What do we know about Large Scale Associations?

By Deborah Goonan, Independent American Communities

 

Do you live in a Large Scale Association (LSA) or know someone who does? Community Associations Institute defines a Large Scale Association as a “community providing municipal type services with a minimum of 1,000 units or minimum of 1,000 acres and a minimum of $2 million operating budget,” and estimates there are 6000-9000 LSAs in the U.S.

Think Active Adult communities, Master Planned communities, and small town sized subdivisions constructed in multiple phases.

 

Recently, CAI’s Large Scale Managers’ Committee conducted a survey of LSAs in conjunction with market research company MOSAK that may shed some light on LSAs as one particular type of Association Governed Housing.

 

The most important page of the 156-page report is the last page, which describes survey methodology.

Here’s what appears as the very last paragraph of the report:

STATISTICAL VALIDITY

•The survey did not achieve a large enough sample size to be statistically valid at a 95% level of confidence with a 5% margin of error. The sample sizes for Age Restricted, Private Club, and Mixed use were particularly low. Results should only be considered directional and not truly representative of the population as a whole.

 

Additionally, according to the report, this was an online survey sent to 400 Community Association Managers in the U.S. Between October and December 2015, there were 149 responses, and of those responses, 94 completed the survey, while 55 only completed a portion of the survey.

It’s critical to note that the survey is not statistically valid, because the sample size was too small to draw valid conclusions. Therefore, anything reported in the survey – or CAI news releases that cite statistics from the same report – may not be representative of reality.

 

It’s key to remember that the survey was provided to LSA managers, not its residents. 

With that fact in mind, take a look at CAI’s recent news release.

LARGE-SCALE COMMUNITY ASSOCIATIONS REMAIN POPULAR WITH HOMEOWNERS AND LOCAL GOVERNMENTS

https://www.caionline.org/PressReleases/Pages/LargeScaleAssociationsSurvey.aspx

Interesting. The title insinuates high homeowner satisfaction in LSAs. However, in addition to a lack of survey validity from a small sample, we also know that the CAI survey asked Association Managers to report overall satisfaction of their residents, apparently based on surveys conducted by the LSAs they manage. We also note from the report (page 69) that only 65 managers responded to the question on how their LSA rated “overall satisfaction” from surveys.

Does that mean 84 LSA managers did not have access to a recent resident satisfaction survey? If there was a survey, was the data was too unfavorable to report?  Asking LSA managers to report on resident satisfaction is, at best, second-hand information. And, of course, the reader has no way of knowing whether the satisfaction survey of LSA residents was valid or reliable.

It’s not surprising then, that satisfaction rates as reported on the MOSAK LSA survey vary widely, ranging from 72.7% (Private Clubs) to 100% (Age Restricted) . But the results themselves are meaningless when put into context. And you’ll note that actual statistics from page 69 of the LSA survey report are not called out in the press release.

 

5 types of LSAs

The survey classified LSAs by 5 types, as defined on page 12 of the report. Of the 149 survey respondents, the committee reports the breakdown of respondents by type of LSA as follows:

• Residential 44.3%
• Age Restricted 14.1%
• Resort/Residential 26.8%
• Private Club 9.4%
• Mixed Use 5.4%

Since Residential and Resort/Residential LSAs had the largest response rate, I’ll highlight some of those survey results below, with full knowledge that the results are merely “directional.”

 

Common disputes in LSAs

One interesting tidbit appears on page 37. LSA managers ranked the most common areas of dispute in their communities. Here’s a partial breakdown. And, once again, we see that pets and parking are not at the top of the list.

Residential LSA

1. Architectural review standards
2. Rules regarding maintenance of facilities/property

Resort/Residential LSA

1. Rules regarding maintenance of facilities/property
2. Architectural review standards

 

Participation of members in Association meetings

On page 33, check out the percentage of members that do not participate in annual meetings (not even with a proxy vote), according to the LSA managers:

Residential LSA 72.5%

Resort/Residential LSA 65%

 

These results are the polar opposite of statistics reported for CAI satisfaction surveys completed by 700-800 community association residents in 2012, 2014, and 2016. According to those reports, 69 – 72% report having attended a board meeting for their Associations.

If past CAI survey results are valid, then wouldn’t you expect a much higher participation rate in LSA annual meetings?

 

See more highlights in Table 1:

 

Survey highlights

Of the LSA managers that responded, it was surprising to learn (on page 35) that 42-50% monitor voting internally, rather than through a neutral third party.

Jumping ahead to pages 40-42, a relatively high percentage (53 – 70% range) report that LSA board members, managers, and even some residents attend local government meetings. However, among the limited sample surveyed, the managers also report that quite a few LSA Residents serve their local government as elected or appointed officials, or serve on a committee or task force (39-57%). Board member participation levels (elected/appointed/committee/task force) range from 10-38%.

On page 75, we can see that private security is very common (not surprising) in LSAs. But what’s noteworthy is that a significant percentage of private security staff have the authority to issue citations (52-77%) and to detain offenders (23-26%).

On page 94, we begin to get a glimpse into the financial health of LSAs. A surprising 76-79% of LSA managers reported that their Associations have an Operating Budget surplus at year’s end, yet only 38-49% fully fund their reserve accounts. (page 106)

On pages 107-108, note that a significant minority of LSAs report that they carry short-term debt (9.5-11.6%) and long-term debt (16.3-28.6%). Resort/Residential LSAs report carrying higher average Average debt ($2.3 million) vs. Residential LSAs ($1.6 million).

On page 110, we learn that less than half of the LSAs surveyed make use of professional management companies and third party contractors. Most LSAs hire in-house staff.

However, on page 122, we see that nearly all of top executives of LSAs are members of CAI, as well as about half to three-quarters of senior staff members of the Associations reporting. On the other hand, Board members are less likely to be members of CAI (38-48%).

On page 125, not surprisingly, LSA managers almost unanimously report regular use of Association attorneys. CAI member attorneys represent 78% of Residential LSAs, but only 57% of Resort/Residential LSAs.

 

Overall impressions

The LSA Survey report paints a very limited picture of large HOA communities that enjoy rather cozy relationships with local government. Reading between the lines, political influence seems to be split between real estate developers, resident/politicians, and CAI. But with at least 6000 LSAs across the country, CAI should be able to obtain a much larger and more representative response rate. And the reader has to wonder, how did CAI compile its original list of 400 survey recipients? That part of the methodology is unexplained.