Political influence of real estate developers: the heart of the HOA beast

By Deborah Goonan, Independent American Communities

 

Real estate developers figured out a long time ago how to exert political influence over government officials and housing policy makers, from the local to the federal levels.

For the past three years, IAC has provided more than 1,000 posts citing thousands of references to prove a point:

The U.S. housing market is not determined by public need or consumer demand, but instead is heavily influenced by interested stakeholders, among them real estate developers and the finance, sales, legal, and management indsutries that exists to support billions of dollars in residential community development.

Government at all levels serves as the gatekeeper to new residential development, as well as redevelopment of blighted neighborhoods.

When governments work in the public interest, they make responsible decisions about the kinds of development to support and how to finance growth and economic development.

When governments don’t represent the interests of the general public, they enact policies that fail to serve the greater good.

For decades, housing consumers and concerned American voters have been largely unaware of the pervasive, sometimes toxic, influence of real estate developers and home builders.

But that’s changing as investigative journalists and consumer protection advocates expose the truth, in a new age of internet-based television and social media.

Free speech is still alive in the U.S., and a diverse array of advocacy efforts contribute to wider public awareness of the financial, social, and political dysfunction of association-governed, common interest communities.

Millions of Americans are learning first hand of the injustices inherent in so-called “contractual communities” that have been designed by and for the benefit of developers. Unfortunately, misguided or self-interested politicians and ineffective regulatory agencies enable the abuse and social upheaval to continue.

Townhouses new construction (Pixabay.com free image)

Let’s connect some dots by examining several sources of information that illustrate why real estate developers are truly the heart of the HOA beast.

 

First, take a look at the largest home builder trade group in the U.S., National Association of Home Builders. NAHB represents the interests of small to medium sized home builders and construction companies. (The interests of large national and international developers — the ones responsible for mass production of homes — are represented by Urban Land Institute.)

Who Are NAHB’s Builder Members?

BY CARMEL FORD on MAY 8, 2017 •

Every year the National Association of Home Builders (NAHB) conducts a member census in order to better understand the composition and characteristics of the people who belong to its organization. In 2016, 32 percent of NAHB’s members were builders—those directly involved in home building. The remaining 68 percent were associate members—those involved in support industries and professions, such as trade contractors, manufacturers, retailers/distributors, designers, and architects.

Sixty percent of builder members are single-family builders (spec/tract, custom, or general contracting), 23 percent are residential remodelers, 6 percent are commercial builders, 5 percent are multifamily builders, and 4 percent are land developers. One percent each are commercial remodelers and manufacturers of modular/panelized/log homes.

Company Details

NAHB’s builder members reported that they had a median of 5 employees on payroll in 2016. Fourteen percent had 1 employee, 31 percent 2 to 4 employees, 24 percent had 5 to 9, 24 percent had 10 to 49, and 4 percent had 50 or more paid employees. Three percent had no employees on payroll.

Read more:

http://eyeonhousing.org/2017/05/who-are-nahbs-builder-members-3/?utm_source=Facebook&utm_medium=Social&utm_campaign=Social2017

 

Many NAHB members build tract homes or provide construction work for major developers. Others build custom homes.

The goal of the trade group, not surprisingly, is to generate more business for their industry. Of course, there’s nothing wrong with businesses wanting to earn higher profits, provided that the industry fulfills genuine consumer needs and demands in a competitive environment.

However, well-organized trade groups, by their very nature, tend to pressure policy makers into enacting laws and administrative rules that fit their members’ agenda, without necessarily benefitting consumers. In some cases, trade group agendas harm consumers and the public at large.

So it’s important for concerned voters and housing advocates to understand the agenda of NAHB. The following news release lists eight Congressional leaders — four Republicans and four Democrats — targeted for lobbying efforts at the federal level.

As the reader can see, NAHB seeks to ensure an easy money supply for new construction, and prefers to ease regulations that might hinder production.

 

NAHB Leaders Call on Congress to Adopt a Strong Housing Agenda

Filed in Capitol Hill, Leadership on March 15, 2018

NAHB Chairman Randy Noel and First Vice Chairman Greg Ugalde conducted two days of meetings this week with Republican and Democratic leaders on Capitol Hill to urge lawmakers to keep housing in the forefront of the national agenda.

The NAHB Senior Officers reiterated the importance of housing and homeownership to the economy and stressed that a vibrant housing market is necessary in order to maintain robust job and economic growth.

