CPA INSIDER

What CPAs need to know about a growing housing option

Cohousing might be the answer for some in retirement.
By Sarah Ovaska-Few

Pat Darlington didn't want to spend her retirement isolated in the large house she brought her kids up in.

That's why she and a group of like-minded individuals decided to build a senior cohousing community, a place where individuals own their own homes but share common spaces to encourage social interaction. The community was the first of its kind in Oklahoma.

"As we age, we need a diverse social portfolio," said Darlington, a psychologist. "One close neighbor is not enough."

Five years after it was built, the Oakcreek Community in Stillwater, Okla., consists of 24 houses on a 7.5-acre parcel of land. Residents regularly attend weekly coffee gatherings, share meals, and work together to manage the property.

Cohousing is a small but growing housing trend involving small communities that are planned, financed, and developed by those interested in living more intertwined lives. The housing style is catching on, with nearly as many new communities forming as there are existing ones. The United States is currently home to 165 cohousing developments, with 142 more in the building and exploration stage, according to the not-for-profit Cohousing Association of the United States.

What should CPAs know about this growing movement to help advise clients who are considering cohousing as a retirement option?

Experts in community housing and those who have made the jump to community living share their thoughts.

  • Cohousing 101. The community-based housing trend started in Denmark in the 1960s, and was brought to the United States by architects Kathryn McCamant and Charles Durrett in the late 1980s.
  • The largest concentrations of cohousing developments are in California, Colorado, Massachusetts, North Carolina, Oregon, and Washington state, according to the cohousing association.

    Residents live their own lives and own their own properties, but they manage the upkeep and use of shared space with their neighbors.

    In these communities, shared space often includes a central building with room to gather for meals and extra bedrooms that serve as guest rooms when community members have visitors. Other cohousing groups share the costs of pool upkeep, landscaping, and other amenities, similar to what occurs in condominiums. Some, with stronger environmental goals, may commit to growing food together or sharing maintenance tasks.

  • Appeal for retirees. Cohousing is increasingly popular with older Americans, who are looking for ways to live out their retirement in active communities. The national cohousing association knows of 14 existing senior-oriented cohousing communities and a dozen more under development.
  • CPAs can help their clients by having conversations about their post-retirement plans, Darlington said. She did that before making the move to start a cohousing community, after realizing the cost of maintaining her home would only increase over time.

    She estimates she saves as much as $10,000 a year now with a smaller home and her monthly homeowners' fees of $316 covering water, sewer, trash and recycling, cable TV, high-speed internet, phone service, and the insurance, repair, and maintenance of her home's exterior and the community's shared spaces. She no longer has to hire someone to clean her pool, clear out her gutters, or mow her lawn — all expenses she was solely responsible for in her previous home. She also spends less on entertainment and going out to dinner, now that she lives in an area with a rich social environment.

    Most significantly,  Darlington  has seen how her cohousing community comes together to help those who are ill, and how individuals are often able to stay in their homes longer than if they were in more isolated living situations.

    While the community has no onsite health care, neighbors are quick to pitch in and drop off meals or take sick neighbors to doctor appointments, Darlington said.

    She sees cohousing as the healthiest way to age and expects to benefit from the relationships she formed by switching to a different way of living.

    "We will be much healthier and happier if we can work together," Darlington said.

  • Financial structure. Cohousing isn't revolutionary when it comes to the basic financial structure, said McCamant, who runs a California-based consulting group CoHousing Solutions.
  • The financial structure of a cohousing community isn't that different from that of a typical condominium complex, where residents own their unit and pay monthly upkeep dues.

    What is different is that there are intentional aspects of community design and operation meant to encourage socialization and interaction. These tend to be more numerous than at condominiums, ranging from weekly communal dinners at some communities to shared spaces that encourage children and others to play and relax. Cohousing communities are also usually smaller, designed for a few dozen families at most.

    "What you're buying is less private space inside your door and more common space," said Phil Dowds, a resident of a Cambridge, Mass., cohousing community and treasurer of the national cohousing association.

    The costs of cohousing vary. There are shared costs for upkeep of common property, similar to setups in communities with homeowner associations.

    Dowds surveyed more than 20 cohousing communities and found average annual dues to cover those shared costs ranged from $1,400 to $11,000, per unit. Those with lower annual rates may have fewer shared properties and amenities, or opt to have residents share in the work of mowing lawns, shoveling walks, and cleaning community rooms. Some with higher costs may rely on contract labor rather than volunteers for routine tasks like yard work, or they may pay for services like trash removal and water. 

    The allure of cohousing shouldn't purely be savings, but a deeper connection with those around you, McCamant said.

    "It's a very successful and great lifestyle for those it fits with," she said.

    Darlington said the homes can be resold, noting that seven homes in her 24-unit community have been sold by the initial owners. "There is a market, even in Oklahoma," she said.

  • Minimizing risk: Most cohousing developments are built by limited liability corporations made up of all the members who have invested in the project.
  • Generally, interested families invest equal amounts, the amount depending on the scope of the project, and then the LLC is used to buy property, hire consultants, and then secure funding to build the housing units. Housing units are owned individually, with residents able to obtain mortgages and financing in the same fashion as for other housing. Those who have been through the process say it is similar to building a custom house.

    Banks are sometimes hesitant to back the projects, something Darlington found in Oklahoma. It wasn't until the members of the planned community were able to sit down with local bank representatives to explain the project in detail — and demonstrate the high level of financial commitment residents had in the project — that they got a loan, she said.

    McCamant, the cohousing consultant, sees cohousing as a safer investment than a typical development, with all the houses in the cohousing development already sold and spoken for — a scenario that rarely occurs in residential developments. 

    Those wanting to start from scratch and create a cohousing community should seek help from those who have been through the process, she said. 

    "Anybody getting involved in a cohousing situation should get experienced consultants," McCamant said. "You don't have to reinvent the wheel." For example, the Cohousing Association of the United States (cohousing.org) has annual conferences, as well as resources for planning communities and contact information for existing communities.

Sarah Ovaska-Few is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, contact Chris Baysden, senior manager of newsletters, at Chris.Baysden@aicpa-cima.com.

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