Rental CoHousing .org

CoHousing can be a better way to live for many people.

CoHousing: living in self-governing, responsible, groups with a combination of private and shared spaces and facilities. This is often associated with shared ownership of a village of homes. Rental CoHousing is a similar social organization among residents, but a landlord owns the facilities.

If CoHousing is a natural and happy way to live, then Rental CoHousing provides access to an improved life for renters also, without the high commitment and, for many, the unachieveable threshold costs required of owning members. Since shared costs are lower costs, and since shared living is better quality of life, since community-supported lives are longer, since social isolation predicts early death, since community improves safety, since supporting community can help in innumerable ways, a goodly fraction of people will do better in a cohousing situation than in isolated rentals.

With higher density comes reduced cost to residents. Sharing the cost of shared facilities allows improved quality and quantity of shared facilities. Everyone could have a kitchenette, or none, but share a large well-equipped commercial kitchen, at a lower overall cost than giving every unit its own full-size private kitchen. Instead of multiplying single-family playspaces for zero or 1.8 children per isolated family, a shared playground costs less overall and enables shared childcare for parents and playmates for the children. The benefits of sharing are obvious, compelling, and general.

Rental CoHousing also provides benefits to rental property owners, including reduced turnover, marketing, management, maintenance and repair costs. The landlord benefits of Triple Net leasing are conceiveable in a rental cohousing context. Resident responsibility and pride-of-participation is likely greater resulting in more attractive units that are easier to fill at market rates. Employment on the part of community-supported workers is likely higher than by isolated individuals, so that financial problems including defaults, evictions, late and unpaid rents are all less likely. Density can be proportionally higher in rental cohousing where private facilities need not include separate duplication of shared facilities, enabling more units and lower cost per unit, thus higher return on investment. It can be a win/win for owners and residents both.

RentalCoHousing.org Community

This site is intended to be a virtual space for advocacy, shared learning, networking for tenant/resident groups and owner/investor groups, mutual support, and useful information for renters and landlords interested in the cohousing subtype of multifamily residential property.

Breaking it down

Why

I have a vision of a happy future for a lot of people. People like people. They like to live together, some of them. They like the benefits of living together. The company, the entertainment, the wisdom, the food. The lower cost.

Now not everyone likes to live with other people, lots of people want to be in the farthest wilderness where noone else can be seen or heard. But many people like the supportive and close community. It's a natural way for people to live.

I'm going to describe this vision in some detail and try to make a case to support this new category of residential real estate: rental cohousing. While housemate groups can incidentally form, jointly rent a house, and perhaps survive for some time, I do not know this to be a category in the existing real estate market, considered from the investor's or landlord's perspective. I don't know of landlord's associations or groups to support this concept, for example. Nevertheless I believe this is a valid, profitable, sustainable, and distinctly different, way of providing quality housing and community support to people, to the benefit of both the housemates in their communities, and the landlords who support them. I'll try to make that case here.

What

I've made a sweet living space out of my house in North Seattle. It now has six bedrooms and two bathrooms, an outside office space, several gathering areas, two fireplaces, even gardening beds and sort of outdoor room areas, like the side yard under the trees, or the back yard around the fire pit. It's a nice place for people to be, and to be together, at least I hope it is.

I made a lease to support the community that I see has come into being at "1210 Haus". It's a normal lease, most of its terms came from a landlord who rents to UW students. But it has some special terms in it. It tries to make it easy and safe to substitute new members for departing members, and to extend the term by another year, with rents changing by an independently set rate. It aims for community longevity.

How it works from beginning to end

The Beginning

  • I fix up my home and make it sweet, and put an advertisement on Craigslist.
  • One or more people that see it, find each other and start a dialog about their values and what they'd like in a place they might live together.
  • Others come together into that dialog. A community begins to form.
  • The group contacts me and asks to rent my house.
  • I give them a rental application, and everyone fills it out.
  • I do background checks and let them know the result. If everyone is happy, I give them the lease to review and sign.
  • The money amounts and dates are negotiated and given in the lease; the group expects to put something down so the landlord can stop searching for other renters, and to have the rent and deposits paid before move-in day.
  • Then the group lives together. Moves in. Takes care of each other. Life goes on. Community forms, storms, norms, and performs, that's the natural thing.

The Middle could last indefinitely, with new people substituting, lease extensions, and an effective community-internal process.

Substitution

The key to community longevity is community fluidity. Change is inevitable. Will it break you and your brittle structure as soon as possible? Or will you deal with it in a positive way?

On a regular 12-month lease, change is frozen and pent up until the end. After 12 months, a lease is up. It's a lot of pressure, and makes the group and relationships brittle. Anyone who wants to go makes it a big deal for everyone else to struggle and find a new group. Similarly anyone who wants to stay can hardly avoid putting pressure and guilt on the ones who want to go, so that a sensitive person might just accept a breakup just to avoid putting pressure on their friends. It's hard to find a win-win in a 12-month lease for a group of housemates.

So as a landlord, I want to make it super easy for individual housemates to leave early. If substitution can be done clean and easy, then the community can recreate itself over and over, and ultimately last longer and longer.

