HOA Common interest community real estate trends

Changes coming to HOA, condo neighborhoods

The industry keeps trying to tweak the HOA, condo product. But do recent changes improve communities, or simply cause new problems?

By Deborah Goonan, Independent American Communities

Six new trends are likely to make homeownership more complicated, and less predictable than ever before.

1. Site Condominiums

In Michigan, it appears that site condominiums are becoming the new norm for single family home development, as an alternative to a standard planned community (Planned Unit Development). These new communities are governed by condominium association, even though they are made up of detached dwellings, rather than apartment style structures or townhouses.

The important point for housing consumers to understand is that the type of home or physical characteristics of the community exist entirely apart from the form of ownership and governance.

Single family homes in common interest communities can be governed by either homeowners’ or condominium associations. Here’s one example of a new single family home condo community.

Condos planned for 24 Mile area

By Nicole Tuttle , For The Macomb Daily
POSTED: 06/27/18, 10:03 AM EDT | 0 COMMENTS

Nicole Tuttle — For The Macomb Daily
More families could be calling Macomb Township home soon as the southeast corner of Romeo Plank and 24 Mile roads is the future site of a 48-lot condo development.

Single-family condo developments of this type have outpaced subdivisions since the mid-2000s, according to Macomb Township Engineer James Van Tiflin.

“Most developers are not doing platted subs anymore,” he said. “Platted subs have kind of gone by the wayside. They are more cumbersome to establish than site condos.”

Read more:
http://www.theoaklandpress.com/general-news/20180627/condos-planned-for-24-mile-area

Note that, according to the description in the article, each homeowner will still be responsible for maintaining the home and lot associated with it.  So, to housing consumers, site condominiums may look and feel like a single family home in an HOA community.

But there are important differences, as explained in the reference article below. While the City of Troy Planning Department glosses over these differences, home buyers need to be aware that site condominiums generally entail a higher level of restriction on individual property rights.

Ranch home photo from pixabay.com

Here’s the link to an explanatory article on the difference between a site condominium and a platted subdivision:

COMPARISON BETWEEN MICHIGAN SITE CONDOMINIUMS AND PLATTED SUBDIVISIONS (HOMEOWNER ASSOCIATIONS)

Here are a few key excerpts:

An individual homesite building in a platted subdivision is called a “lot”. In a site condominium, each separate building site or homesite is referred to by the Condominium Act as a “unit”. Each unit is surrounded by “limited common area”, which is defined as common elements reserved in the master deed for the exclusive use of less than all of the co-owners”. The remaining area in the site condominium is “general common area”, defined as the common elements reserved in the master deed for the use of all of the co-owners.

Each unit and lot, as respectively depicted on a condominium plan or subdivision plat, together with any home located thereon, are required to be individually maintained by the owner. Likewise, separate real estate taxes are assessed on each condominium unit or platted lot and paid individually by each homeowner.

Unlike subdivisions, site condominiums do not require the review and approval of the Michigan Department of Consumer and Industry Services. For this reason it can sometimes take a substantially shorter period of time to obtain necessary public approvals of site condominiums than platted subdivisions.

In a site condominium, general common areas, such as open space, entrance areas and storm drainage system, are owned by condominium unit owners in common as an incident of ownership of each unit. In a platted subdivision, legal title to common areas is owned by a homeowners association.

Because the Condominium Act confers special enforcement powers upon homeowner associations, which are not characteristic of platted subdivision associations, it is generally thought that the condominium form is superior from the standpoint of enforcing rules and regulations of the private community.

So, what do these facts mean for individual homeowners, from the consumer’s perspective?

First, if you own a site condominium, you do NOT own the lot, in other words, you don’t individually own your front, back, and side yards, or your driveway. A “limited common element” is property that is essentially owned collectively (in common) with all other owners in the condominium association, even though you have exclusive use of that property. Your ownership interest in the limited common area is more akin to a rental apartment — as long as you abide by the terms of a lease, you have exclusive use of your apartment home, but you don’t own it.

