By Deborah Goonan, Independent American Communities
There’s been a great deal of talk about repairing infrastructure by the incoming Trump Administration, as well as Democrats in Congress. There’s no question that roads, bridges, and dams across the U.S. are in dire need of maintenance and repair.
But Federal tax dollars rarely make their way to small towns and rural counties. And they certainly don’t trickle down to private, planned communities.
When many thousands of planned subdivisions were originally approved by local government planning commissions, developers were required to establish homeowners or property owners associations (HOAs or POAs) to fund future maintenance and repair of privately-owned dams and roads.
For local governments, when it comes to HOA infrastructure, the prevailing attitude is, “It’s not our problem!” Never mind that they were enablers of economically unsustainable housing development. After all, no one has ever evaluated how much it would actually cost homeowners to adequately fund major infrastructure projects within their private housing enclaves. But, then again, government rarely does a good job of estimating the economic impact of any of its own capital improvements on future taxpayers.
While a municipal or county government has access to alternate funding sources – proerty taxes, various grants, sale of bonds, government loans, sales and consumption taxes, to name a few – HOAs have a sole source of funding: assessments collected from property owners. While some banks now offer loans to HOAs, not all communities meet lender qualifications, and those that do tend to pay high interest rates. That only increases the financial burden for homeowners. And since most HOAs tend to have a relatively small population compared to municipalities, cost per property owner tends to be relatively more expensive. The smaller the HOA community, the bigger the financial burden per housing unit.
Generally, FEMA (Federal Emergency Management Agency) won’t provide grants to private Association-Governed communities. (See more about why that’s the case here.) So if an Association lacks appropriate insurance, and has insufficient funds in reserve, homeowners and residents are left to deal with inconvenience, potential threats to health and safety, and signficant unexpected financial obligations.
Owners of about 40 homes in Sunset Beach, North Carolina, have recently discovered the downside of living in a self-contained community with private roads, after Hurricane Matthew took out a spillway, dam, and entry road to their small subdivision. Estimated minimum costs for a full repair: about $4,500 per property. Ouch. See video report below to get a sense of just how bad it is.
These reports are becoming more common. I’ll continue to share future reports here on IAC.
COMMUNITY STRUGGLING TO RAISE FUNDS FOR ROAD REPAIRS AFTER DAMAGE FROM HURRICANE MATTHEW
By Taylor Yakowneko
SUNSET BEACH, NC (WWAY) — For some people in Sunset Beach just leaving the house has become a challenge.
“On October 8th when the hurricane come through, where we already had leaks underneath the spillway everything collapsed, water went around it, now it’s not going into the pipes as it should,” said one resident, Lee Gushman.
Dozens of families have to use an alternate route to and from their homes.
“We have to enter and exit to our homes through The Pearl golf course. And they’ve been really nice and we’re so thankful to Dr. Williamson for what he’s done in allowing us to enter his property just so we can get to and from, but the roads are not good,” said Gushman.
Safety is a serious concern.
“Our kids have to pass this for the school bus,” said Gushman.
Read more (VIDEO):
2 thoughts on “NC HOA cannot afford to repair unsafe entry road”
While I agree with you on the need for adequate reserves, I disagree that this situation is equivalent to an apartment complex.
A traditional rental community is a for-profit business. One owner’s entity is reponsible for operation and maintenance. The landlord can deduct maintenance expenses from taxes on business revenue.
An Association cannot do that. They are mostly classified as nonprofit corporations.
Also, if the landlord fails to maintain the premises, tenants will choose to rent elsewhere or will not pay market rate rents.
No such disincentive exists for homeowers and condo associations. HOA, COA Members are compelled to pay assessments, regardless of their relative satisfaction with services. If they are dissatified, they can only sue the association, if they have the financial means and access to justice.
And Associations have the additional burden of attempting to collect assessments from multiple owners vs. managing tenants.
In many cases, HOAs serve the purpose of substitute or limited purpose local governments, not property owning landlords leasing to tenants.
This is really not different than an apartment complex. Typically the access roads and the parking lot are owned by the apartment owners. Somehow they have funds to repair when needed. I think it’s mostly the HOA’s that don’t want to keep sufficient reserves for these types of situations. In my HOA, I am a vocal proponent of raising the dues as needed to keep the reserves up. Many other residents applaud the HOA board when they announce at the annual meeting there will be no dues increase of the coming year, even though water, sewer and taxes go up each year and eat into the budget (either operating or reserve). That is very short-sighted.
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