The Public Role in Establishing Private Residential Communities:
I started a mini-debate with some comments about CAI having a perfect right to engage in lobbying. This led to another mini-debate over whether CAI is responsible for the spread of CIDs. The fact is that government, not CAI, has been the major promoter of CID housing. The FHA and other federal agencies promoted HOAs from the early 1960s on, and now municipalities, in conjunction with developers, are driving the spread of private governments. The best analysis of municipal mandates for CID development is Steven Siegel's recent law review article for Urban Lawyer, published by the American Bar Association (abstract follows). Conspiracy theories to the contrary notwithstanding, the fact is that CAI is not hatching more CIDs in an underground laboratory in the Arctic.
"Steven Siegel, The Public Role in Establishing Private Residential Communities: Towards a New Formulation of Local Government Land Use Policies That Eliminate the Legal Requirements to Privatize New Communities in the United States, 38 Urb. Law. 859 (Fall 2006). This article examines the critical and insufficiently understood role that government plays in the widespread and ever-growing establishment of private residential communities in the United States, particularly in the high-growth Sunbelt states. The author argues that local governments, on a broad scale and independent of market forces, effectively have required developers of new subdivisions to create community associations to operate and maintain the subdivision in lieu of the municipality providing traditionally municipal services to the subdivision, including such services as street maintenance, sewer service, water supply, drainage, curbside refuse collection, parks, and even traditional police patrols of public streets. This article aims to partly fill a gap in the literature and in the scholarly commentary. Part I catalogs and assesses the significant demographic, social, and economic factors that have contributed to the phenomenon of the explosive growth in the number of private communities in the United States. Part II traces the history of the PUD zoning concept and how this concept evolved from a mechanism to interject greater design flexibility into the zoning approval of new subdivisions into a vehicle for municipal privatization decisions affecting traditionally public facilities and services. Part III sets forth substantial evidence of the active and direct role played by local governments, through the exercise of their plenary regulation of new residential development, in the rise of the territorial community association as the standard template for new community development in the fastest growing areas of the United States. In Part IV the focus of the inquiry shifts from the empirical to the normative. In particular, the author identifies the adverse effects of a municipal land use policy that effectuates the privatization of the operation and maintenance of traditionally municipal infrastructure by way of the de facto or de jure requirement that a subdivision developer establish a community association (to operate the infrastructure) as a condition of subdivision approval. Part V explores potential judicial remedies as well as legislative policy recommendations aimed at reducing the future municipal imposition of public service exactions in new community development, as well as mitigating the effects of public service exactions in existing communities. If the public role in enabling private residential communities were to be more clearly delineated and analyzed (as this article seeks to do), then the groundwork can be laid for serious public discussion of the future of new community development in the United States and for a thorough and public assessment of what has been called “the most significant privatization of local government responsibilities in recent times.”"
12 comments:
It's not a simple either/or scenario. Nor is it a "conspiracy;" it's the realpolitik of mutual self interest. Both local governments AND the community association industry have an interest in promoting and preserving the privatization of local government in the form of CIDs governed by HOAs.
For example, several years ago CAI-CLAC lobbyist Skip Daum wrote the California Legislature concerning pending CID-related legislation arguing that CIDs benefit local governments by helping them deliver services without having to raise taxes.
Darn it Evan, now we will have to relocate the Fortress of Solitude: and just when I thought that Arctic real estate was going to pay off due to global warming.
Tom
PS: Be careful, you know that no good deed goes unpunished.
In fact, CAI has led the charge to work to address the issue of tax fairness for all residents of associations. Why should they pay full tax rates while receiving only partial services from their local government? This is a double taxation situation at its worst and an issue we have been working on for years.
Also, appreciate your reminding folks that CAI doesn't build homes, developers do. In addition, we don't approve plans or create zoning laws, local governments do. We even don't write the law that governs associations, legislators do (of course we have an opinion on some laws which we are entitled to express as are all citizens). It is a little ironic that so many folks are "free speech" advocates only so long as everyone agrees with them.
Mr. Skiba can't really believe that CAI's position is, "We din't do nuthin'. Its dem guys!"
Steven Siegel shines badly needed light on the real nature of the problem of HOAs and show why there is increasingly no housing choice for home buyers.
The solution to the whole HOA "problem" is not to "reform" HOAs, but rather to create a real free housing marketplace and subject HOA housing to the real 'wrath of the marketplace.' To do that, the incentive of 'double taxation' must be removed by allowing municipalities to tax only for services provided. In such an environment, if HOAs treat owners badly, they will have to suffer the consequences in the marketplace.
I think a certain component in the current housing slump has to do with buyers rejecting the HOA concept, which I do, and choosing not to buy. If non-HOA housing of recent vintage were more available, we might not be experiencing the current fall of home sales to the severity we are now.
