Development Process

A key document developed in this period in 1999 before final settlement of the land purchase was the core legal agreement we called the Cohousing Agreement. This defined the relationship between the members of Earthsong Eco-Neighbourhood (at the time called Waitakere Eco-Neighbourhood Cohousing Project) and our company CNZL. Essentially, members loaned or pledged to loan specific amounts to CNZL, and became shareholders in the company according to their financial commitment. CNZL undertook to develop the project using the member loans as equity, and pay certain rates of interest to the lenders based on the development stage and therefore level of financial risk involved. With loans varying between $2,000 and $250,000, this system went some way to equalising the impact of differing contributions and allowed members to put in differing amounts of money according to their ability.

In October 1999 the Cohousing Agreement was signed by 28 members who pledged a total of $860,000, enough to complete the purchase of the site and leave $200,000 to pay for the development costs of design, consents, and project management.

Preconstruction 1999 - 2000

Once we had an unconditional agreement in March 1999 to buy the land, the clock started ticking. There was significant money at stake, and thus huge pressure to work to a tight development programme. The first task was to get the design work underway. The group engaged an architect and engineer, and moved immediately into developing the Design Brief. This was a comprehensive document setting out our goals for style, materials, accommodation and layout. The group met on four weekend hui over 3 months to brainstorm, consense and prioritise our site, house and common house design criteria. Many participatory processes were used to engage group members in envisioning their desired neighbourhood, realistically consider the implications, and come to agreement of the key elements in quite some detail. The Design Brief was a key document in clarifying for ourselves what we wanted and clearly informing our architect. While the details continued to evolve and some changed over the design and construction period, it continually proved its worth and the finished neighbourhood remains very close to that early articulation of requirements.

With a diverse decision-making group there would be the potential for hugely complicated relationships and miscommunications with outside contractors and advisors such as professionals, contractors, councils, and bank, and we very quickly realized that, to minimize cost and confusion, we needed one person from inside the group to be the key contact and liaison person.

We appointed a group member, an architect by profession, to be the Development Coordinator (DC), with the role of both a conduit of information in both directions between the group and the outside consultants, and champion of the group's vision in all aspects of the implementation of the project. While there was a strong commitment to full participatory decision-making within the group, during the construction phase the DC also had the mandate to make some decisions quickly at times when that was in the best interests of the group and the project.

Three other coordinators from within the group were engaged over the next few months to handle legal issues, financial issues, and town planning issues for Resource Consent. These four key group members and occasional others met twice weekly as the Development Team over the course of the next 2 ½ years, essentially acting as the developers of the project, though with complete transparency and accountability to the full group.

The other key outside professionals we engaged during this time, in addition to architect, engineer, town planner, and lawyer, were project managers, including a Quantity Surveyor. We'd been advised that, as unknown and inexperienced "developers", we would need professional project managers in order to get a construction loan from a bank. Their task was primarily to manage the time and money, and during this phase, in liaison with the group through the DC, they put together both a development programme and a development budget, two key documents to keep the project on track and affordable.

Financing and Managing the Construction

Obtaining development funds from a commercial bank was a huge challenge. As unknown developers, our company Cohousing New Zealand Ltd (CNZL) had to meet a robust set of conditions from the bank regarding valuations, pre-sales, and guarantees. The first valuations for the houses that were done off the plans were much lower than their expected build cost, as no value was attributed to either the healthy eco-features of the designs or the substantial common facilities we were planning.

The valuations were important for two reasons: a bank would only lend CNZL up to 80% of the total value of the project as a construction loan. If the construction costs were higher than the valuation, the 20% that CNZL had to find as equity became more like 30% of the total costs of the project. We also needed sufficient sales as security for the bank for the construction loan. A low valuation also affected the individual buyers' ability to get a pre-approved mortgage to buy their house off the plans, and thus the number of confirmed buyers dropped off as costs rose and the valuation remained low.

At times it seemed that the crucial threads of construction prices, valuations, house prices, house sales, and bank loan would never meet in the middle. We had to prune back the construction costs wherever we could, several times. Eventually we found a valuation company that was willing to include the value of the common facilities in the house value. The new valuations were still lower than we believed they should be but were sufficiently close to what we needed that we could move forward.

The total projected development cost of Stage I, the first 17 houses, was $4,300,000, including the cost of the land, construction of 17 houses and most of the services (water, drainage, power and phone), and other development costs of consents, consultants, legal costs and finance interest. Of that, CNZL had already spent $860,000, or 20%. The National Bank eventually agreed to lend us the balance, once all of their conditions were met. Family members signed up to the last unsold units to bring our presales up to 100%, in the hope and expectation that proper buyers would be found before completion. All of the Earthsong members agreed to be jointly liable, through indemnities and guarantees, for any losses or inability to repay the loan. Again our great strength was the willingness of the group to take the risks together and support each other.