Discussions were held with several influential lawmakers from both sides of the political aisle, including:

Senate Majority Leader Mitch McConnell (R-Ky.)
Sen. Chris Van Hollen (D-Md.), chairman of the Democratic Senatorial Campaign Committee
Sen. Bill Cassidy (R-La.)
Sen. Chris Murphy (D-Conn.);
House Majority Whip Steve Scalise (R-La.)
Senate Minority Whip Steny Hoyer (D-Md.)
Rep. Steve Stivers (R-Ohio), chairman of the National Republican Congressional Committee
Rep. Ben Ray Lujan (D-N.M.), chairman of the Democratic Congressional Campaign Committee

Talks centered on the need to enact policies that would:

Provide a stable and affordable supply of credit for home buyers, home builders and rental housing.

Reduce or eliminate unnecessary regulations to make homeownership and rental housing more affordable for teachers, firefighters, police officers and other middle-class families.

Adopt sensible workforce development and immigration policy that will help the residential construction industry to fill open jobs and boost the nation’s economy.

Achieve a long-term reauthorization of the National Flood Insurance Program that will keep the program fiscally sound and let builders provide safe and affordable housing.

Read more:

http://nahbnow.com/2018/03/nahb-leaders-call-on-congress-to-adopt-a-strong-housing-agenda/?utm_source=Social&utm_medium=Facebook&utm_campaign=Social2018

 

Reading between the lines, NAHB favors:

relaxing mortgage standards for buyers who might not otherwise qualify for financing, creating housing that is affordable to purchase, but usually not affordable to own,

allow the maximum density of construction of new homes on cheap land, even if that land is located in a flood plain, near a watershed, or the site of a former garbage dump,

making it easy to hire foreign born, undocumented subcontractors (by not requiring E-Verify), some of whom may lack skills and training to build safe, high quality homes and community infrastructure, (See screenshot below)

continuing to provide flood insurance for homes and properties with a history of repeated flooding, subsidizing flood insurance premiums with taxpayer dollars, if necessary.

 

Source: https://www.nahb.org/en/research/nahb-priorities/labor-shortage.aspx

 

To further their political agenda, NAHB has produced a 3-minute video instructing its members how to lobby their Congressional representatives in their home states. You can read the 6 tips here, and view the video at this link:

https://www.nahb.org/advocate/bringing-housing-home

Local politics drive local housing development

Now that you are familiar with NAHB’s agenda, let’s take a look at local politics and weak regulation of the real estate industry, and its effects — for better or for worse — on residents and taxpayers.

 

Birnam Woods covenant enforcement sought by residents

BY JAMES COBURN THE EDMOND SUN 18 hrs ago

Amid the consternation of homeowners, the Edmond City Council approved the final residential plat Monday for Birnam Woods Section 3. Residents representing the first two phases of development were displeased with promises they said were made concerning the development’s club house and pool.

The vote was 4-0 to approve the final residential plat. This 1.3-acre plat is located south of Covell Road, 285 feet west of Bryant, said Kristi McCone, a planner with the planning department.

Section 3 plat consists of five residential lots and two common area lots, each of them at 6,598 square feet. The lot sizes exceed the minimum requirement. The final plat differentiates from the preliminary plat by creating common lots. Seven residential lots instead of two lots were approved by the city council.

At issue is the club house and pool of which residents of the first two phases of development stipulate must be indicated on the plat, said Birnam Woods resident Marsha Gore. But the council has no legal jurisdiction over enforcing neighborhood covenants, said Charles Lamb, mayor.

Read more:

http://www.edmondsun.com/news/birnam-woods-covenant-enforcement-sought-by-residents/article_e60a608a-2975-11e8-9508-5f4aaea5407d.html

 

In this Oklahoma subdivision, homeowners have been promised a club house and pool, neither of which has ever been built. But the only way to fight for their consumer rights is to join together to sue the deep-pocketed developer in civil court.

Although City Council could have exerted some pressure on the developer and  home builder by delaying a permit to build even more homes in Birnam Woods or elsewhere in Edmond, the council has elected to stay out of the fray and ignore the concerns of taxpaying homeowners.

 

$100 bills (pixabay.com free image)
Oxberry pays HOA dues to get neighborhood support for luxury retail project

By Paul Takahashi Updated 1:51 pm, Friday, March 16, 2018

Oxberry Group compensated nearly 200 residents in a deed-restricted neighborhood to approve plans for a high-end shopping center in the Tanglewood area.

The Houston developer donated $100,000 to the Briarcroft community association and paid one year’s worth of HOA dues — about $625 per household — to any Briarcroft homeowner who voted in favor of its Shops at Tanglewood project. It also held neighborhood meetings, sent informational mailers and knocked on doors to get signatures.

Sean Jamea, an Oxberry co-principal and an attorney, said there’s “nothing wrong” with swaying votes in this manner.

“It’s been happening in Florida for decades,” he said. “There’s absolutely nothing wrong with it. We wanted the Briarcroft neighborhood to prosper with us as we build this shopping center.”

