Three factors that create perceived “need” for association-governed housing

By Deborah Goonan, Independent American Communities

Ever wonder why most new construction and redevelopment in the past 20-30 years is part of a common interest community with a mandatory membership homeowners or condominium association?

Contrary to real estate industry pubic relations efforts, the institutionalization of private governance of communities — both residential and mixed-use — is not primarily a result of widespread public demand for a shared property ownership lifestyle.

Instead, stakeholders of the multibillion dollar association-governed community industry have carefully cultivated several political agendas, in order to justify tax incentives, private equity, and public policy that leads to the same end: the creation of more privately-owned and association-governed communities, to the distinct advantage of prominent stakeholder groups.

Stakeholders include real estate developers, community association management companies and law firms, and financial service organizations that cater to HOA, condo, and co-op associations. (Think lenders, insurance companies, and reserve specialists.)

Let’s take a look at three political agendas of the HOA industry

According to research conducted by the foundation funded by trade group Community Associations Institute (CAI), a majority of Americans do not actively seek to reside in an association-governed community. In recent CAI surveys, less than one-third of respondents said that a “community association” made them more interested in purchasing or renting their current home. But the existence of association-governance did not impact the purchase or lease decision of 57% of housing consumers.

CAI prepurchase awareness Bar chart
Source: foundation.caionline.org

There are several possible explanations for the high percentage of “no impact” responses. First, many housing consumers, having never experienced living in a common interest community, may be unaware of the disadvantages and potential risks. It’s true that some prospective home buyers and tenants are sold on the apparent advantages and perks of the community’s services and amenities. But, primarily, most housing consumers are sold on the features of the home itself, and the home just happens to be subject to restrictions and a mandatory residential association.

Second, a buyer or tenant may have owned or resided in an association-governed community in the past, and they were fortunate enough to avoid encountering a dictatorial or incompetent HOA board, or they were able to relocate prior to the community’s decline due to financial distress.

Whatever the reasons, the industry that sells and supports association-governed real estate recognizes that it needs to continuously downplay shortcomings and failures, and, at the same time, look for opportunities justify its existence and perceived value.

Because, given the indsutry’s own survey statistics, more than half of U.S. housing consumers could be easily swayed to purchase or lease elsewhere, if provided with competitive residential alternatives without the added monetary burden and political bureaucracy of an HOA.

 

RULE blackboard authority Know the rules
Pixabay.com free image

 

#1 The Fear Factor.

One way that the industry has pushed the HOA agenda is by exploiting fear, and selling residents on the idea of rules and standards that will protect not only their property values, but also their personal safety.

For example, check out the following Fox59 News report on Geist Harbours Property Owners Association. The POA board has decided to propose an amendment to its Covenants, Conditions, and Restrictions (CC&Rs), to prohibit registered sex offenders from residing in their community.

Geist homeowner’s association looks to ban registered sex offenders from community

POSTED 5:51 PM, AUGUST 10, 2018, BY NICK MCGILL, UPDATED AT 06:26PM, AUGUST 10, 2018

INDIANAPOLIS, Ind. – A new proposal by a homeowners association in Geist is raising some eyebrows.

Earlier this month, homeowners received a letter for a proposed amendment to community regulations that would “restrict registered sex offenders from living in the community.” In the letter the Geist Harbours Property Owners Association, which oversees more than 2,000 homes in the community, said it needs the approval of at least 75 percent of homeowners for the proposal to move forward.

Several homeowners say at first glance, they had some questions.

“My first thought was like, we said do they have the authority, or anybody to do something like that,” Steve Reising said.

“I haven’t heard the other side of it. I’d like to hear people who say this is not the right thing to do, and if so, why?” Craig gosling said.

The letter expressed that the proposed regulation wouldn’t apply retroactively to registered offenders currently living in the community.

Real estate attorneys say in cases like these, HOA enforcement powers are wide-ranging.

“They can’t discriminate based on race, or anything like that, any other protected class. They can make sure the houses follow a certain protocol that are enumerated in the declaration itself as far as what type of siding band things like that are put up,” said Michael Mahoney of McAnlis Law Group. “They can’t just deny somebody some sort of housing based on their race or some other protected class.”

Registered sex offenders are not a protected class when it comes to housing.

Geist Harbours issued the following statement regarding the proposal:

We have worked closely with our association’s attorney in preparing these restrictions. The proposed restrictions are limited to those offenses classified as sex and violent offenses by Indiana law and which are serious enough to require registration on the statewide registry. The owners in Geist Harbours do not wish to prohibit any and every individual with a criminal history, but we are concerned about repeat violent offenders and protecting our residents – especially children – from violent crimes. While there is nothing an association can do to protect against any and all possible criminal activity, we believe this to be a positive step toward creating a safer, more secure subdivision and helping protect our residents from violent crimes. For these changes to be valid, 75% of our owners would have to approve, which in our case is 1,777 owners. Accordingly, this is not going to pass unless the owners overwhelmingly support the restriction.”

Source (Video):

fox59.com/2018/08/10/geist-homeowners-association-looks-to-ban-registered-sex-offenders-from-community/

The attorney interviewed for this news segment confirms that a homeowners’ association has the power to restrict who can and cannot live in a community, so long as the restriction does not run afoul of fair housing laws.

The HOA’s statement makes it clear that there’s an HOA attorney behind this proposed amendment to the CC&Rs.

And, on the surface, the proposed restriction appears to be a great idea. The way it’s framed by the association, who wouldn’t be in favor of protecting children? Of course, virtually all residents of Geist Harbours, readers of this post, and the author, are in favor of protecting children from harm.

The problem is, the proposed amendment is a clear exploitation of fear that residents, especially children, may be harmed by a sexual predator — even though Indiana state law already requires a convicted sex offender to publicly register. Geist Harbours POA wants to go beyond the sex offender registration requirement, and ban residency in their community.