Although an HOA often has restrictions on signs, exterior design elements, and landscape choices, in a condominium association, those standards are likely to be more restrictive, because, although you have to maintain your own yard and the exterior of your home, you have very limited individual rights to decide how to use or modify a limited common element.

Second, because there is no individual ownership of land in a site condominium development, and because voting interests in a condo association generally attach to the property owned, and not the person, there are considerable risks to condo owners.

Consider this: when a minority of owners acquires a sufficient share of condo units, the association becomes vulnerable to hostile corporate takeover by investors or developers. A hostile takeover occurs when investors form a voting bloc that allows them to control the condominium association’s board of directors, and puts them on the road to obtaining sufficient voting power to change the nature of the community by amending the governing documents and bylaws.

This level of control puts the controlling interests in a position to terminate the association for the purposes of converting the community to rental homes, vacation rentals, or for some other use, by way of wholesale redevelopment. In order to make this happen, owners of condos holding a minority of voting interests are forced to sell their units to investors, often under unfavorable terms.

In a traditional HOA, neighbors or board members who control a supermajority of voting interests cannot force you to sell your property, because the lot is deeded to you individually, and not owned in common by way of a Master Deed.

Second, the site condominium benefits developers, by making it quicker and easier to obtain building permits. For site condominium development, there’s no consumer review at the state level!

Third, Michigan’s Condominium Act confers greater power to condo association boards than it does to HOA boards in platted subdivisions. Generally, the more power granted to the association, the higher the probability for abuse of that power.

The most disturbing thing about site condominiums is that, in states like Michigan, they are favored by the real estate industry in lieu of planned communities to the point where a home buyer may be unable to avoid a condo association, even when purchasing a detached single family home.

architecture-modular-luxury-condo
Example of modular condo construction (Pixabay.com free image)

 

 

2. High-end Modular Construction

Here’s another new trend: modular construction for the luxury condominium market.

The manufactured home industry has come a long way since its humble beginnings. A modular home is no longer limited to relatively inexpensive manufactured homes set on a foundations.

In countries around the world, larger homes and multifamily properties are built in modules, in climate controlled factories, and then assembled on site.

The article below compares the process to stacking Lego blocks, and points out the many advantages of, and reasons for, going modular in the U.S.

The trend shows promise for reducing the frequency of construction defects, assuming that factory made modules are fabricated by trained workers, with the help of robotic technology, in climate controlled environments.

The on-site module assembly process, although quicker and easier, must be closely supervised to ensure high safety standards and quality control.

Is Modular Construction the Future of Multifamily Housing?
Advantages Include Time Savings and Greater Flexibility

If you didn’t know anything about its history, the building at 193 Henry Street on Manhattan’s Lower East Side may seem like your average new luxury condo on the block. However, there is something quite unique about how it was built that just might spark a trend in the city.

As first reported by Curbed earlier this month, the six-story building named Idylls recently topped out, becoming the first luxury condo in Manhattan to be built using modular construction. It’s a method in which a home is initially assembled as separate segments (or modules) in an off-site factory, employing the same standards and materials as if the home was built on-site. The pre-assembled parts are then transported to the actual building site and stacked on top of each other, forming one piece — not unlike building something with Legos. (You can watch a time-lapse video of the building being constructed on-site here).Read more:

https://cooperator.com/article/modular-construction?utm_source=newsletter258&utm_medium=email&utm_campaign=newsletter&npe=n258-312536

(Pixabay.com free image)

 

3. Dead and dying golf courses

Developers and urban planners have their eye on dying golf courses, hoping to redevelop them with dense housing. But many existing residents of golf communities oppose such development. Here at IAC, I post monthly updates and document examples of communities facing the challenge of how to deal with their defunct golf courses. (HINT: Just do a keyword search on “golf communities” for more examples.)

As the sport’s popularity wanes, vast amounts of underutilized land will open up. Can it be developed?

Golf is dying, many experts say. According to one study by the golf industry group Pellucid Corp., the number of regular golfers fell from 30 to 20.9 million between 2002 and 2016. Ratings are down, equipment sales are lagging, and the number of rounds played annually has fallen.

