Market Values in Cohousing

By  Jim  Leach, Founder/President of Wonderland Hill Development Co & Chairman of CoHousing Partners
June  20,  2012

Lee  Bartholomew,  a  professional  appraiser,  had  the  challenging  assignment  in  1991  to  appraise  the  finished  home   values  for  Muir  Commons;  the  first  cohousing  community  completed  in  the  United  States.    Considered    one  of  the   most  experienced  appraiser  of  cohousing  homes  in  the  nation  and  for  the  majority  of  California  communities  he   has  begun  accumulating  and  assessing  data  from  cohousing  sales  throughout  the  country.

During  the  2012  National  Cohousing  Conference  this  month  in  Oakland,  California,  Bartholomew  presented  recent   research  regarding  market  values  from  several  cohousing  communities  in  Northern  California.      He  revealed  post-­‐ recession  resale  data  that  challenged  comparable  housing  markets  within  California.    It  was  surprising  to  learn   that  cohousing  units  were  achieving  market  values  of  24%  to  112%  higher  than  comparable  homes  within  the   market.    This  significantly  higher  price  percentage  cannot  be  justified  from  the  added  cost  and  value  of  common   facilities  and  green  upgrades  alone.

So  what  is  it  that  drives  the  market  value  for  cohousing  prices  and  why  would  it  be  different  than  the  conventional   housing  market  for  similar  size  and  quality  homes?    To  some  extent  it  could  be  supply  and  demand.    When   considering  the  entire  housing  market  there  aren’t  many  cohousing  homes  available  for  purchase.     Comparatively,  the  proportion  of  buyers  seeking  cohousing  units  to  the  number  of  investors  seeking  conventional   housing  types  is  very  small.
To  a  significant  extent  the  market  value  for  cohousing  homes  is  determined  by  attributes  and  features  not   typically  found  in  for  sale  in  mainstream  housing.    Bartholomew  invents  two  general  categories  for  the  idea  of   community;  its  “bones”  and  its  “soul”.    The  “bones”  of  community  include  common  amenities  that  are  unique  to   cohousing,  like  the  common  house  and  higher  quality  green  specialties  built  into  the  structure  and  its  surrounding   landscape.    The  “soul”  is  the  real  value  of  the  intentional  neighborhood  community,  that  which  is  defined  as  the   social  capital  generated  by  a  group  of  neighbors  cooperating  to  create  diverse  relationships  with  one  another.     Obviously  the  value  of  these  unique  attributes  can  vary  from  one  cohousing  community  to  another.    The  diversity   that  goes  into  building  the  “soul”  is  unique  thus  so  is  the  design:  The  qualities  built  into  the  common  facilities  and,   more  importantly,  the  commitment  and  strength  of  the  social  community.    Location  has  always  been  a  primary  driver  of  market  value  in  housing,  having  said  that,  there  is  an  inherent   attribute  to  cohousing  that  is  not  typical  compared  to  conventional  housing  locations.    That  inherent  attribute  is   the  quality  and  social  value  of  the  micro  neighborhood  that  the  home  is  part  of;  often  referred  to  as  the   cohousing  community.    Typical  housing  neighborhoods,  one  block  or  a  group  of  homes,  may  have  extra  value  than   others  within  the  same  neighborhood.  Extra  value  is  usually  attributed  to  appearance;  the  relative  attractiveness   or  aesthetics  of  the  homes  and  landscape  within  the  block.  However,  in  cohousing  communities  the  extra  value  is   based  on  both  appearance  and  the  social  value  of  the  community;  its  inherent  attribute.        This  year  as  the  great  recession  still  grinds  on  in  many  American  cities,  the  first  early  sprouts  of  new  market  rate   housing  within  the  building  sector  are  beginning  to  appear.

It’s  a  slow  and  tentative  housing  recovery  but  one   that’s  feels  like  its  time  has  arrived.    These  spouts  are  helped  in  large  part  to  low  interest  rates  which  to  some   extents  allows  homebuyer  to  meet  very  stringent  qualifying  requirements.    In  spite  of  tight  builder  margins,  one   challenge  to  meet  is  the  price  for  new  housing.    Prices  seem  high  relative  to  the  used-­‐home  market  that  has  been   impacted  by  foreclosures  and  homes  that  were  not  constructed  to  today’s  expectations  for  higher  quality  energy   efficiencies  and  more  thoughtful  greener  standards.    New  homes  are  priced  based  on  actual  cost  to  build  which  in   most  places  did  not  decline  with  the  housing  market  and  has  recently  begun  to  inflate  due  to  labor  and  material   shortages.

What  does  all  of  this  mean  for  cohousing  prices?  It  is  not  particularly  good  news  for  those  trying  to  jump  start  new   cohousing  communities.    For  new  communities  the  prices  have  typically  been  based  on  the  actual  cost  to  create   the  homes  and  common  facilities  with  relatively  small  margins  for  project  contingency  and  profit.    Cohousing   neighborhoods  are  relatively  small  in  scale  and  are  generally  custom  designed  due  to  the  diversity  homebuyers   that  come  together  to  build  a  community.    Therefore  each  cohousing  community  comes  across  as  unique  or  “one   of  a  kind.”    Cohousing  has  extensive  common  facilities;  their  costs  to  develop  are  significantly  higher  than   production  built  housing  of  similar  apparent  quality  minus  the  common  facilities  and  some  green  features  desired   by  cohousing  buyers.

Production  builder  profit  margins  were  higher  prior  to  the  recession  when  equivalent  cohousing  homes  attracted   prices  10%  to  20%  higher.    In  today’s  environment  that  spread  can  be  30%  to  40%;  in  some  instances  more.    This   is  not  an  unusual  situation  for  the  housing  market  where  specialty  and  “one  of  kind”  custom  homes  are  priced   100%  or  more  above  conventional  new  homes.  New  home  prices  have  always  been  a  challenge  for  new  cohousing   communities;  these  groups  of  future  neighbors  will  typically  seek  affordability  when  designing  their  common   features  and  amenities.

As  cohousing  increasingly  becomes  recognized  as  a  ‘progressive’  housing  choice  in  our  sustainably  challenged   American  culture,  the  market  resale  prices  will  better  reflect  the  real  value  gained  from  the  “bones”  and  “soul”  of   the  neighborhood  community.GIB 2