In other words, until the home building industry, the local and state governments, and the lending institutions realize that not all home buyers want to live under an HOA regime, the HOA issue will be a drag on housing industry recovery. Has anyone gone on Google and looked at "home 'No HOA!'" lately?
Thanks, Evan, for your kind words about my article in The Urban Lawyer. Incidentally, the full text of the article is posted on-line at the "On the Commons" website.
Steve Siegel
George K. Staropoli said...
Mr. Skiba can't really believe that CAI's position is, "We din't do nuthin'. Its dem guys!"
....
Not what I said now or ever. Just another example of George willfully misinterpreting something to further his own arguments.
Like most things in life, the idealism that fostered the idea of "private governance" for communities has been corrupted by money, at every level. The people who are either forced to, by the ubiquitous nature of HOAs in some parts of the country or are coerced into purchasing a home in a CID under false pretenses, due to the laughable notion that "constructive notice" serves as credible disclosure, serve as the food source for the CID industry and the public governments that enabled them, much like plankton in the ocean's ecology. The prime focus for the CAI and all of the "service providers" is to keep the income stream flowing. I call this "The HOA Gravy Train". During my tenure as treasurer for my HOA, I found this to be transparently true. The incestuous relationship between the management companies and the various businesses that they recommend is at best suspicious and at worst payola.
Precedent is an important concept to the law. Professor McKenzie in his book Privatopia traces the legal underpinnings of deed restrictions from 14th century English Common Law up to the current day, explaining how the governments at the Federal, State, and Local level have supported the concept of "privatized communities" throughout the history of America, thus establishing the precedent that explains the current state of affairs. As the "Twin Rivers" decision shows, relying on precedent is a sure prescription for failure. In my view, the only hope of stopping the "privatization" of people's domestic lives must involve a fresh look at the "realpolitik".
At the dawn of the civil rights movement in America the existence of "Jim Crow" laws made it almost impossible to challenge any racial injustice. Why? Because the courts had "precedence" that these laws were, well, the law. What you had was "institutionalized injustice". I believe that it is much the same today.
What had to happen to effect a cure was a raising of the national awareness to exactly how perverted and tortured the concept of justice had become, and I believe that it must happen again. Dealing with the minutia of past law, constructed by, and in the image of, the CID Industry will fail, just as that approach failed with the civil rights movement in the 1950s and 60s. Instead, the fix required things like "The Fair Housing Act" and "Affirmative Action". Only efforts at this level will have any real chance of success in banishing these affronts to citizenship from this country.
As for Mr. Skiba's remarks about having an "opinion about some laws", they are as bogus as his organization. Anyone with a 9th grade education understands that lawyers, paid for by PACs, write the laws. His characterizing the CAI's lobbying efforts as being a combination of "Mr. Smith Goes To Washington" and "aw shucks, I just wanna talk to my representative" is both misdirected and sinister. The CAI, and all its components have one goal and one goal only, keep the "HOA Gravy Train" on schedule.
Robert Metcalf
Chadds Ford, PA
Evan McKenzie wrote:
"This led to another mini-debate over whether CAI is responsible for the spread of CIDs. The fact is that government, not CAI, has been the major promoter of CID housing. The FHA and other federal agencies promoted HOAs from the early 1960s on, and now municipalities, in conjunction with developers, are driving the spread of private governments."
Of course you know and wrote about a key figure in your book "Privatopia" who played a seminal role in the FHA's actions -- the CAI's late co-founder, Byron Hanke. The origins of the policy nexus couldn't be clearer.
The people who promote CIDs are the same people who benefit from them. Along with the local governments, the CAI and its constituency are major benefactors of the spread of CIDs, so to expect them to act in any other capacity simply defies logic.
In the end, it's about money. Nothing else.
Robert Metcalf
Chadds Ford, PA
Attributing the spread of community associations to CAI misses the point, which is that things are nowhere near that simple. Maybe it would be nice if they were.
CAI speaks favorably of community association life and does other things to advocate on its behalf. That advocacy contributes to some extent to the spread of CIDs. But what would you expect them to do, given that most of their members work for associations?
What CAI does in the policy arena is mainly focused on the micro-politics of community association living. They are concerned about how associations operate, as you would expect. CAI wants to minimize government regulation of association activities. Again, that is to be expected--I'm sure the dry cleaning lobby opposes most government regulation of dry cleaning. Ranting at CAI because they do this is like being angry at the trees that drop leaves on your lawn in October. There is only one way to deal with this in a free society, and that is to organize and make your own position heard, which many people are doing quite effectively now.
The fact is that structural forces in this society, not CAI, are at the root of the rapid spread of HOAs and condominiums. Developers want to increase residential density because of (a) the high cost of land, and (b) the obvious fact that more homes and narrower private streets on the same plot of land produce more profit. Community associations allow them to make high density more marketable (common areas with amenities, private streets, etc).