Because convicted sex offenders or criminals of any kind are not a protected class under U.S. Fair Housing Acts, HOA attorneys argue that CC&Rs (or Declarations for condo or co-op associations) can legally restrict residency.

Likewise, HOA attorneys have also made the argument that association-governed communities can block halfway houses and addiction recovery “sober” houses.

As a result, sometimes housing consumers see a need or benefit to having an HOA to enforce restrictions against certain undesirable types of neighbors, even if those neighbors pose no measurable threat to safety in the community.

A bigger problem with enacting a sexual offender residency restriction: going forward, it creates a duty of the association board to investigate the prior criminal history of its residents. And, if applicable, the HOA must then enforce residency restrictions, even if that means evicting a tenant or a homeowner from the community. That’s a serious responsibility for volunteer leaders.

And what if the HOA fails to enforce a sex offender prohibition? If a resident is assaulted by an offender, will the association become liable for legal damages, even if the offender deliberately concealed a prior conviction?

 

new-home estate single family
Executive estate home – with 73% approval rating for HOA management.

 

#2 NIMBY-ism and the desire to protect property values

For as long as HOAs have existed, they’ve been all about creating exlcusive neighborhoods by way of deed restrictions. Prior to the Fair Housing era, which began in 1968, those restrictions were explicitly discriminatory.

Since then, CC&Rs, and condo and co-op restrictions have shifted to covert or selective discrimination. It’s all in the art of how and when the association enforces its rules.

So CC&Rs create enforceable rules against parking work vehicles in the driveway, or hanging the laundry in the back yard. Condo and co-op declarations might require expensive window coverings and pricey condo amenity fees. So it’s possible to weed out less wealthy, less sophisticated residents, while technically not breaking fair housing laws.

Over several decades, as the affluent homeowners moved up the property ladder, once posh and fashionable communities trickled down to the working class, and, eventually, low income tenants.

The evidence is abundantly clear. Fair housing laws have not changed local housing policy. Instead, they have only resulted in even more onerous zoning restrictions in the name of local control.

Note that most new housing created in the past 4 decades is association-governed. Yet as the number of HOAs continue to increase, housing inequality and neighborhood segregation persist. That’s probably not a casual coincidence.

As NYTimes columnist Emily Badger points out, the real estate industry has spent generations playing upon homeowner anxiety about upholding property values in their neighborhoods.

 

On a national level, organizations such as Urban Land Institute continue to push for new construction with increased housing density, which is a buzz word meaning more residential dwellings per acre.

For the past few decades, that policy led to building more multifamily housing such as townhouses, 2 to 4 family homes, condominiums, and apartment buildings. It also led to the creation of mixed used communities of apartments or condos on top of ground level store fronts.

In those fast growing cities and suburbs, either you’re a tenant in residential rental apartment building or community, or you own an attached home or condominium. As an owner, by default, your new “modern” community will almost certainly be association-governed.

The interesting irony is that now it’s becoming more difficult for developers to continue to build dense, multifamily housing. And, guess who objects the loudest to more “affordable” dense housing?

Yep. Affluent communities are opposing new development, often through organized efforts of their homeowners associations!

And, as Badger explains, members of both Democratic and Republican parties now reject the standard density-equals-affordability argument. So they oppose building more of the same.

But, in some cities, the push for development continues, despite objections.

 

 

Higher density housing Boston

#3 The money is too good to pass up.

In Boston, urban developers have been on a housing feeding frenzy over the past decade. First, there was a major transformation of the Seaport District in the South. Now, in East Boston, condos and stacked homes have replaced historical architecture and mature trees.

Residents complain that their transit lines are too crowded, and that streets and sidewalks flood in heavy downpours.

Don’t let Eastie become Southie, residents say

By Milton J. Valencia GLOBE STAFF JULY 26, 2018

East Boston, with its picturesque views of the harbor and downtown skyline, diverse restaurants, and historic landmarks, has emerged as one of the city’s hottest neighborhoods for real estate — second only, perhaps, to South Boston’s Seaport District.

Only, don’t let Eastie turn into the Seaport District.

So say community leaders who have called for a temporary halt to development in East Boston — at least until some sort of community master plan can be put in place. They say they fear a disjointed building spree will turn their neighborhood enclave into another overdeveloped, mismatched expanse of gentrification — like what has happened across the harbor.

“I think we have a lot to learn from South Boston,” Debra Cave, a lifelong East Boston resident who heads the Eagle Hill Civic Association, told a crowded July 16 City Council hearing in the neighborhood.

“They’re rushing to build, and it will change the landscape,” she added later, while giving a tour of gutted Italianate Victorians being converted into condominiums.

Last week, city officials responded by announcing the launch this fall of a neighborhoodwide review of planning and zoning priorities, called PLAN: East Boston. It’s the first master plan effort of its kind for the neighborhood in 18 years.
Read more:

www.bostonglobe.com/metro/2018/07/25/please-don-let-eastie-become-south-boston-residents-say/mI9TYz7YlygPEWF1cSI0RP/story.html

 

But, with Boston City Leaders courting Amazon to set up its second headquarters, and the promise of massive profits to be reaped from new multifamily construction to accommodate growth, there’s no sign of a slow down.

Developers and investors will continue to push association-governed condos, promising affordable housing and economic progress for the city.

And with the promise of huge gains in tax revenue, city leaders are not likely to limit growth or slow down the pace of redevelopment and new construction.

However, when the economy enters its next recession, when buyers stop buying, and tenants stop leasing, how many new housing units will remain unsold and vacant, with no one to maintain them?

No one seems to be thinking that far into the future.

That’s why history tends to repeat itself.

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