Decoding HOA industry talking points

By Deborah Goonan, Independent American Communities
In the past few weeks, several HOA articles have been circulating on social media that just beg a response.
Every one of these articles conveys the usual HOA industry talking points. They’ve been repeated many times, and in so many ways. After following the industry for more than 6 years, I can spot the agenda a mile away.
Smart housing consumers need to learn how to decode slick real estate marketing campaigns, public relations statements supporting one side of controversial housing policies, and general HOA damage control — cleverly referred to as “reputation management.”
For example, here’s a California columnist explaining why he has come to believe that the U.S. needs homeowners’ associations.

Ed Goldman: How I learned to stop worrying and (almost) love the HOA

By  – Columnist, Sacramento Business Journal

An acquaintance of mine once said a homeowners association, or HOA, “is essentially a microcosm.” He never finished the thought — someone interrupted our chat at a reception — and I wondered what an HOA is a microcosm of. Not enough to track him down, apparently, but wonder I did.

 It’s not a miniature U.S. government and it’s not a dollhouse replica of a Third World republic’s ruling junta. All I’ve been able to learn is that if you’re not part of one where you live, there are certain benefits — like being able to paint your home whatever color you want, like not having to park your car in the garage and, it almost goes without saying, like not having to pay monthly dues.

On the other hand, if you live without an HOA, as I did until a little more than a year ago, you can’t stop people down the block from painting their house a color that might have made even the late LSD guru Dr. Timothy Leary say, “A bit garish, don’t you think?”

Read more:

So, according to the columnist, maybe U.S. housing consumers need an HOA to prevent a neighbor from parking an RV in the road.
However, if you read the entire column carefully, you’ll notice that Goldman admits that the City already has an ordinance against parking and RV in the road.
So why do the residents need the HOA?
Most municipal codes prohibit any vehicle from blocking visibility at an intersection or where a driveway meets a road.  And, thanks to misguided local planning codes that rarely require sufficient space for parking, most new neighborhood roads are built too narrow to allow someone to safely park an RV or any large commercial vehicle on the side of the road. It’s not so much about the neighborhood resident’s view of the RV — it’s about efficient use of tight spaces and traffic safety.
Notice that Goldman also proclaims that HOAs are not “miniature U.S. government.” That statement, as others made by supporters of the HOA industry in California, is made in direct opposition to proposed legislation (SB 1265) that would limit the rights of boards of association-governed communities to hand-pick board nominees and to avoid holding annual elections.
HB 1265 begins with the premise:
The Legislature hereby finds and declares both of the following:
(a) Common interest developments function as quasi-governmental entities, paralleling in almost every way the powers, duties, and responsibilities of a local government. (Source: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB1265)
And, technically, it’s true that an HOA is merely a corporate governance entity imposed upon a housing community — be it large or small — often in addition to a city or county government.
However, the California courts have ruled that HOAs are quasi-governmental, which is not the same thing as saying HOAs are like small towns.
Merriam-Webster dictionary defines quasi-governmental as follows:

supported by the government but managed privately

When it comes to HOAs, that succinct definition sounds about right.

And there’s no denying that, although the associations are legally established and organized as corporations, state governments have bestowed them with certain governmental powers.

Among those governmental powers — the authority to enact rules and enforce them. Envision Home Rule on steroids, without the usual Constitutional constraints and little oversight from state government.  That’s a troublesome, potentially dangerous combination: a private entity (corporation) with powers of government. 

Of course, it’s true that some residents of HOAs appreciate having “enforcers” of community rules and standards. I hear from readers with that point of view occasionally.

But most HOA residents would rather do without their neighbors — or a non-resident community association manager — acting as Big Brother, sizing up the condition of their lawn, objecting to their choice of paint color, or threatening to fine them because their kids have left some of their toys outside, in plain view from the front yard. Of course, multifamily properties such as condominiums and cooperatives need house rules (just as any rental apartment property), but, all too often association boards go overboard with their relatively unchecked authority.

Compare the supposed convenience of having HOA enforcers to penalize your neighbor for every minor inconvenience or nuisance, or the occasional eyesore, to the very real inconvenience faced by residents and homeowners when their HOA wastes assessment dollars on unwanted projects.
Consider that it’s nearly impossible to compel an HOA to consistently maintain the community to high standards. And recognize that the vast majority of private communities with volunteer board members lack good fiscal planning. Over time, poor money management results in higher fees and costs, or deterioration of common areas, or both, and inevitably leads to lower property values.
Most homeowners would rather live with the minor inconveniences and the occasional eyesore, than financial risks and internal political conflicts that are becoming more common in homeowners, condominium, or cooperative association-governed communities.
The industry recognizes a surge in negative public opinion, and that’s why we’re starting to see more articles written in defense of HOAs.
HOA planned community aerial view
(pixabay.com free image)

The unpopular push for densely-packed housing

And then there’s the push for housing density, particularly in the form of condos.
Here’s an example from Spokane.

Demand is soaring for condominiums in Washington state — so why are so few of them being built?

 Inlander

With the decade-long quest to resurrect the downtown Ridpath Hotel into a residential complex almost complete, developer Ron Wells’ ambitions have turned skyward. He has a vision of a new downtown tower, one that would rise far above every current building in Spokane.

He pictures a thin 40-story residential skyscraper rising up from a Diamond parking lot in downtown Spokane. There would be 25 floors of apartments topped with 15 condominiums.

He’s talked to financers, to Diamond Parking and already got some preliminary design work completed. Still, it’s a long way off, with plenty of hurdles in the way.

“I’ve developed and sold more condos downtown than anybody,” Wells says. So he knows the lay of the land as well as anybody. In Washington state in particular, building condominium units from scratch can be a nightmare of regulatory, financing and legal challenges.