Read more:

https://www.mysanantonio.com/business/article/Oxberry-pays-HOA-dues-to-get-neighborhood-support-12757202.php

 

In this case, a Houston developer decided to pay one HOA’s dues for an entire year, effectively buying their approval of a potentially controversial commercial shopping center.

Of course, the decision to accept the $100,000 “donation” was made by the HOA board, not necessarily with the approval of its voting members.

The developer’s goal is to obtain citizen buy-in for his project, and to prevent homeowners from protesting his proposed commercial development at future City Council meetings.

 

And finally, for a breath of fresh air…

 

Developer tries to sell Lady Lake Commission on idea of smaller lots for family subdivision

By Meta Minton – March 6, 2018

A developer made a second pitch to the Lady Lake Commission on the idea of smaller lot sizes for a family subdivision on Lake Ella Road.

It was strike two.

Bob Holston of Holston Properties and Development LLC presented on Monday night his revised plan for Lake Ella Estates.

A representative for Holston made an unsuccessful pitch for the subdivision in December.

Holston’s revised plan trims the subdivision down to 265 units from 279. It provides slightly larger lot sizes for the homes.

But his pitch didn’t capture the imaginations of some commissioners.

Commissioner Tony Holden said a homeowners association at the development likely wouldn’t have any teeth.

He spoke of the HOA in the 53-unit development in which he lives, and serves on the board.

“The only power you have is to put a lien on the property. They’ll be parking everything they own on wheels in the front yard,” Holden said.

He added that in close quarters, barking dogs can fray neighbors’ nerves and the HOA is powerless to effectively regulate anything.

Commissioner Dan Vincent, a resident of Water Oak, shared his own HOA woes.

He said that of the 1,100 occupied homes at Water Oak, “less than 300 pay dues.”

Mayor Jim Richards, a retired engineer, voiced concerns about drainage at the development.

Commissioner Paul Hannan, absent Monday, sent word ahead of the meeting indicating his concern about more cars on Lake Ella Road feeding into the heavy traffic on Rolling Acres Road.

Read more:

https://villages-news.com/developer-tries-sell-lady-lake-commission-idea-smaller-lots-family-subdivision/

 

In one small Florida town, the Mayor and 3 out of 4 Commissioners don’t want any part of yet another densely-packed association-governed, common interest community.

It turns out at least two commissioners happen to own and reside in homes in HOAs, and they’re certainly not pleased by their experiences.

The Mayor, an experienced engineer, understands that overdevelopment creates too many hard surfaces that result in poor drainage, not exactly a plus in hurricane and flood-prone Florida.

This report highlights a viable grass roots strategy for housing consumer advocates: run for local office, or elect representatives who will only support real estate development that serves the best interests of all constituents, rather than the economic insterests of developers and home builders.

 

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2 Replies to “Political influence of real estate developers: the heart of the HOA beast”

  1. The article is focused solely on the demand side of the equation and frankly the less relevant one, in addition to attempting to connect unrelated dots .

    The key question you fail to consider should be how do local governments benefit from Association development. The answer is simple and has always been obvious – Association governed communities allow local government to offload the development and long-term maintenance of infrastructure like roads, storm water management, recreational facilities, etc., while still collecting 100% of property tax revenue. As a result they can keep local taxes down and keep taxpayers happy.

    Like

    1. Anonymous? I hesitate to respond to a No Name, but here goes.

      Yes, local governments offload costs and liabilities onto members (owners and shareholders). But, in the process, they are NOT keeping taxpayers happy. These days, an increasing number of taxpayers are frankly FED UP with being double taxed—once by their government and once by their association-governance entity. I read reports — almost daily now — of owners going back to their local governments for assistance rebuilding private roads and storm water infrastructure, or requesting the local police department to provide *real security and traffic control with trained officers of the law.

      The truth is many developers LOVE HOAs, because they directly benefit from holding a controlling interest in the corporation, and by including special privileges and rights for themselves and any successor Declarant. Smaller association-governed communities are especially likely to remain under perpetual control of the developer/real estate broker/property manager/rental agent. Either the developer or family members hold onto units and self-manage indefinitely. They collect rent from their tenants and HOA fees from the owners! It provides the developer and family with ongoing revenue streams well beyond the actual sale of (some) of the units in the association. In larger communities, developers often retain ownership of commercial amenities such as restaurants and storefronts, golf courses and country clubs, organic farms in agrihoods, etc.

      There’s an unhealthy codependent relationship between local government and developers. Both parties get something out of the HOA “deal,” while consumers and taxpayers get stuck with the bulk of financial risk and liability.

      Like

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