The financial side of things

els · October 13, 2024, 3:30am

I would like to come back to something that was discussed yesterday and does make me feel we are mixing up things. Also in the light of Tuesday’s discussion about money and the fact that this is a sensitive subject that I feel we will have to rush on, to get to a decision because the architects need to know very soonish if we can afford the extra elevators, common spaces (and this rushing doesn’t feel so comfortable)

the 10 % safety margin that the architects have asked us to foresee as a safety margin
This is for when ‘shit hits the fan’, completely unforeseen. Eg another war breaks out , prices go up, the detailled price estimation they will give us (before the war broke out) doesn’t stick any more. Eg 9 soil samples were taken to give the architects an idea of the soil situation of jet-14. But it turns out that 1 m to the right of one of the samples taken, the structure of the soil is completely different (a rather exceptional situation but yeah that sometimes happens) meaning extra cost. Eg after introducing the permit the commune (and before getting the permit), the commune comes with some demand, which lead to extra costs,… Talk to somebody who did a new construction and more than once they have some crazy story to tell that you don’t believe is possible.
extra money needed for unforeseen needs
Unforeseen needs based on misunderstandings/miscommunication (e.g missing the fact that with the FS the architects only foresaw 1 elevator instead of 3), or extra money because we would like something that makes the Reef a nicer looking place (because beauty is taken up in our blueprint so surely it is justifiable that we need (extra) money for that if we would agree that sth would make the reef more beautiful)

When asking during ‘The statute’ discussion if the 10% that is mentioned there is the same thing as the safety margin. The answer was ‘yes’. And after reflecting on it, I do wonder if that is correct.
It is for me the correct answer, if and only if we only judge that ‘shit hits the fan’ extra costs to be part of this extra 10%, which I think is not what we are going to do.
I think we are going to take any extra cost made from the point of the ‘avant projet’ onwards, disregarding the true nature of the extra cost.
What I fear (and is completely human) is that every once in a while we are going to ask ourselves: are we not going to spend some extra - not foreseen- money on beauty-issues (because beauty is part of the bluepring), are we not going to spend some extra - not foreseen - money on ecological/sustainable aspects (because that is part of the blueprint),…
We have started doing this already since voting on JET-14: the extra elevators, the extra common spaces,… (allthough no decision has been made where this money will come from)
I have the impression we ‘too easily’ say: it’s only peanuts in comparaison to the total budget of the construction of the Reef, who doesn’t want en elevator in all buildings : families with children having to drag their groceries via the stairs, us all getting old ,…).
The fact that these are completely human, blueprint related topics makes it very justifiable to make these extra costs. I don’t think anyone would even think of saying ‘no’ if we would all have unlimited budgets.
The fact that we are conflict avoident (or maybe this is not the correct term in this case) also plays a role, we surely don’t want to block the group of fulfilling these extra needs,…
There is something Hannah mentioned yesterday (a reason why marije and roger stepped out i’ve understood): do we want our whole life to work like we do today? Even if we can afford it today, do we want the have the pressure on ourselves to have to pay a high mortgage today, tomorrow and in 15/20 years (i have no view on my capacity of doing so)? Affording it today, means maybe that we will block these kind of ‘freedoms’/decisions for the future (and does that feel comfortable?)
And than there is the reality for some of us: we have limited budget. The budget has been increasing since I joined (and even before if i understood well). The aim was to stick to a budget of 4063 per m2 (or sth), finding the site it increase to 4370 euro/m2, now we are talking 4438 euro/m2 (still to be discussed/decided if we agree to this new price), an atelier might still be included (which i know it will be peanuts)
There is the argument of Alberto (not absolutely sure I understand his reasoning correctly): you have the +10 and -10 % margin foreseen in the simulation file towards the average price. So if the the price per m2 goes up, well as long as it is within this -10 + 10 % fork you are good. For me this is not the way i see things: i have basic needs (no ground floor apartment,…) that are fixed (and i do request what are my basic needs). If a raise in price make me having to choose for a ground floor apartment, it’s a big no, even it’s within this +10 - 10% fork.

What i would like to come to is fix

a total amount /a percentage of the total budget that we allow ourselves to have for the rest of the project for all these very human and blueprint needs.
if possible attribute a % for extra common space needs, attribute a % for ‘beauty’ needs, attribute a % for sustainability needs,… That might be a hard one, what i want to avoid is that we now already use 100% of this budget for the extra common spaces/elevators.
definately have a separate monitoring (seperate from the 10 % safety margin), and this monitoring should start from the moment of voting for JET-14 (4370 euro/m2).

because if we vote on these extra ‘needs/blueprint’ costs, occasion per occasion, i am afraid that it will always be seen as peanuts and will put a huge pressure on people with limited budgets

mieke · October 13, 2024, 8:45am

Thank your for writing this post Els. It reflects well what goes through my mind as well everytime we talk about extra things like common spaces, elevators etc. Joannes also made the fair remark yesterday that we need an estimation of budget for the garden too, because that is money that we will have to take into account as well at a certain point.

