Capital Hill Urban Cohousing in Seattle, WA*

In 2008, when Grace Kim and her husband Mike Mariano (founding principal architects of Schemata Workshop) purchased the 4,500 sf lot (1/10 acre) in Capitol Hill neighborhood, they formed Frog Pond LLC for securing a loan to acquire the property.

As they started to convene people in 2010 around creating cohousing and exploring different models, they settled on a rental apartment building for a number of reasons. Partly because in 2010 the National Cooperative Bank was not funding cohousing and Seattle banks had a moratorium on lending to condominiums. Also, as they were mindful of how rapidly homes were appreciating and how they become inaccessible to families once they moved in, they wanted a building that would remain affordable in perpetuity. So they decided on a long-term rental model.

As they put out a call for membership, Sheila and Spencer comprised the first household to express interest and started helping to field questions and arranging monthly informational sessions where 4 to 16 people would attend to learn about cohousing. Then they were asked to attend 2 social meetings and a business meeting. For those who continued with interest, they were invited to become associate members and pay a $1,500 non-refundable membership fee to the newly formed legal entity CHUC (Capital Hill Urban Cohousing) LLC. The LLC had two types of members: Class-1 member included Grace and Mike (since they had purchased the land), and Class-2 members included the 9 households (including Grace and Mike). Eventually each Class-2 member was asked to contribute $30,000 towards this new entity (actually it was $15k-$30k as a couple households couldn’t afford the full amount). This amount initially was non-refundable, but became refundable once there were 10 interested household members, after which one could withdraw and recoup their payment. The order in which members paid this amount, established the order in which they could select their unit (at this point they already had 5 of the 9 required households).

The overall cost of the project was $5.6 million: $4.25 million development for construction and soft costs such as prof fees, permits, etc + $1.35 million land value (although the property was purchased for $975,000, by the time of construction its value had increased).

The bank approved them for a 10-year mortgage loan for $4.1 million, which was capped based on their projected net operating income (revenue generated by the building minus expenses). So this meant they had a gap of $1.5 million. To bridge that gap, they were able to use the $15k-$30k paid by each member ($250,000), plus the $325,000 downpayment for the land paid by Grace and Mike) as equity, which meant they had to raise $925,000 before construction. Fortunately they were successful in raising that amount by getting “friendly” loans from friends and cohousing supporters, with a commitment (not guarantee) to be repaid at 4% annual interest.

In terms of their rental model, each member of CHUC LLC has a stake in the company (the company owns the apartment building), so that each household rents its unit from the LLC, with a lease that is renewed annually. The rents in the first year are commensurate with market rates, and increase only a modest amount each year. When a household leaves, they will get back their $30,000 (the amount initially paid to the LLC), and the new household would contribute $30,000 and pay rent commensurate with current market rates, which then increases nominally.

CHUC LLC is a limited (no) equity model (unlike a co-operative, no one has a mortgage). They do have capital accounts for each member household, and track accrual of equity based on percentage of rent paid, but in reality the only way one could access this equity is if the building is sold. Their model is not to sell real estate but to build community. They all understand that shares will stay in CHUC in perpetuity. Most important, they do not see this as a real estate investment — home is not a commodity to be transacted. They believe in building social capital and creating home that is about community.

HOME = belonging / support / security / well-being / community

HOME ≠ real estate transaction ≠ commodity (founders are not interested in making a profit on land)

This information was gathering from Grace Kim’s presentation at a convening of the Cohousing Association of the US in February 2020. More at Capitol Hill Urban Cohousing.