Paying for cohousing: finance and costs

Money shapes every cohousing project. Groups need funds for professional advice before they have land, a significant sum to buy a site, finance for construction and, finally, home loans or other arrangements for members. Along the way there are risks: delays, cost overruns, members leaving and lenders unfamiliar with the model.

This guide outlines the stages of cost, ways projects are financed in Australia, the main risks and how ongoing shared costs work. We don't publish typical prices, which vary enormously by location, size and design. Instead, we explain the principles and questions to ask. This is general information, not financial advice.

The stages of cost

1. Forming and feasibility

Early costs include meeting venues, facilitation, legal advice on structures, feasibility studies, site searches and early design. These are usually funded by member contributions or fees, and they're at risk if the project doesn't proceed.

2. Land

Buying land is usually the largest early cost. Groups may need deposits within short timeframes, which can be hard for a group still forming. Some secure options on land, partner with landowners, or work with councils or not-for-profits.

3. Design and approvals

Architects, engineers, town planners, surveyors and council fees are needed to obtain development approval. Approvals can take months or longer.

4. Construction

Construction is the largest total cost. It includes homes, the common house, landscaping, services and infrastructure. Contingencies are essential.

5. Completion and settlement

When homes are completed and titles issued, members typically settle on their homes, often with home loans, and the development finance is repaid.

How projects are financed

Member contributions

Members usually contribute funds at several stages, from small early fees to substantial deposits. Agreements should state how funds are held, what they're used for, and whether and when they're refundable.

Development finance

Banks and specialist lenders may provide construction finance to a development entity. Lenders typically require a significant equity contribution and evidence of demand, such as pre-sales or binding member commitments.

Home loans

Once homes are complete, members on strata or Torrens title can usually seek standard home loans. Lending on company title or co-operative homes can be harder. Speak with lenders early to understand their requirements.

Partnerships

Groups may partner with developers, community housing providers, not-for-profits or landowners who bring capital, land or expertise. Partnerships can reduce risk but involve sharing control.

Other sources

Some groups explore ethical lenders, member loans, grants for feasibility or sustainability features, or government programs. Availability changes over time.

Managing risk

Key risks include:

• Cost overruns from construction prices, design changes or site problems.
• Delays in approvals or construction, which increase holding and finance costs.
• Member turnover, leaving the project short of funds or buyers.
• Finance risk, if lenders change their terms.
• Market risk, if property values change before completion.

Ways to manage risk:

• engage experienced professionals and a project manager;
• use fixed-price or well-managed construction contracts;
• include realistic contingencies;
• keep a waiting list of interested members;
• get legal advice on member agreements, including what happens if someone leaves.

Ongoing shared costs

After move-in, households share costs such as:

• building and public liability insurance for common property;
• maintenance of the common house, gardens and shared infrastructure;
• council rates and utilities for common areas;
• a sinking fund or capital works fund for major repairs;
• administration, including accounting and legal compliance.

Groups must decide how to split these costs: equally, by home size, by unit entitlement in strata, or a mix. Our cost splitter lets you compare approaches.

Affordability strategies

To make cohousing more affordable, groups consider:

• smaller private homes and more shared space;
• simpler design and standard construction methods;
• staged development, building the common house later if needed;
• rental homes through co-operatives or community housing partnerships;
• community land trusts that remove land from the speculative market;
• sweat equity, where members contribute labour, carefully managed for safety and quality.

Talk openly about money within the group. Different households have different budgets and attitudes to risk, and honest conversations early on help the group design a project that members can actually afford.

Common mistakes

• Underestimating professional fees and holding costs.
• No contingency for cost overruns.
• Informal handling of member funds.
• Assuming banks will lend on any structure.

Questions to ask before contributing money

Before you contribute money to a forming group or project, ask:

1. Which legal entity will hold my money, and who controls the bank account?
2. What will my money be used for, and when?
3. Is my contribution refundable if I leave or the project doesn't proceed?
4. How are budgets reported to members?
5. What happens if costs rise or the project is delayed?
6. Have independent professionals reviewed the budget and finance plan?

Clear answers, in writing, protect both you and the group.

Where to find more information

Moneysmart explains home loans and borrowing. The ATO explains GST and other tax rules for property. Housing researchers such as AHURI have published work on community-led housing and finance. Your accountant and lawyer can advise on your specific project.

Keep in mind that every project is different. Location, site conditions, the size and number of homes, the specification of buildings and the legal structure all affect costs, so figures from another project are only a rough guide. Your own feasibility study, prepared with professionals, is the only reliable basis for decisions.

Whatever stage you're at, talking with people who have lived in or built cohousing is one of the most valuable things you can do. Their experience, good and bad, will help you make better decisions and set realistic expectations for the road ahead.

Key points

Cohousing projects move through forming, land, design, construction and settlement, each with costs and risks. Finance comes from member contributions, development finance, home loans and partnerships. Manage risk with professionals, contingencies and clear agreements. Plan ongoing shared costs and consider affordability strategies, and get independent advice before committing money.