Tuesday, March 22, 2011

If we abolish HOAs and condos, what then?

I have a few questions for the HOA and condo abolitionists. I have been thinking about what a non-CID America would look like, and what the options are. I'm asking these questions seriously because I presume that those of you who want to abolish CIDs have given some serious thought to what that would entail.

I'm hoping to see something other than ALL CAPS RANTING and continued criticism of the status quo. We all know about the problems. I am interested in real solutions that could be implemented in the real world, and that go beyond the reform laws the abolitionists are always denouncing. Let's see something other than sanctimonious bombast, insults, and bomb-throwing, OK? I will delete all that stuff.

So--here are the questions:

1. If you could have your way right now and enact a law that would dissolve all existing HOAs, what would you do about the millions of homes that are now in HOAs? What would happen to the common areas? Who would own them, maintain them, and pay for their maintenance, and how would the money to do that be collected? What would become of their Declarations? Would every word be stricken from the records?

2. If you could dissolve all existing condominium associations, what would you do about the existing condominium properties and their millions of unit owners?

3. Would you also dissolve all the housing cooperatives in the country?

4. If we abolish the institutions of common interest housing as we know them, how do you envision new housing being built in the future? How will the structural considerations that drove the CID craze be addressed in new non-CID housing? These include the high cost of suburban land, the very high cost of urban land, and local governments being in dire fiscal condition. All this led to the current conspiracy between developers and local governments to spread common interest housing everywhere by mandate. (If you don't know what I'm talking about, please read up on it before commenting).

15 comments:

Anonymous said...

1. Housing co-ops stay - they are a different beast altogether

2. Condominiums stay but there are changes to be discussed.

3. HOAs Plan I part a: Starting immediately, the HOA becomes a voluntary organization and has any authority to enforce restrictive covenants in its own name revoked. Like corporate law in every other context, the debt of the HOA corp is the debt of the HOA corp - not that of the owners. The lien power of the HOA must be eviscerated moving forward. Now let's see how creative the HOA becomes about surviving. You can bet that no one will support it when it plays hide the ball with records, votes, elections, etc. If it offers something of value, then maybe it will be able to survive.

The problem is not just the HOAs, however. There is a fundamental problem with using restrictive covenants in the way they have been used in the context of HOAs. Municipalities have been using restrictive covenants via private developer agreements to enact "ordinances" that would not pass constitutional muster and that are not applicable to citizens as a whole. So much about the restrictive covenant regime must change. In particular, cities must lose any authority to enforce restrictive covenants as well.

Anonymous said...

Addressing only HOAs, one solution might be to form a local district (a political subdivision of the state) for the sole purpose of maintaining the property and collecting money for maintenance.

The local district should not have any authority to enforce restrictive covenants. If this is not acceptable then the local district should require that a complainant become a party to any enforcement suit to be filed. As a pre-requisite to filing (or as a burden of proof issue moving forward), the district must show that the alleged violation is substantially affecting the tax base that it relies upon.

There will no longer be assessments. Payments previously labeled "assessments" will be voted upon by the residents of the district who must approve what will now be ad valorem taxes. The citizens will get a tax deduction for any ad valorem taxes they pay.

The local district must operate just as any other political subdivision of the state in regards to open meetings, open records, open elections, etc. Criminal sanctions will now apply to officials and agents that attempt to thwart such processes for personal gain - just as they do in public office.

The district will have the authority to acquire, maintain, and dispose of assets. Most assets will become public use. This approach also addresses "involuntary membership" as restrictive covenants in many places have lapsed or will lapse in the not to distant future. There is nothing more offensive than suggesting that private persons should be able to compel a non-consenting landowner into yielding use and enjoyment of his property without his consent. If the district tries to do so, it shall be subject to takings lawsuit just like any other governmental entity.

Anonymous said...

Evan:

Don't "abolish" them, but limit their authority to "maintaining the common areas," strip them of any quasi judicial "enforecement" power (they can go to a real court and seek a real injunction from a real judge), and require a vote by the Homeowners for assessment increases.

This will cure 95% of HOA problems.

Frank Short

Anonymous said...

If HOAs and developers aren't going to provide the infrastructure for new housing developments, then appropriate development taxes for roads, sewers, etc. will need to be assessed by the municipality. This is what should have been happening all along but no one wants to pay taxes, so they ended up paying assessments instead.

Evan McKenzie said...

It's easy to say that cities will just have to take over the functions they have been delegating to HOAs. It is another thing entirely to make that happen. It borders on the impossible because of fiscal constraints, already-high property taxes, and tax caps that require voters to consent to tax increases. I live on a public street with no HOA in a house built in 1978. However, everything in our area that has been built since about 1990 has an HOAs. Things have changed and we can't just go back to 1958, when the WWII housing boom was on, land was cheap, and it was understood that the local government would provide services and infrastructure. That system was undermined pretty conclusively, and HOAs are one of the consequences. I don't see how we can go back to it, although I agree that it would be a better system.

Anonymous said...