Construction of Stage I commenced in December 2000, and all 17 houses and siteworks were completed by May 2002. At the point that the houses were completed and the Unit Titles were issued, CNZL sold each house to the individual purchaser. That member's original loan to CNZL went towards the purchase price of their house, and each paid the balance of the purchase price through obtaining individual mortgages. As CNZL completed the sales of houses to individuals, the company was able to repay the bank loan.

Further stages were financed in the same general way. For each construction stage, the purchasers provided 20% of the equity required up front with the balance provided by commercial construction loans from the National Bank of New Zealand. New Zealand's small ethical lender Prometheus Ethical Finance provided finance to both the company and individuals where possible. CNZL operated as a non-profit company and house prices for all stages were calculated only to cover the development costs.

We received a grant in 2001 from Auckland Regional Holdings Ltd (formerly Infrastructure Auckland), who granted $93,400 towards the cost of the innovative overland stormwater system, specifically the water tanks, channels, pond and permeable paving. This was not paid out, however, until final completion of the project in 2008. We also received financial assistance for the construction of the common house or Earthsong Centre from Waitakere City Council and the ASB Community Trust, as outlined here. Apart from these grants, the houses have been 100% funded by the purchasers.

It ultimately took us 7 ½ years to complete the construction phase, with the final driveway and siteworks finished in June 2008. Throughout that time, the Development Team (until 2003) and then the Construction Team (from 2003), led by the Development Coordinator, was the key team of group members that managed the construction on behalf of the full group. Another key area of group participation throughout the design and construction was the Design Focus Group, which researched, considered and agreed on every aspect of the design, materials and services in collaboration with our outside consultants.

Challenges

The financial costs and risks are high with any major construction project, and particularly when pioneering non-standard design and construction methods. Without any financial support from either public or private organisations until well into the second stage of the project, the group of ordinary individuals and families on a variety of incomes paid all the costs faced by a normal commercial developer, and in addition paid a premium for the research, development and approval costs of unusual construction methods and eco-friendly on-site services design. Creative judgements were required at every step to navigate a path between the ideal and the pragmatic reality.

A cooperative venture such as Earthsong has both strengths and challenges not faced by a commercial developer. Very clear leadership, group commitment to a common vision, and legal agreements between group members are needed to ensure the group works together effectively. Years of voluntary effort by members have gone into the planning and management of the development. Some members also worked full or part time in a professional capacity for the project for several years for a very low income.

The other main area of difficulty and challenge has been in design and construction issues. One consequence of pioneering new techniques to address environmental aspects of construction is that inevitably some mistakes were made as other aspects of the materials were not understood or were overlooked. Two examples are to do with materials incompatibility, one being the accelerated corrosion of unpainted zincalume roofs through copper-laden runoff from the solar panels, the other being corrosion of zinc flashings installed at ground level to protect floor slab insulation in the common house. While the roof issue has been relatively simple to fix, the ground level flashings required substantial research, redesign and expensive replacement. This was a painful process that delayed full completion of the common house by nearly two years, but was eventually solved and repaired.

These major construction challenges and a very lengthy development process have taken a financial toll. House owners have twice had to pay extra levies to cover the cost of building the common house. Much of the landscaping was deleted from the budget and residents completed this over several years of weekend working bees. However, all loans have been repaid, the interest on members' loans from 1999 was finally paid out in 2010, and the project is almost in a break-even financial position at completion. That is an achievement!

Lessons

One thing that has shone through again and again in this project is the value of having a committed group aligned with the vision. We've been able to achieve as much as we have in the physical aspects of our neighbourhood not only in addition to a social and cooperative structure, but because of our social and cooperative structure; the two have gone hand-in-hand.

As a group of future residents designing and developing housing for ourselves, we were willing to make design decisions on aspects, important to us, that a developer might find too risky for speculative housing. One example is our car-free neighbourhood: we chose to place a higher importance on our relationships with each other than with our cars. A standard developer might well assume that the market wasn't ready for this. However, by building a pedestrian neighbourhood and inviting others to experience the benefits, Earthsong is helping to shift this market perception.

The commitment of the group led to Earthsong achieving much more than any one of us individually would have been capable of. We can achieve so much more by working together, because of the combined strength of diverse experience, skills, resources and perspectives to think things through and make informed decisions. We are supportive of and accountable to each other and remind each other of our vision. This group cohesion has certainly been through cycles, but overall the group commitment and vision have been stronger than any particular conflict or difference. The internal cohesion of the group needs regular updating and reinvigorating, especially now that the tasks of development are completed and we settle into growing the ongoing life of the community.