By Deborah Goonan, Independent American Communities
Just how many Association-Governed Residential Communities are there in the US? Does anyone really know the answer? Or are statistics published by trade group Community Associations Institute (CAI) just rough estimates?
These are the question consumer/homeowner advocates are trying to answer. After all, it’s difficult to rein in corruption and abuse in a largely unregulated 70 billion dollar industry if we cannot even identify each and every Common Interest Community Association that exists.
For example, a recent article published in the Chicago Tribune highlights conflicting data with regard to the number of Associations that exist in the state of Illinois.
New Illinois Condominium & HOA Report Reveals 50,000 Associations
“The state of Illinois currently has more than 50,000 active condominium and homeowner associations containing nearly 600,000 residential units, new comprehensive research by Association Evaluation, LLC has revealed. The Community Associations Institute, a respected national organization, lists a total of 18,250 condominium and HOAs in Illinois as of 2015.” Our research team was surprised to learn that thousands of condominium and HOA associations were uncounted in Illinois,” said Sara Benson, president of Association Evaluation, LLC, a Chicago-based real estate data-analysis firm…Association Evaluation is marketing its condominium and HOA data to condo service providers such as attorneys, property management companies, landscapers, and remodeling and repair tradesmen including roofers, plumbers and contractors.”
Sara Benson and her team at Association Evaluation began delving into the matter as they embarked on market research for her company’s service offered to real estate investors, finance companies, and home buyers: examining key characteristics and financial data of homeowners’, condominium, and cooperative associations, and using a data driven algorithm to assign the equivalent of a credit score to each association.
Working with clients, it became apparent that many Associations – especially small or self-managed Associations that are not registered with the state – were not included in CAI’s estimates for Illinois. So Benson and her research team conducted their own comprehensive review, and are now releasing details of their findings.
Evan McKenzie, noted University of Illinois Chicago professor, attorney, and author of two books and numerous white papers on Association Governed Residential Communities (generically known as HOAs), posted the following comments regarding this Chicago Tribune article: (my emphasis added)
CAI’s estimates have been used by just about everybody because the Census Bureau can’t be bothered asking questions about this, and most state and local governments are happy to just let CIDs proliferate without much oversight, even to the point of not keeping track of how many there are. Sara and her organization have a different methodology than CAI uses, and they came up with a much higher number. I don’t know which is more accurate at this point, although of course I want to find out. I’m not clear on the methodology Sara’s organization is using, and the Trib article doesn’t explain it very well: “The data was gathered from physical reviews and Google rooftop checks of thousands of condo and HOA properties, and an analysis of the Secretary of State records.” You have to be careful with Secretary of State searches because they lump all corporations and LLCs together and you have to decide which is an HOA or condo association. Often it is clear, sometimes it is not (see for yourself).
I also don’t see any motivation for CAI to understate the numbers. But it does lead me to wonder–if it is true that CAI’s numbers for Illinois are low, then are their numbers for other states and their national numbers also understated? For example, in their latest Statistical Review. CAI says there are 333,600 associations nationwide, with 26.7 million units of housing and 66.7 million people. Sara says that CAI’s Illinois numbers are way low. CAI finds 18,250 association and Sara says there are 270% more than that. So they claim that CAI only found 36.5% of the association in the state. That is an enormous difference in estimates–if you extrapolate from the claims about Illinois, then do we have close to one million associations in this country? To be continued.
One point is that very few states have a legal requirement for all Associations to register. Those that do rely on the honor system for each Owners’ Association to self-report. How reliable is that?
Some self-reported HOAs are completely bogus — they don’t legally exist anymore due to expiration of the CC&Rs. Some Associations never did legally exist because the proper procedure was not followed when the subdivision or community was first established. Other Associations just don’t bother to register or file IRS tax returns, so they remain invisible to CAI, State and Federal Legislators.
A second point is that there are a significant number of people who own property with mandatory membership in more than one association simultaneously. This is common in large master planned communities, where an owner might be part of a condo association plus the Master HOA. How does that get counted by CAI?
Both points, and the fact that the Census Bureau doesn’t track Associations and their demographics, make it impossible to create a representative sample for any of CAI’s self-funded satisfaction surveys. So when CAI touts that the vast majority of residents appear to be satisfied with their homeowners’ or condo association experience, remember that conclusion is based upon a questionable sample of survey respondents that simply volunteered to participate.
The truth is, no organization can gather a representative sample of HOA residents, because reliable demographic data simply does not exist.
As far as the US and state governments are concerned, there is no constituent group for residents of Association-Governed Residential Communities, even though millions of Americans belong to that group.
As long as the US Census fails to track the existence of Association-Governed Residential Communities, the federal government is also unable to track their relative financial health, and their impact on the housing market and US economy, for better or worse.
Without reliable demographic data, there is no way to track the crime rate in these housing communities, large or small. Nor is there any way to determine the rate and monetary impact of construction defect claims. This is despite the growing epidemic of white-collar crime and large-scale class action settlements involving shoddy construction all across the nation.
In short, if Association residents remain invisible, so do all their problems.
Come to think of it, perhaps that’s the reason no one – except CAI, the trade group representing industry that sells its product and services to the public – bothers to keep track.
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