Part of the bust can be blamed on the fallen fortunes of a single person: Tiger Woods. Golf boomed in the 1990s and early 2000s as the charismatic superstar raked in titles. Then, beginning in 2009, it faced a one-two punch of recession and bad press when its star golfer’s chronic infidelity came to light.

But the bigger story involves the sport’s aging demographics and the athletic tastes of Millennials, who just aren’t that into an expensive, poky sport that provides few health benefits. Unless the golf industry can change its ways, the decline will mean a lot of empty greens across the country. How that land is used—or isn’t—could reshape America’s suburbs for decades to come.

Read more:

https://www.citylab.com/environment/2018/06/the-next-housing-battleground-dead-golf-courses/561896/

 

 

4. Downsizing to a condo more expensive than staying in single family home

In the following article, the author laments not being able to afford to downsize to a condo. But, why is it assumed that the only way to downsize is to purchase a condo?

Housing prices are way out of control in eastern Massachusetts, and the Governor is considering changing state law to make it easier to rezone for density. RED FLAG! That means the Governor is planning a zoning policy giveaway to developers of multifamily housing, particularly condominiums — even though, it’s clear that new condominiums are more expensive to buy and own than the vintage single family home, without the HOA strings attached.

If local zoning laws were written to benefit taxpayers and housing consumers, instead of local governments and developers, circumstances would be a lot different. The real estate industry would feel compelled to build the kind of housing that’s in short supply, and that consumers really want: quality built, modestly sized and finished homes on “right-sized,” low-maintenance lots — each property individually owned, and without any common ownership or any variety of HOA governance scheme.

By “right-sized” lots, I mean private lots that are large enough to provide a privacy buffer and pleasant outdoor space, but small enough to be easily maintained.

Affordable homes would include energy-efficient components and low-maintenance exterior surfaces and landscapes, rather than expensive bling such as solid surface kitchen counters and master bathrooms with separate tubs and showers. It’s a matter or shifting priorities to features that really matter in terms of keeping homes affordable to own for generations to come.

 

The kids are gone, but their boomer parents can’t afford to downsize
In the Boston area housing market, there’s no longer an upside to downsizing for many empty nesters.

by Mark Pothier
JUNE 04, 2018

LET ME FIRST APOLOGIZE for any part my wife and I may be playing in worsening the Massachusetts housing shortage. Our youngest child has a freshly minted college diploma and a job. That officially makes us empty nesters, although our golden doodle might object to the description. After more than 20 years at the same address in Plymouth, we’re theoretically in a position to downsize, to ditch the drudgery of yardwork and upkeep for a simpler life governed by condo association rules. We’ve built up a pile of equity. Our 120-year-old house sits on a corner lot in a “desirable” part of Plymouth, about two blocks off the ocean. It’s updated and spacious, ideal for a growing family stretching at the seams.

That may sound like the draft version of a Zillow listing, but please don’t make an offer. We’re not budging. Crazy as it sounds, we can’t afford to sell. Not in this market. Or not without exiling ourselves to a place where we don’t want to live. Oh, we sometimes tour open houses south of Boston, just to “see what’s out there.” We’ve trailed our fingers across the obligatory quartz countertops, admired fancy stoves with more burners than anyone needs, and discovered the benefits of a “comfort height” toilet. We’ve also learned that safely “aging in place”  —  the notion that old folks should have a say in where they live  —  will require a first-floor master suite and technology that allows over-scheduled adult children to spy on their feeble parents from afar.

These experiences have led me to ask: Where have I been? When did downsizing become as expensive as upsizing? For many older homeowners in Massachusetts today, there’s no place like the home they’re already in  —  as in no place to go.

Read more:

https://www.bostonglobe.com/magazine/2018/06/04/the-kids-are-gone-but-their-boomer-parents-can-afford-downsize/N1sHDhtqfDchGOl9UXIzIM/story.html

Two family homes (Pixabay.com free image)

 

 

5. The return of the duplex and triplex — condo style

Meanwhile, in another part of Massachusetts, City leaders are putting reasonable limits on maximum housing density for active adult communities. A small step in the right direction.

