What can be done about HOA dysfunction?

By Deborah Goonan, Independent American Communities

Beyond all the gripes and complaints, what are the solutions to HOA dysfunction?

Finally, concerned readers are starting to discuss possible solutions to HOA dysfunction, including alternative housing models.

When I first began participating in HOA discussion forums, most of the conversations were either an exercise in self-promotion, gripe sessions, or downright adversarial exchange. None of it was productive conversation.

A few years ago, the only news reports about HOAs, condominiums, and cooperatives were either press releases (advertising) or “horror” stories about displays of the American flag, holiday decorations, or houses painted blue.

These days, the media is paying attention to more important issues such as theft and embezzlement, fraud, crime and blight in failing associations, fair housing violations and discrimination, HOA foreclosures, and more.

But now the discussion has reached the next level. What can be done about HOA dysfunction?

As more consumers request “No HOA, please!” Or seek to put an end to their HOAs,  the question becomes, where and what are the alternatives?

Several readers have asked me these questions over the past few months. Many have offered concrete ideas and suggestions on private forums.

The following list combines many good ideas discussed with knowledgeable readers. See what you think about it.

Feel free to add your ideas and suggestions in the comment section below.

Repeal and outlaw the power of the Association to fine or otherwise penalize association members.

Require the Association to resolve disputes or enforce governing documents by filing complaints with the appropriate judiciary court or mediation board. Allow a truly neutral third party to decide on the resolution. Remember, this was the process before management companies and HOA attorneys lobbied for the HOA’s right to fine and otherwise penalize members via the Association’s internal kangaroo court. In other words, bring back true due process and separation of powers.

End local government mandates for common interest development and HOAs.

Require that at least half of all new construction be fee simple with NO common interest, and no HOA, and that local governments build a diverse array of housing sizes and types to match local demand. (For example modest ranch or Cape Cod or bungalow style houses on manageable lots OR separately owned row houses that do not share facades and roof lines.) This may require local governments to rewrite their land use and development regulations and requirements, potentially reducing construction costs in the long run.

Create an expiration date for all HOAs – so that they cannot be perpetual.

If homeowners want to renew the mandatory HOA, they must vote unanimously to do so. Otherwise, participation becomes voluntary, and the association becomes more like a civic group or a social club.

Abolish developer control of common interest communities – restore private property rights of homeowners for their own units and parcels.

Create an owner-resident controlled co-op to manage common property or a membership club to manage common recreational amenities. Homeowners should not have to subsidize the developer’s investment risks, especially since they cannot share in any future profits. And they should have the right to use and maintain their private property with the least possible restriction.

Phase out private association funding of construction, maintenance and management of “public works” infrastructure.

Untrained, uneducated volunteers have no clue about what is necessary and developers have inherent conflicts of interest. (Private roads, storm water management, water and sewer utilities, etc.) Most homeowners discover that long term infrastructure costs are unaffordable – especially in small associations. Spread out the cost in the public sector to achieve economies of scale. This could include establishment of special tax districts, phased-in annexation to a nearby municipality, or, for very large scale communities, incorporation as a city, dissolving the mandatory HOA.

Curb speculation and investor ownership of housing–set limits on the number of units or percentage of association interests any one person or entity can own.

Also…limit foreign (non-citizen) investment. Too much investment and speculation artificially inflates prices, makes homeownership unaffordable for remaining home buyers, and increases the risk of hostile takeovers of mandatory associations.

Police, fire, and emergency services need to be fully integrated within all communities, and forget about private security guards and gated entries.

Private security guards, especially armed guards, are simply a bad idea. Gated entries offer little – if any – additional security, are costly to staff or maintain, and only serve to divide HOAs from the community at large.

All CC&Rs and ByLaws should be subject to state review and Constitutional laws (for residential housing) prior to being adopted and filed.

Right now these documents serve as community “constitutions,” but they are written to benefit developers and/or are often misused to get around Fair Housing laws.

Separate recreational amenities from property deeds.

For new development, either manage these by public tax districts or allow for purchase by private commercial investors who will sell private memberships. Existing communities all over the U.S. currently struggle with how to dispose of or redevelop underused amenities.

Some practical solutions and alternatives for developer-built “modern” condominium and cooperative associations

Some people are comfortable with living in a multifamily setting. Residents of heavily populated urban areas often have no other alternative.

Solving or preventing chaos or adversity in common interest development in the form of condos or co-ops is very challenging. But here are some thoughts to consider.

Owners-shareholders need simple, explicit disclosure that lets them know it is a collective arrangement where all share in costs and liabilities.

Too often, associations members do not understand or even buy into this very basic concept of common interest housing. In general, however, most condominium associations will probably struggle financially unless units are owned by fairly affluent people who can afford maintenance and improvement costs as they escalate over time.

To maximize the chances for social cohesion, communities should be kept small – perhaps less than 50 units.

And if you’re sharing costs for living space, it only makes sense that you should know your co-owners or co-investors before they purchase and become members of the Association. Cooperatives already pre-screen new residents, but condominium associations rarely do. The big challenge here is how to pre-screen new buyers for a good fit, without engaging in housing discrimination.

Do away with the strict management hierarchy that dominates over remaining members.

Co-owners, shareholders should be free to work directly with all of their neighbors on shared projects, rather than allowing a small group of their neighbors on the board make all the decisions with little or no input. And members should not be forced by law to allow a developer or – after turnover, opt to allow a community manager or attorney – to call all the shots.

Owners need to take a much more active role in making financial decisions, rather than acting as silent investors. For example, some co-ops manage by consensus and without a Board of Directors. The model does require a high level of participation and commitment.

Another possible solution would be to require that each owner take turns serving on a board or on various work committees. In this way, everyone plays a role in the decision-making process, and no one clique becomes entrenched, entitled, or corrupted.

Planners and developers need to decide on a single use for multifamily housing.

Will the condominium or cooperative be built for owner-occupants or for other purposes such as seasonal housing, vacation housing, or real estate investment?

The key is to have one clearly-defined land use plan, and then govern and manage accordingly. An owner-occupied condo association is more of a shared housing arrangement, as opposed to second homes or resort properties where ownership is more of a business relationship. Different, laws, rules, and tax policies should apply, according to the designated type of property ownership.

The common theme in these proposals to end HOA dysfunction:

Consumer-focused housing policies that reduce financial costs, risks and liabilities for owners, shareholders, and residents, while also upholding equal rights of individuals.