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COSTINGS

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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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