So the main innovation here is the substitution addendum. The substitution addendum is mentioned in the lease, which says it's okay to substitute a departer for an arriver in good order. I want it to be easy to leave, but of course I want them to leave in good order. So I define what good order is, and I make it easy to know what to do, and not too hard to do it. Then it's not such a big deal to substitute somebody out, and someone else in. Anyone that wants to leave, that's fine, just the group must find a good replacement, someone that passes the background checks and everyone agrees to, then clean up after the move out, make it nice for the new person, and then once again create a community again by all signing responsibility for each other. And maybe a graduation and welcoming party.

If leaving is no big deal, and everyone is used to having new people come in and become part of the group, it makes the group resilient, self-healing. Substitution equals fluidity.

Substitution can also pay. Divide each tenant's deposit into a smaller non-refundable part and a larger refundable part. When the group moves out you have to clean the carpets and send the landscaper over to do the natural primping that time requires. Tenants can leave a space as clean as they want but as a responsible landlord I would still feel I need to steam the carpets, kind of thing. So that's what the non-refundable part is for. Then if the departing tenants leave a lease-described, definite mess behind that requires paying the housecleaner or the painter or whatever, that goes to the refundable part, which might not all get refunded if much cleaning needs to be done.

Here's the pay part: I tell the tenants that if they move out in good order, then I'll give them their non-refundable deposit too. I'll come look at the room -- I want the new person to feel welcomed by a clean and fresh space -- and if it's good, the departer gets their deposit, and because they found an arriver to put in a new deposit, I'll let the clean-good-order departers have their non-refundable part back, for as long as the community keeps replacing itself, and I'll only use the last departing group's non-refundable part at the end of the last lease extension, to clean up at the end.

In short I'm paying the departers when they leave! Why? Because they left with a replacement in good order, and that's valuable to me as the landlord. It means I don't have to find anybody, and I didn't have to go clean up and fix after them. I'm happy. They're happy.

The subtle implication here is that the group that ends the group is going to pay more, since they are the ones that don't get back their non-refundable deposit. It's not a big amount, it's not the end of the world, but it's a point that reveals what the landlord wants: I want group continuity. Ultimately, the group itself, surely, must also like it, at least up until the very end.

Extension

Renegotiation at the time of renewal is another high-pressure point of brittleness in the continuity of a rental arrangement. Who knows what the other side may demand? It's a natural time to worry, and definitely not time to make or rely on a decision until the negotiations are well underway. A good negotiator has to be ready to walk away. Which just increases the probability of termination.

As a landlord interested in continuity of tenancy, I want to minimize this. I want to make renegotiation as minimal and predictable as possible. So as with substitution, there is an extension addendum. It's also less than a page, and says the change will be the minimum change. Change the end date by incrementing the year. Change the rent amount so as to follow the market, as impartially measured by the Zillow rent index for this town. That's it. It's minimal, and who can argue that it's fair. Since everyone knows it in advance and nothing is controversial, it's very easy to extend.

And there's no reason not to extend, because anyone that wants to leave can use substitition, and the rest of us can continue under the extension for another year. Most people most of the time will stay for now, and with substition and extension, there's no need to terminate as a group.

From the landlord's perspective, this is ideal, and raises the value of rental cohousing above the value of other forms of rental real estate. Risk and cost that burdens regular houses on regular leases are removed from the equation in rental cohousing with substitution and extension. This is a substantial commercial advantage to this class of residential real estate. If a month of lost rent plus an amount for cleanup and preparation for the new tenant are otherwise typical between annual new tenant generations, then on the order of 10% of costs to the owner can be saved by using this kind of system. Since 10% a year can typically make the difference between negative and profitable business, or between an okay and a great investment, this point is significant for landlords and real estate investors.

Internal Self-Government

Yes the group also has to govern itself.

This is an important point, and the boundaries should be clear. If I'm the landlord, it's not my business how you, the tenants, want to regulate each other, my business is to care about the house, the lease, the rent, I'm outside the community, although I am not nobody, and although I strongly wish for a happy and wise group that can figure out how to live well together, it's not my job to make that happen, it's the members of the house.

So I might (and do) have an *opinion* that they would do well to adopt a consensus driven house-meeting system like I experienced at Columbae House at Stanford when I went to school there. But the group can, should, must, and is right to, do what *they* want. That's basic.

But some points should be thought about, even so. Here's one. A group lease has deep hooks between the renters themselves. A normal multi-party lease says that each renter is "individually and severally liable" for the whole lease. This is perfectly standard and normal, but many people might not know what it means. It means two things. One, you're responsible for your part. Two, you are each responsible for the entire group. For example, if five get run over by a truck, it means number six is liable for the whole lease and has to pay the whole rent. That person might hustle about and get five replacements to help, but it's all on them, or they have to move out. So each group member is not just responsible only for themselves and forget the others. No, everyone is responsible for everyone.

