Hi everyone
It’sJeffrey, Catherine’s partner. I’m new to the cohousing project but keen to beinvolved and looking forward to living in Toiora.
I’d like toput forward a few thoughts about the development fund and some figures producedby Rainer.
There are currentlytwo potential revenue sources for the development fund: monthly fees, similarto the BodyCorp, and the contribution of 5% of capital gains (5%cg) upon saleof units.
A fewmeetings ago there was discussion about ‘do we need to change documents formortgages? And if we were to take out the 5%cg clause upon resale, how could werecoup that money for the development fund through annual fees?’
Accordingto Rainer’s table and email, if the capital gain of every unit over the next yearwas 10% then 5% of capital gains (5%cg) is about $65,000. But the only way that we would get $65,000 intothe development fund via the 5%cg next year is if we sell all the units with a10% capital gain. No offence intended Rainer, but I suggest that theunderlying premise of your figures is wrong. This may seem like splitting hairsbut we need to be careful about the big numbers we wave around and where theycome from and what are the underlying assumptions. There seems to be an idea in the group thatwe will have ‘too much money’.
I suggestthat a more likely scenario is that once everyone is settled into cohousing theturnover 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 oneunit is $100,000 after 5 years then, when sold, $5,000 goes to the development fund.
In theshort term, taking the 5%cg out of the cohousing documents may only have a smalleffect on the liquidity of the development fund (depending on how much we levyannually). In the long term, if weassume that property prices keep rising (quickly or slowly) 5%cg might become substantial.
(The ideathat prices keep going up forever is also questionable. Property bubbles expandand pop for various reasons. World issues of climate change/pestilence/war canmean the collapse of financial systems. These things have happened throughouthistory. The recent large increase in property values in Dunedin of the last 2years is not consistent with the previous 28 years and we cannot assume it willcontinue.)
Earthsongsuggested 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 alot of money, due to some extent on the back of the work by everyone in theCommons, but none of that money ever came back to the Commons, as they wouldnever be sold.
The pointof the Covenant is to keep Toiora as cohousing in the long term to fulfil theconditions of our Resource Consent. It is simple and enduring, but we may need tolook at other ways in the short term to fulfil those conditions. The point ofthe 5%cg contribution is to fund development in the long term. I suggest that away is found to keep this contribution as a mandatory part of the cohousingset-up. Not so much for the short term but for the long term. As Iunderstand it, the actual amount of yearly fees to go to the development fundhas 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 annualcontributions. With mortgages, living expenses and BodyCorp fees to pay theremay not be much left to accumulate in the development fund. I suggest we are veryunlikely to have ‘too much money’. BestJeffrey