It is not feasible to do away with all HOA's. The one I live in works but is beginning to stagnate due to lack of participation. However, there are some that need to be done away with. Some are a drain on a community(HOA's tend to drive down land prices) also taxpayers pay for improvements especially on roads while some HOA's are immune to the costs. Some HOA's are insolvent and need to be done away with. I believe the state attorney general should have the final word on wether a HOA exists or doesn't based on hearings and investigations. The common areas mentioned would be sold to developers or opened to the public but the money either paid by the state or a developer would go to the HOA members and only after hearings are held. That would be fair but first the AG needs to be involved.
Future HOA's should be admitted only after research to see if they will actually benefit a community.

Anonymous said...

These three things would solve HOA's problems. 1)restrict exec. committees powers, term limits for board members,and a progression of power for the home owners, example for every percentage of homes sold such as 10%, 25%, 50%, ect. a home owner is elected to the board with full voting powers until full control turned over to home owners. 2) voting should be done with home owners only and voting done through and by the county board of elections. 3) The attorney general must be fully involved for the establishment of HOA's, the restriction of HOA's, the investigation of complaints, and the punishment of violations.

Beth said...

I don't see any way to eliminate condo associations, or any need to eliminate housing communes.

I'd like to see what Frank Short proposes--limit the HOA power to maintaining common areas. Make them go to a real court if they want to try to ban your lawn ornaments. Make it possible for them to collect maintenance fees via property tax assessment mechanisms (no more hoa lawyers).

I'd also like to see some kind of limitation on new HOAs. For example, only allow a certain % of new developments to be in HOAs. Give homeowners a real choice about where to buy. Where I live, the choice is effectively zero, because this part of my county was developed after the CID craze began.

Establish a mandatory sunset provision for existing HOAs--if X years pass without a quorum for annual elections, the HOA is automatically dissolved unless a supermajority of residents affirmatively votes to keep it. When the HOA dissolves, common areas revert to the local municipality that can assess maintenance fees/raise taxes to pay for it.

Anonymous said...

HOAs have to be abolished. They cannot be controlled. And, one cannot limit board authority. No attorney general in his/her right mind would want to expand its authority to oversee HOAs, in ANY state and in ANY way shape or form. Admit it was a flawed and failed concept. Abandon it and the laws governing it (which ALL prejudice the homeowner(s)), the sooner the better. A simple contract between owners regarding remaining easements and/or common areas is simplel enough. Enforceable in a court of law without a trade union's interference and without ignorant management company employee involvement.

Shu Bartholomew said...

Evan,

Thanks for starting this conversation. I think it is a great idea to put all these thoughts and ideas out there.

Tossing everyone who does not believe the HOA housing is a viable alternative in the “HOA and condo abolitionist box” and assuming that they all want to eliminate all existing HOAs and condos is not really capturing the sense that is out there. I guess I would fit in the abolitionist group for future CID housing, realizing that the existing stock is here to stay. I am more concerned with rethinking the concept with future construction in mind.

Having said that, here are my answers to your questions:

1- I would not dissolve all existing HOAs, I would however make it easier for the ones who want to be dissolved to do so. I believe that all covenants do contain a provision for their dissolution. Some may not be terribly practical but some may be doable. I heard from someone a few years ago saying they wanted to dissolve their HOA. It seems the only common property was an open field that backed up to a church or other non profit organization that was willing to take it over. In that case, it could have worked. I don’t know what happened to it. In another HOA all the members but one voted to dissolve their HOA. The one person went to a municipal meeting, said he wanted to maintain the HOA and the municipal staff recommended that it would be better for the municipality to disapprove the request to dissolve the HOA. The request was denied. Never mind what the owners wanted, it was to the local government’s advantage to keep it going.
2- Would not dissolve condos. They are a different creature altogether. I would not encourage the building of stand alone units being formed as a condo. Absolutely no need for that.
3- Ditto coops. Certainly not my cup of tea but popular in some urban areas. Did not fly in Northern Virginia and most of them were turned into condos. There was no consumer buy in for coops.
4- The cost of land is a creature of governments. The land available for use by humans has been shrunk to create an artificial shortage and increase the cost. The fact is that we are only using about 6% of the land we have. I understand that a recent study found that the entire world population would easily fit in a space the size of Texas quite comfortably.

How do I envision new housing? The way it was before HOAs came along 40 years ago. For centuries we managed without yet another layer of government, why is it so difficult to imagine a world where homeowner ownership means something? Albeit overseas, but I grew up in a house that was not controlled by the neighborhood Nazis and had none of the problems Americans encounter on a daily basis. I suspect so did you as well as a number of other people reading your blog.

Shu Bartholomew

Fred Pilot said...

Question: If you could have your way right now and enact a law that would dissolve all existing HOAs, what would you do about the millions of homes that are now in HOAs? What would happen to the common areas? Who would own them, maintain them, and pay for their maintenance, and how would the money to do that be collected? What would become of their Declarations? Would every word be stricken from the records?

A. I wouldn't enact such a law outright but instead examine if there are any obstacles to deprivatizing the governance of planned unit development HOAs that require legislative intervention. CID governing docs generally have provisions allowing for their dissolution.