This might be a surprise and might seem like a big deal, and in a way it is so, but it's also pretty normal. For example, a partnership is a legal entity in which each member is responsible for the actions of all of the others. Partnerships are common and normal. But it's a good to recognize what's going on, to go in with eyes open, and to make some contingency plans for what should happen if the road is rocky. So people who might go into a regular partnership, should perhaps think about it and establish some internal governance policies and procedures. Like, I'll be responsible for this, and you'll be responsible for that. Here's the rights and responsibilities of the members. Here's how we'll decide if there's a controversy. That's a wisely-designed partnership.

The issues of financial and social alignment are both crucial.

Social Traction: A consensus system, where decisions require unanimity, is achieveable with some effort in small groups where all seek the best for all rather than individuals seeking individual self-interest. It also results in improved decision making because all sides of an issue can be considered and balanced, and because everyone owns the result.

The prerequisite for consensus is that each member must commit to support the interest of the whole group. Commitment to dialog and the best for all can resolve the sharpest conflicts. Very rarely, one person just will not go along, consciously or unconsciously not cooperating, even after many attempts to expose assumptions and understand each other. In an extreme case, such a person may need to be ejected from the group without their agreement, a nuclear, non-unanimous decision, to enforce the group commitment of the group. Co-housing groups have foundered on the unwillingness of one member to cooperate; the group dissolved and everyone moved out. Seek gentler ways, but if the alternative is group dissolution, do what you must. The point: A founding agreement should address this.

Financial Traction: For example, if I were to join a group like this, I'd kind of like to know that my partners are also responsible, and have them know and trust that I am, too. I am signing up to stand behind them, so I want to have knowledge of them and traction with them. I might like to see their background check information, because I will be subject financially to their financial behavior. I might want to get their parents' phone number, in case adult supervision or backup rent money is needed. And I'd like to have a group agreement that says, if someone can't come up with the rent for the next month, then they would tell the rest of us right away, and be willing to move out and get replaced right away, in order to have a financially sound house again -- and let the rest of us know early enough, before anybody misses a payment, so that the rest won't have to pay for it or all face eviction. If we all want to loan each other rent month to month, that is one way to do it, but pretty sloppy and pretty easy to get out of control with someone exploiting the others. Instead we should all agree in advance that if it's looking like a problem for next month, to let everyone know as early as possible, and to trigger a substitution, to get the non-payer out and a new payer into their place to help us move forward.

This is some heavy traction. This is internal governance within the housemate group. It's not a lease condition between landlord and tenants. Indeed such a demand would be illegal between landlord and tenant because a landlord has to give a tenant 30 days notice, whereas this might be on a tighter schedule, depending on how much notice the tenants are able to give each other.

A landlord is outside of internal governance relationships, because lease terms are a totally separate process. For example, if rent isn't paid, the law in Seattle provides for 3 day pay-or-vacate notification, then a court judgement of unlawful detainer, then a sheriff eviction. That's strictly between landlord and the tenant group as a whole under the terms of the lease agreement. But between the tenants themselves, it's not about the law of tenancy. It's about mutual agreement of how the group wants to operate. The group has to decide their own deadlines and how confident they want to be that each other's rents will be there before saying, Hey, let's arrange a substitution because before the end of this month we have to have you replaced and the new person vetted and ready to move in and pay the rent at the beginning of the next month. If member Z can see they won't make it, two weeks in advance, then everyone has two weeks to find someone to join. That's doable. If you have a good internal governance system, and you've thought about this in advance, a tenant group can surely find a nice solution that works.

Another nice idea, it seems to me, is for the tenants to all contribute to a rainy-day savings fund, in the amount of one person's rent for a month. The idea being, if someone needs it, they can use it to buy a month of time to move out -- if they really need it, that is, if they really have to move out. That way no-one will take it lightly. And if someone did take it lightly, they want the money that badly, they'd rather move out than pay their share of the rent, hey, that's a person that might be better somewhere else not in a strong community, where everyone ultimately has to rely on each other.

Footnote. This is a little painful to think about because it means considering someone among us in financial difficulty and not being able to just help them out. But maybe we can help each other in lesser ways. Like, hey I know there's a job over here, or so-and-so might give you a raise, or a side job, or something. If everyone is motivated for everyone to succeed, we all do better. It's great to try to have each other's back.

I think this kind of mutual support creates a deeper relationship, more reality-based, more connected, than just living in the same place. It makes the members an economic unit, in a way. They depend on each other. When they see how they've depended on each other, they'll see their true friends. It will bring a high quality of community cohesiveness. I'd like to live in a place like that.

The End.

All good things come to an end, eventually. So a normal lease has a built-in process for termination. Just don't sign the next year's extension, either side, and it comes automatically to its end, that's how you can end it. No problem. That's how normal leases end, and that's how either side can end this lease too. Another graduation party seems in order. But then just leave it clean, walk through with the Landlord, checking off the comparison with the start day list, landlord steam cleans the carpets, does whatever's needed, sends a statement of account and any remaining refundable deposit, and life goes on, happy that we overlapped for the time that we did, and got to know each other as well as we did.
 

Copyright © 2018, Thomas C. Veatch. All rights reserved.
Modified: November 24, 2017, March 8, 2018.