Framingham to rewrite over-55 housing bylaw

ByJim Haddadin
Daily News Staff

Posted May 23, 2018 at 8:45 PM
Updated May 23, 2018 at 8:45 PM
FRAMINGHAM — City officials are rethinking Framingham’s active adult housing bylaw, with an eye toward reducing the number of units allowed in an age-restricted project.

The bylaw, adopted by Town Meeting in 2005, provides a special process for developers to seek approval for over-55 housing projects. It was designed to encourage the production of housing for seniors, while controlling the strain of residential development on municipal services.

Read more:

http://www.metrowestdailynews.com/news/20180523/framingham-to-rewrite-over-55-housing-bylaw

Additional Points/observations:

City leaders want to reduce density, not increase it. They want more room between homes. That’s a good thing. Less crowding of homes will allow for better storm drainage and better quality of life.

However, note that all of these planned housing developments are conceived as condominiums, in the form of two-family, three-family, and even detached homes.

City planners are requiring these 55+ communities to be governed by a condominium association, because the community will have private roads, drainage, utilities, and common areas to maintain, as well as providing trash removal services. Future owners must agree to collective ownership, and all of the social and economic disadvantages that come with it.

It makes little sense to put private homeowners, most of them on fixed incomes, in charge of funding perpetual maintenance of complex infrastructure, without any administrative or financial support. But local governments all over the U.S. continue to do so, to avoid having to raise property taxes.

But, in the end, if the homeowner has to pay both property taxes AND hefty condo association (or HOA) assessments, they’re not saving any money. Instead, they are essentially paying two taxes — one to the local government and one to their condo or homeowners’ association.

If City planners would think outside the HOA/Condo-ville box — for a change — infrastructure would be dedicated to the municipality or County and funded by property taxes instead of condo fees. Then each residential structure could be independently owned and managed.

Duplex and Triplex homes would be purchased and managed by a single owner (a very likely outcome even if sold as 2 or 3-unit condo buildings), without having to answer to the additional layer of condo association bureaucracy.

 

 

6. The “All-Ages” community

Another emerging trend is combining age-restricted (55-Plus or Active Adult) communities with “All-ages” communities in the same master development plan.

This model requires developers to build two sets of amenities — one collection for older residents of the 55+ portion of the community, and another collection for families with children.

Although this new model of development might reduce HOA neighbor disputes between older adults and families with children, it also creates additional infrastructure to maintain, thereby increasing costs for homeowners. Judging from the prices of the homes in examples noted in the reference article, these combination communities are targeted to homeowners with substantial household incomes.

Some residents of existing adult communities are not enthused about the coming influx of families with children.

You’ll note from the article that the market for Active Adult and 55+ communities varies with economic cycles, and that adding All-Ages sections to a master planned community is designed primarily to benefit developers.

There are pros and cons to this trend, but this seems like a way to entice younger generations into association-governed, common interest communities — many of them largely unaware of the financial risks of common ownership, as well as significant compromises to individual property rights.

Now we’ll be in the minority here’: Residents of older-adult community feel blindsided amid merger with all-ages neighborhood

Two years ago, when Margie Yates moved into Two Rivers, a planned community in Odenton in Anne Arundel County, Maryland she was one of the first residents in the development, which was then restricted to buyers age 55 and older.

“Even though I won’t retire for at least four years or more, I love living here,” says Yates, who commutes to the District of Columbia and works for the federal government. “I’m very committed to the community, and I love being with people my age and older who are retired or semiretired and just want to have fun.”

Now after four years as an older-adult community, Two Rivers added an all-ages neighborhood. Mike Johnson and his family were one of its first residents.

Read more:

http://www.tampabay.com/news/business/-Now-we-ll-be-in-the-minority-here-Residents-of-older-adult-community-feel-blindsided-amid-merger-with-all-ages-neighborhood_168744334

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