By Deborah Goonan, Independent American Communities
An interesting editorial written by David Sobotta in The News & Observer, entitled My descent into HOA hell in North Carolina, is both eye-opening and provocative.
Sobotta explains how, after eight years of uneventful living in his HOA, everything quickly spiraled downward when the developer abruptly decided to hand over control to a volunteer homeowner board. Well, the way Sobotta describes it, it was more like dumping a lot of problems and financial liability onto unsuspecting homeowners.
He writes that his HOA was not collecting fees properly, and was not insuring portions of the common property. Homeowners became divided over covenant enforcement. The HOA hired a management company, but they were of little help.
Three years after the transition, the developer still owns 20 lots. He uses proxies to vote family members and allies onto the HOA’s overwhelmed, floundering board. Now there’s no transparency at all.
Sobotta calls for various reforms to include:
- A state HOA commission to answer legal questions of HOA members
- Training board members
- Licensing HOA management and HOA developers
- State sanctioned way to report assessment delinquencies to credit bureaus in leiu of liens and foreclosures
- Independence from developer control of HOAs
But, can we actually reform HOAs or – for that matter – their close cousins, Condominium Associations?
I agree with Sobotta’s general assessment of some basic problems with HOAs. But I seriously doubt that any of his suggestions for reform – other than breaking free from developer control — can fix fundamentally flawed HOA governed communities.
For one thing, several states have already attempted Sobotta’s suggestions: Florida, California, Virginia, Illinois, Arizona, Colorado, Nevada, and others.
State level HOA commissions, regulatory agencies, and state Ombudsman offices have utterly failed to reduce HOA conflict and abuse. Most state agencies have weak or non-existent authority to investigate problems or resolve disputes.
The only board members who are willing to get training are the ones who least need it. Let’s face it. Board members with ethical challenges, superiority complexes, narcissistic tendencies, and those who get a kick out of their bully pulpit flatly refuse training or education.
Furthermore, it’s my observation that the content and quality of HOA education tends to be skewed. Mostly, it’s indoctrination of the industry trade group’s self-serving vision of how a community should be governed. Training workshops are nothing more than an opportunity fo promote the trade group members’ professional services.
Does professional management help?
Perhaps in some cases. But don’t count on it.
Nine states already license community managers, yet those states remain poster children for the most dysfunctional and corrupt associations in the nation.
There’s absolutely no convincing evidence that manager licensing has increased Community Association Managers‘ accountability. We still read quite a few reports of managers that engage in financial mismanagement, theft and embezzlement, or creating or increasing internal conflict in HOAvilles across the nation.
Homeowners are already being reported to credit bureaus. That happens after the HOA sells its delinquent account portfolio to debt collectors. Many of these owners will eventually lose their homes to foreclosure anyway, because that makes more money for the debt collectors.
Management companies and boards don’t direcly report late payers to credit bureaus because that might make them legally responsible to comply with the Fair Debt Collection Practices Act. (FDCPA)
And breaking away from developer control is exceedingly difficult to impossible as long as votes are tied to lots or units owned.
A corporate voting structure based on share of ownership in the Association guarantees that regular owner-occupants will remain vulnerable. It’s common for homeowners to be outvoted by developer-owned interests or predatory real estate investor groups.
Efforts to reform Association-style governance can only go so far toward restoring democratic local government. Many HOA leaders are not committed to upholding Constitutional, Civil, and property rights of individual residents. Collective corporate ownership is fundamentally incompatible with personal freedom and democratic process.
HOA Reformers vs. Abolitionists
Just to get an idea of what my readers think, I created a short poll, and posted it on this blog and my social media pages.
What should be done about HOAs?
When it comes to HOAs, which of the following changes would you most like to see?
Click to review the results of my unscientific poll! A lot of people think HOAs should be abolished.
And that’s not surprising, if you have ever read comment threads following online posts of HOA horror stories and conflict on multiple media websites.
Yet, industry experts and academic scholars have repeated the mantra: HOAs are here to stay. This rhetoric serves the industry well, and ithrough sheer repetition, the general public accepts it as true.
But, at one time, Coal was King, railroad travel was the norm, and cameras relied on Kodak and Polaroid film.
No one in these defunct industries, at the time, dared to consider their own demise. No one acknowledged that the passage of time and the human desire for a better life changes everything.
Why should our real estate and housing industry be immune to structural change, technological advancements, and social innovation?
Is it possible to abolish HOAs or phase them out of existence?
Of course, we cannot force people who want to keep their HOAs to abolish them, and, for some people, a well-managed association (rare as that is) may serve their needs.
At the same time, members of aging and failing Associations need a way to phase out or opt out entirely, depending on the specific circumstances of the community. This is a complex and sticky process. Problems with deterioration of community infrastructure and entire condo projects are also not going away.
Of course, no one wants to lead a sinking ship. We desperately need HOA alternatives.
We cannot simply rely on developers to buy and redevelop entire communities as brand new Associations, essentially recreating the same fundamental problems.
And the truth is, developers don’t want to invest in the worst-off communities — they only want real estate with profit potential, preferably well-located.
Structural change needed
I believe real housing and HOA solutions require structural change, shifting the way responsibilities are shared between owners/residents and local and state governments. We should be rethinking the role that developers should or should not play in creating safe, affordable housing and viable communities.
Maintenance of infrastructure and community safety must once again become a matter of public interest. Some joint responsibilities are most appropriately shared by all through tax dollars, and not private HOAs.
Millions of people living in HOAs should be free to opt out of HOA nonessential services: architectural control standards enforcement, membership in recreational clubs and amenities.
If freed from the many burdens of maintenance and rule enforcement, HOAs could once again become voluntary civic organizations, instead of unaccountable substitutes for local government.
Of course, it’s also time to reduce the over-supply of mandatory Association Governed Housing. We should stop creating more of the same, and return to governance models that work. Emulate successful municipalities that practice good government.
We would be better off to improve municipalities that we already have, instead of abandoning them in favor of developer-centric profit centers and rampant speculation in real estate.
We must restore individual property rights and Constitutional protections.
Fundamentally, home ownership must no longer be all about “property values” – ie. increasing the property tax base and real estate industry profitability.
Instead, we should focus on strengthening social values and individual rights for all Americans, no matter where they choose to live.