I really have to pay close attention to what I can afford and starting with an increased price (4438 instead of 4370) already makes a difference and makes me feel worried for the future.

I found your three proposals a very good starting point to try to address this issue.

MariaAM · October 13, 2024, 8:59am

I also thinks this post was very necessary

alberto · October 13, 2024, 2:24pm

I would like to propose a different take.

Let’s start by accepting this:

So, it means: get to some sort of budget that covers the entire Reef project. Then add 10%, and hopefully at the end you get 10% back. This far, I am with Els.

When the budget is hardened, there are no more “unforeseen needs”. Either we have the lifts or not, we know how much to spend in the garden, etc. When we say “wait, we still want to add lifts” we are not changing the budget, we are making it. These decisions do not fall into the purview of Coral Reef’s board, but into that of the entire group. The board will never decide to add solar panels, or lifts, or whatever, but can only decide to pay more for the stuff already agreed upon, because there has been another war or inflation spike.

With that said, I strongly suggest we stop talking about the average price per square meter. At this stage, this is no longer an informative metric. No one pays the average price per m2: we each pay the total price of our units, which means the surface of our specific units multiplied by the price per m2 of our specific units. These two are the variables we can control individually, without needing to convince the entire group and without affecting everybody’s decisions. They are also super powerful levers. To give you an idea, let me walk you through my own case:

In Le Programme 3, I asked for one minimum-surface 1 bedroom (69 m2). I also imagined to have a 3 m2 cellar and a 12 m2 balcony, priced at 1,350 EUR x m2. With an average price of 4,370 EUR x m2, and adding the 10% for unforeseen expenses, this came down at 353,958.
But now, in the sketches, the choice of unit is practical. Cheapest one I can get is I2, at 63.8 m2 – a llittle less than I had asked for – and on the ground floor. Adding the cellar (but no terrace needed, it’s on the ground floor) and the 10%, it comes down at 280,473 – over 20% cheaper, with the same average price per square meter and a very similar surface, just by being on the ground floor.
If I were to go for the most expensive 1 bedroom, I could go for O9, a third-floor unit, almost exactly as large as I asked for but slightly larger than I2 at 67.6 m2. Adding a balcony, a cellar and the 10% this will cost me 379,723 EUR. That’s 7% more expensive than my baseline, and 35% more expensive than the cheapest unit.

So, to summarize:

Adding amenities like lifts will increase the average price by some small amount. For example, moving from the feasibility study to Maxi the average price increased by 2%. This bought lifts everywhere and almost doubled the common spaces – huge, huge difference.
Meanwhile, our own budgets change a lot more depending on our choices of unit. In my example, there is a 100K EUR difference between two units with the same surface! And it could even be more if your choice is between units with large differences in surface, which is not the case for the 1-bedrooms in my example.

This is true for all of us. I have two recommendations.

First, focus on your choice of unit. You can save MUCH more by giving up a couple of square meters than by buying a more basic model of lifts. A 2% difference is basically statistical noise. A 35% difference… well. That’s another story.

And second, try not to go to the very limit of your financial capacity. Stay below it. This will give you peace of mind, and it need not compromise your quality of life in The Reef. Because, you know what? This is a cohousing. We have a path to a good life that non-cohousings do not have, which is to invest in common resources and go small on our own units. Building that path took almost three years and a lot of work. And here, as me move to the avant-projet and choose our units, is where we finally get to use the freedom to walk it.

Lee · October 13, 2024, 3:44pm

1. How do we deal with the current increase in the price of square meter?

My proposal would be this:
We stick to our governance methods and Mark’s recommendation: any increase to the price of 4370 euro per square metre is a level 5 decision, which means we will take it by consensus.

That said, here are the things I would consider for now

There is a vast array of options to deal with a possible price increase. Below you can find a copy of the slide that I presented at the Full Members meeting of 15 July.

image1000×534 48.9 KB
*
Things are too much in motion for now to make it meaningful to invest a lot of time and energy in an increase of about 2%.
I agree with Alberto that what matters is our budget. We will know more once we get the value of the units, and where everybody wants to be.
In function of what we learn in the coming weeks, we will find creative solutions, just like our sister cohousings did. None of the current Full Members will be left behind for budgetary reasons.

In sum, I propose to postpone this level 5 decision about the budget for a little while still, until we have more information. When panick kicks in (“but what if the price increases and the square meters go up?” etc), I suggest to focus on point 4 above, and if need be, that you have veto power.

2. How do we fix the 10% that is referred to in the statutes?

We agreed on that yesterday, namely that this will be the budget of the avant-projet. Based on the point above, this is something that will be a level 5 decision, which should hopefully give everybody sufficient emotional safety.

Once that is done, as Alberto mentions, there should be no more “unforeseen needs”, simply for governance reasons.