The Urban Land Institute, far more than CAI, teaches developers how to create these planned communities. But ULI is simply showing them how to develop in an environment of high land costs, cash-strapped municipalities, and an aging and crime-fearing population where many people look for a managed and even gated neighborhood.
Cities want the double taxation windfall, so they create PUD zoning that mandates or heavily prefers HOAs.
And some unknown percentage of buyers choose HOAs for their own reasons (security, fanatical property maintenance standards, control over others, etc.), although I think the majority of buyers don't think about that at all, or have no non-HOA options anyway.
And remember that the federal government and a host of semi-public mortgage insurance agencies and companies (FHA, Fannie Mae, VA, etc.) have been promoting HOAs since long before CAI was invented in 1973. Their activity dwarfs anything CAI ever did.
Sorry to throw cold water on the conspiracy theory, but the fact is that if CAI went away tomorrow, there would be just as many HOAs built next year as if they were still around.
If you want more choice in the housing market, focus on your local governments, because they are the ones who issue the building permits. Somehow they always seem to get off the hook. But expect them to come back at you by saying that nobody wants to pay property tax but everybody wants more services. They will ask you how you expect them to meet those twin expectations except by using the land use approval process as a fiscal tool to raise money?
To Professor McKenize:
I don't think that anyone is attributing the spread of CIDs solely to the CAI, all one has to do is read your book to understand that. What I do think should be attributed to the CAI, however, is operating under a false pretense. The face that they put on their operation is simply a lie. Do you really think that the CAI membership cares one bit about the actual people that live in HOAs? I can tell you from my experience of serving on the board of my HOA that there is a clear and distinct delineation between the association and the actual human beings that inhabit it. A board member's "fiduciary responsibility" is to the HOA, not the residents, and the CAI is there to reinforced that continuously. Furthermore, at every turn they attempt to stifle, usually with great success, any and all efforts that allow power to pass from the HOA back to the residents. Why?
I also disagree with your assessment that the CAI's main focus concerns the micro-politics of life within an HOA. From what I can see the main focus of the CAI is to maintain control of the relevant laws at the state level. All one has to do is to look at the purposely convoluted and tortured nature of these statutes to realize that the intention is to produce an endless stream of ambiguities that can be cashed in at a later date, via the HOA Gravy Train.
I do agree that the driving force behind all of this is money. Period. A free-market economy's greatest strength and weakness is the ability for the players to leverage every possible situation to their advantage, and do it without apology. If it's particularly egregious, society will ultimately put a stop to it, but not before a large amount of damage has been done to the victims of same. Unlike the early incarnations of associations that were created by joint agreement amongst the parties involved, the modern version is far more disingenuous in its construction and execution.
The courts allowing "constructive notice" to serve as sufficient disclosure is nothing short of a disgrace, and that in combination with a home seller not being required to even supply the HOA's documents until he or she sits down at the settlement table with the buyer leads to disillusionment, unhappiness, and ultimately all the horrific incidents that one reads about day long involving CIDs. I believe your statement that the "CAI wants to minimize government regulation of association activities" downplays what, in my view is a far more nefarious motive, namely, maintaining control of the law through legalized bribery at the state and local level in an effort to keep the public at large ignorant of just big the "Sword of Damocles" is that hangs over their heads once they purchase a covenant controlled property.
The "Twin Rivers" decision reveals just how arbitrary the law is with regard to CIDs. The fact that an appellant court and a supreme court could arrive at such diametrically opposed conclusions on serves to demonstrate that any attempt to deal with this problem through normal legal means is at best a crap shoot and at worst a testament to the failure of using "precedent" as valid reasoning from which to draw a conclusion.
If "privatization" is what the future holds in this increasingly "corprotized" world, I fear that the very foundations on which a true democracy is built will fossilize and become the bones that political and social scientists will point to as the historical past. The propagation of HOAs and their even more invasive cousin, the "New Town", paint the picture of a grim future, where "rights" have been diminished into cheap imitations that serve only to amuse the powerbrokers and pacify the ordinaries.
The very idea that a person's life can be lived under the heavy hand of the "Business Judgment Rule" in a fashion that in any way resembles what true citizenship provides is defective at its core. For the ULI, FHA, CAI, or any other organization or individual to state otherwise is both an insult to one's intelligence and a disservice to the basic principles of representative government we were all taught in grade school.
The fact that government at all levels promotes HOAs in no way diminishes the CAI's responsibility for their reprehensible behavior. The simple truth that someone can lose their house or be saddled with "reasonable" attorney fees that can run into six figures over such trivial things as parking their car in the wrong spot, demonstrates the absolute amorality of the people who author the laws that permit it, PACs funded by members of the CAI.
Finally, assuming that "if the CAI went away tomorrow, there would be just as many HOAs built next year as if they were still around" is a true statement, which I agree it is, the one thing that would be missing is their laughably transparent propaganda which the various service providers use to their advantage in manipulating BODs.
Robert Metcalf
Chadds Ford, PA
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