By contrast, if this were Florida?

“I could put this out there, and I could start selling condos… for a prayer and a promise to sell air in the sky,” Wells says. “I’d be off and running. It would cut off five years of what it will take me to do it.”

And because creating condominium units would be so much simpler outside of Washington, he could build a lot more of them.

“It would be easier to collect the money,” Wells says. “I think the demand is there.”

During this year’s legislative session Senn introduced a bill to attempt to ease the regulatory burden in Washington state. Right now, all it takes is, say, four of a seven-member condo board to be convinced to sue on behalf of the complex of hundreds of condominiums.

Senn’s bill would have required at least half of the homeowners to decide to sue — and it would give developers a chance to present a plan to repair the problems instead of fighting a legal battle.

“It gives the developer a chance to say, ‘We have to fix it,'” says Eddie Chang, a state director of the Washington Association of Realtors. “It gives the homeowners the chance to make the decision.”

But while the House Judiciary Committee was supportive, Senn says that Senate Judiciary chair and Seattle Democrat Sen. Jamie Pedersen — concerned about protecting consumers — was opposed to the bill.

In the meantime, many condo developers have figured out a way around the warranty problems. Build apartments first, and then — after the warranty period expires — convert them into condos. Many of Wells’ condo units — like those in the Poplar building in Browne’s Addition and Finch Hall in the Kendall Yards area — are apartment units converted into condominiums.

But with the rental market already under pressure, there can be serious downsides to largescale apartment-to-condo conversions, instead of new construction.

“It scares me a little bit,” Gilberts says.

Read more:

https://www.inlander.com/spokane/demand-is-soaring-for-condominiums-in-washington-state-so-why-are-so-few-of-them-being-built/Content?oid=9381848

 

Actually, the headline for this article is a bit misleading. Where is the proof of demand for condominiums?

There isn’t any.

Rather, so many condominium projects floundered and failed in the past recession, that middle class and lower-income buyers are reluctant to purchase a condo. Many view renting an apartment or buying a single family home as a safer way to spend their money.

Did you notice the admission of the industry’s strategy to get around the fact that lenders won’t finance condominiums?

Build apartments first, and then — after the warranty period expires — convert them into condos.

Talk about a disaster waiting to happen. Apartment to condo conversions create associations that are notoriously badly renovated, woefully underfunded, and particularly vulnerable to economic volatility.

Not only have many buyers lost their condos to bank foreclosure, quite a few owners have been forced to sell their condos to investors interested in redevelopment or deconversion (changing back to apartments).

There’s a segment of the real estate industry that thrives on the revolving door of apartment-to-condo-back-to-apartment conversions. Savvy investors make a great deal money in both multifamily conversions and deconversions, while most condo owners lose their life savings and their primary financial asset — their homes. Tenants become pawns in the process, too, forced to relocate and pay even higher rent for smaller, less desirable apartments.

And the fact is, building millions of condominiums prior to 2007 has failed to sustain higher rates of homeownership. Instead, because of sub-prime and predatory lending practices, the condo market collapsed over night.

U. S. Census data reveal that gains in homeownership leading up to the recession have been lost.  

What makes anyone think that the cycle won’t be repeated, if lenders were to loosen up and start lending money to condo developers and home buyers again?

Just because some real estate developers say condos are in high demand, that does not make it so.

Condo or apartment building

The war on single family homes

And then there’s the political push to replace single family home with multifamily housing. This war is being waged by a persistent group of urban elites. They claim that housing density is needed to save the planet from torrential floods.

But is that really the case?

The single-family house: An American icon faces an uncertain future

“A man is not a whole and complete man,” Walt Whitman claimed in 1856, “unless he owns a house and the ground it stands on.’’ In a little more than a century, the single-family house helped make America something new in the world: a nation of suburban homeowners.

Cape or ranch, colonial or contemporary, the house — more even than the car, the skyscraper or the Hollywood movie — is the American idol.

But now, demographic, political and meteorological changes are calling the future of the single-family house into question.

Its critics say that the house is too sprawling in a time of climate change, too expensive in a time of economic inequality and just too boring for many city-dwelling Millennials; that more of us should live closer together, in neighborhoods near mass transit, with less need to drive and more chance to interact.

Its defenders say the single-family house is what most people want, if not what professional planners, social reformers and academics — the elites! — want for them. And they say that construction of new houses on empty land at the edge of the metropolis offers working- and middle-class people the best shot at the American dream.

Read more:

https://www.usatoday.com/story/news/2018/04/25/single-family-house-american-symbol-facing-uncertain-future/514655002/

 

The message from the industry is that density is good for the environment and creates more affordable housing.

Both claims are blatantly untrue!

Densely populated cities happen to command the highest home prices and monthly rents in the nation. The more crowded and popular a city becomes, the less affordable it is.

High real estate prices bode well for home builders and landlords, but certainly not for housing consumers. Maybe that’s why most of the people pushing hard for dense, multifamily housing happen to real estate developers.

And densely packed housing in cities creates far more hard surfaces and far less green space to absorb storm water, than any lower-density or suburban locale. How does that benefit the environment?

It doesn’t.

The truth is, flood damage in Houston was a function of building new homes inside a known flood reservoir. It had nothing to do with sprawl. It was a matter of local government looking the other way and allowing mass production of housing on unsuitable land.

And one more thing…

It would be most interesting to explore where wealthy developers and other Disciples of Density reside, and how much space they enjoy in their own homes.

It’s unlikely that moguls of real estate reside in tiny, cramped apartments or condominiums located next to train stations and bus terminals.

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