Q. If you could dissolve all existing condominium associations, what would you do about the existing condominium properties and their millions of unit owners?

A. The question is absurd. Existing condos will not be dissolved by legislative fiat. I do believe however their current structure should be reviewed. The condo HOA management model as Tyler Berding and others have pointed out has major weaknesses that threaten the viability of these developments. Condos also pose an investment suitability risk as those who purchase them are often least able to assume that risk, i.e. first and last time buyers.

Q. Would you also dissolve all the housing cooperatives in the country?

A. No. Again, an absurd question unless we're talking about dictatorial state.

Q. If we abolish the institutions of common interest housing as we know them, how do you envision new housing being built in the future?

A. In much the same way it always has and in response to shifting market and demographic demand.

Q. How will the structural considerations that drove the CID craze be addressed in new non-CID housing? These include the high cost of suburban land, the very high cost of urban land, and local governments being in dire fiscal condition.

A. We cannot ameliorate high land and governance costs by privatizing local government in the form of mandatory membership CIDs governed by HOAs. I believe local government cannot and should not be privatized. We need to develop creative means of addressing these cost and fiscal challenges without compromising constitutional, transparent and accountable local government via privatization.

Fred Fischer said...

The title to this story, “If we abolish HOAs and condos…” is about two different issues. Condos are just one type of CID housing and HOAs are the form of governance used most often in CID housing but not the only one available or the best.

Regarding your first question, What would a non - CID America look like ? It would look just fine after all non – CID housing is and has been around long before the CID model was first used. I grew up in a neighborhood that has Cc&Rs and a swimming pool and we just moved from Georgia from a development that has Cc&Rs and a storm water retention basin and both had no housing association. We also used to live in a municipality that has many CIDs that have Cc&Rs, common areas, retention basins, amenities etc. and are governed through improvement districts without having or using housing associations.

Then regarding your second question, I presume that those of you who want to abolish CIDs… ? That’s not an accurate statement; I and many others don’t have big issues with the architectural housing concept of CIDs itself. Instead our concerns and significant disagreements are over how CIDs are governed through the municipal mandated use of private contract governance and operated as non-profit corporate entities. As compared to the owners voluntarily creating the CIDs governance structure after build out or the municipalities using some other form of governance. CID housing has been and can be governed in many different ways that don’t use exclusively created contracts created by others and don’t always have to be operated as non–profit entities under corporate law.

Regarding your last questions about, …dissolving all existing associations.., this is where the real solutions and real world comes into play depending on who you talk to. Remember everyone gets a seat at the creation table of CIDs that include how they will be governed, except for the consumers who ultimately become its members. Furthermore in the real world not all housing associations could be or should be dissolved instantly through some legal ruling or legislative action. However dissolving some housing associations is appropriate if one looks at them on a case by case bases compared to the cookie cutter way municipalities mandate their creation in all CIDs presently.
Finally I also agree with Frank Short, to limit the HOA power to maintaining common areas. Because this is the foundational intent of the municipalities in their scope for creating the CIDs governance, “to manage portions of” the CID not all of the CID. Another solution is that many but not all CIDs could be converted to something else instead of dissolving them. Therefore the solutions to the endless issues can be found in, less is more and it all starts with an end to using mandated adhesion contracts exclusively created by others and registered as non-profit entities called housing associations in CID housing.

Evan McKenzie said...

For those who are quibbling about the questions I posed, let me just say that if you don't believe that the institutions of CID housing that we now have can be reformed, these are questions that you need to think about. I am constantly hearing from people who say that HOAs and condominium projects should be "abolished" (hence my use of the label "abolitionists"). I hear about how nobody accepts CID governance as "legitimate" and they never will. I hear from people who denounce every single reform measure that has ever been adopted as useless. And of course I hear from some people that anybody who works within the existing system in any way is a sellout and part of the problem, no matter how hard they try to change things. (It all reminds me of SDS meetings in college, where nobody is ever radical enough for some people, but that's another story.) Maybe all these people are right. But break this down. Unless you have some practical proposals regarding what we are going to do about the 300,000 or so existing developments, you are only talking about changing the way we build future developments. So let's get clear on that point and separate out the people who want to dissolve at least some of what we have now, from those who are only concerned about future housing construction and land use decisions. And if we are going to decommission some developments, what kind, and how? And please don't tell me that this only applies to HOAS, and not condos. There are express provisions in the condo acts of (I think) all states for dissolving the condominium and selling the property. Here in Illinois, it can be done by a receiver under the supervision of a judge, on petition from a city.

John & Yoko said...

CIDs are over -- if you want it.

Intruder2u said...

My conclusion is the only way to win this game is not to play.

Our 1969 HOA mobile home community of 9,000 created limited purpose special district with FS 418.3 in 1984. They took over operation of the recreation facilities in 2000 when the developer completed the project. This Special District operates like a super HOA with sovereign immunity complete with the condo commando mentality.

No surprise they ignore the effect of MRTA on our vintage 1969 covenants which should be extinguished.

Government in Florida is no help because they do not wish to be helpful.