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Furslid comments on Tips for Starting Group Houses - Less Wrong
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Make sure that you don't just have an agreement on what everyone wants. It is inevitable that either someone will not meet the house's expectations or will interpret the expectations in a different way. You also need some sort of a process for resolving whatever issues may come up.
Agreed, its important to be realistic. With the hot tub, I made a detailed list of all expected expenses, plus margin for unexpected - I think I heard that projects usually cost about 20% more than the estimate. It ended up costing quite a bit more in practice, so I checked with people to see if they were okay with the upward adjustment, and then asked for a max that they were willing to spend so that I could continue working on it without continued asking at every point. We were able to make it happen for under the max.
Another trick with group houses is making payment optional/voluntary - sometimes projects can get blocked because not everyone wants to contribute equally, so its good to just ask people to chip in what its worth to them, or whatever it is that they want to chip in, and see if you can cover expenses in a way that works for everyone. There are a lot of different options.
As far as people not living up to expectations, that can definitely be an issue. I personally get around this by trying to automate as much as possible. Getting a housekeeper, and including expense of paying the housekeeper to take care of the hot tub was part of the expense estimate I gave that everyone agreed to.
Hofstadter's Law?
A very close parallel, indeed.
However, to be approached with caution and the trigger-finger ready on the bayesian judo button for when the "Hofstadter's-Law fallacy" is preparing to kick in. Changing your estimate will not change the reality. A change in estimate will only change your own approach to the problem - if changing the estimate changes the time and resources it takes to complete a project, start asking the right questions.
When I was a kid (think 7 to 12), I'd often be surprised at how awesome I was for understanding how to use the "Law of Bad Guessing" (since, at the time, I did not know of Wikipedia nor of Hofstadter's Law, but had noticed the pattern it describes), since I would under-estimate every time and resource cost with the knowledge that it would cost more in practice, because I figured that guessing more would only result in even higher costs, unless the mind was somehow physically forced to guess under the real cost no matter what, which I could easily disprove. Turns out I eventually grew past that mentally, of course, once I realized that the reason it actually worked was because of the effect it had on my approach to the problem afterwards.
As a rule of thumb, double all estimates of cost or time.