Even though the financial model is often the least exciting part of collabortive housing, it's important for the long term health of your community. The financial model of Eco Villages Australia is ready to use for small groups of people who want to enter into collaborative housing.
We largely rely on private loans to fund the cost of the land, buildings and infrastructure.
Each community can negotiate the length and terms of the loan. Loans are paid back by the weekly contribution (rent) that residents pay.
Once the land and infrastructure has been paid off, each community can then choose the rent that they pay.
We have an official 'loan deed' that will be signed by all parties.
Why do we encourage communities to fund themselves?
Some communities may have to draw a bank loan, but our preference is to not use the banking system. By not relying on the banks is both a practical and philosophical decision for Eco Villages Australia.
By using existing money to purchase the property outright, no new money is added to the financial system through debt creation, which means that we are not contributing to unsustainable economic growth that interest payments necessitate. Read Charles Eisenstein's book, Sacred Economics, for more background on the structural problems of the debt system.
Why do we encourage zero percent loans?
When you introduce interest into a system, you introduce the need for growth. Runaway growth is destroying traditional cultures, the earths resources, and human relationships - infinite growth is impossible on a finite planet. So we encourage people to make loans at zero percent, though ultimately its the choice of the community, eco villages Australia and the person who loans.
How are loans protected?
Great care is taken not to over-capitilise a property. Even though our model does not include capital gain from the sale of property (we effectively lock property away from the speculative market), we ensure that if the property is sold, it will always be worth more than the sale price. If sold, philanthropist's loans are paid FIRST. We also only accept loans that have the capacity to be paid back. Any capital gain must remain with the non-profit and cannot be distributed to the members or directors as per the company constitution.
If a property has no bank loan, the risk is lessened. We also carry healthy cash reserves and have world class accounting practises and yearly audits.
How big are loans?
People can loan however much they would like to give. $2,000, $20,000, $200,000 or $2,000,000. If there are one or two people who have large loans, these loans can be reduced as new loans are made. In this way, the project can begin to be less reliant on a small number.
What is the term (length) of the loan?
The term is negotiated when the loan deed is signed. Many loans are given for 10 years.
When are these loans made?
If a loan is dependant on residency, we don't accept a loan unless those making the loans become a full member (which takes 18-24 months). This is to protect both parties, as we don't want to accept money from people unless there is a high degree of 'fit', integration and commitment with all the residents.
Who makes these loans?
Some people who loan will be philanthropists, loaning money in an ethical investments designed to challenge our financial system. Some will be residents, but offering loans does not give priority for residency.
What if I need the money before the end of the term ?
The loan deed is a legal document and can be legally enforced, even if the person making the loans dies. HOWEVER, we would do everything we can do pay out a loan if circumstances require. Smaller loan amounts can be easily paid back and larger amounts could come from others who have loaned and been paid back. In some ways, the loan pool can be seen as a rolling loan that the larger group of people create to bring the intentional community into being. As the fund gets bigger, people could choose to hold and withdraw money as life circumstances require.
How to you make money?
All members are volunteers, the directors do not draw a wage or make any financial gain from Eco Villages Australia. We believe that housing shouldn't be connected to wealth creation. There are literally millions of way's to make money. This is not one of them.
Surely this doesn't work?
There is a growing group of people who have discovered that money doesn't bring happiness. Eco Villages Australia invite those with financial means who wish to change culture, to partner with us. Yes, it does work. It's working now.
Article 5 of 6. Next article - 6. Membership Model