charges on economic versus affordable rents. o Would Housing Corp give us the 50% grant if we agree to house from priority list? Commercial borrowing . The Company no member has to sell own property to o commercial lenders are not likely to lend if there is no borrows all the capital required for site purchase fund development; investment from the Company – they would expect and construction. The Company is the interest charges on loan can be delayed evidence of significant risk sharing (usually at least developer. We might find a developer who puts until first sales begin; 30%): some of the capital in, making Company more complete control over design of the site, o commercial lenders not likely to offer a lower rate of attractive to a commercial lender and adding buildings and shared facilities; interest, so might be more expensive than member- professional expertise. complete control over who we can rent to; investors; may be the only way to get the project o we would need a list of committed buyers before Every member will need to make a minimal going if no partner is interested or there are commercial lenders would be interested; investment in the shares of the Company, to cover no willing member-investors. o what premium/additional cost for delaying the payment expenses and show some willingness to share the of interest (paying interest on interest) ? risks. o we would still be our own developers – see list of disadvantages above! No known example of this model o no example of this model to learn from.
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