Hi Jeffrey,
Thanks for your input. Great to hear your thoughts.
Here is what I think: In the scenario that you suggest, if one house is sold every few years with a capital gain contribution of 5%, we will have the following situation: Let's take an example of ONE house sold every 2 years, with a capital gain of 100K. The contribution towards the development fund would be 5K after 2 years.
If that was the case, this would equate to 2.5K per year or less than 2$ per week per unit if we were going to fund ourselves. I personally think that it would be simpler to add a 2$/week to the fund through the body corp to achieve the same result.
I think we are talking about two extremes here. We might not have and/or might not want to have 65K per year. But is 5K every few years too little (?)
*I think we need to have a discussion on how much we actually want to raise. And start from there. *
The good thing is that once we move in we can take the year 2021 to discuss and agree on how much we want to raise and ways of doing this. As mentioned at the meeting, this might change from year to year depending on our proposals and needs. We will have the opportunity to review and agree on a new figure once a year through our body corp.
Kind Regards,
Maria Callau 0211847490
SUR Architecture Limited www.sur-architecture.com
Kind Regards,
*Maria Callau* 0211847490
*SUR *Architecture Limited www.sur-architecture.com
On Tue, Dec 22, 2020 at 12:47 PM Jeffrey Robinson via Ucol-shareholders < ucol-shareholders@list.king.net.nz> wrote:
Hi everyone
It’s Jeffrey, Catherine’s partner. I’m new to the cohousing project but keen to be involved and looking forward to living in Toiora.
I’d like to put forward a few thoughts about the development fund and some figures produced by Rainer.
There are currently two potential revenue sources for the development fund: monthly fees, similar to the BodyCorp, and the contribution of 5% of capital gains (5%cg) upon sale of units.
A few meetings ago there was discussion about ‘do we need to change documents for mortgages? And if we were to take out the 5%cg clause upon resale, how could we recoup that money for the development fund through annual fees?’
According to Rainer’s table and email, if the capital gain of every unit over the next year was 10% then 5% of capital gains (5%cg) is about $65,000. But the only way that we would get $65,000 into the development fund via the 5%cg next year is if we *sell all* *the units with a 10% capital gain*. No offence intended Rainer, but I suggest that the underlying premise of your figures is wrong. This may seem like splitting hairs but we need to be careful about the big numbers we wave around and where they come from and what are the underlying assumptions. There seems to be an idea in the group that we will have ‘too much money’.
I suggest that a more likely scenario is that once everyone is settled into cohousing the turnover of units will be relatively low (it’s going to a great place to live). Perhaps only one unit sale every few years. If, for example, the capital gains on one unit is $100,000 after 5 years then, when sold, $5,000 goes to the development fund.
In the short term, taking the 5%cg out of the cohousing documents may only have a small effect on the liquidity of the development fund (depending on how much we levy annually). In the long term, if we assume that property prices keep rising (quickly or slowly) 5%cg might become substantial.
(The idea that prices keep going up forever is also questionable. Property bubbles expand and pop for various reasons. World issues of climate change/pestilence/war can mean the collapse of financial systems. These things have happened throughout history. The recent large increase in property values in Dunedin of the last 2 years is not consistent with the previous 28 years and we cannot assume it will continue.)
Earthsong suggested a percentage of capital gains be returned to the Commons because, over the long term, the large rises in property values made those who sold a lot of money, due to some extent on the back of the work by everyone in the Commons, but none of that money ever came back to the Commons, as they would never be sold.
The point of the Covenant is to keep Toiora as cohousing in the long term to fulfil the conditions of our Resource Consent. It is simple and enduring, but we may need to look at other ways in the short term to fulfil those conditions. The point of the 5%cg contribution is to fund development in the long term. I suggest that a way is found to keep this contribution as a mandatory part of the cohousing set-up. Not so much for the short term but for the long term. As I understand it, the actual amount of yearly fees to go to the development fund has not been fully discussed, unlike the BodyCorp fees which have been decided. Over the next few years the development fund will mostly come from our own annual contributions. With mortgages, living expenses and BodyCorp fees to pay there may not be much left to accumulate in the development fund. I suggest we are very unlikely to have ‘too much money’.
Best Jeffrey
Ucol-shareholders mailing list Ucol-shareholders@list.king.net.nz https://list.king.net.nz/listinfo/ucol-shareholders