Is the HOA management industry too big to fail?

By Deborah Goonan, Independent American Communities

Each month I am fascinated by the bold attempts of the HOA industry to justify the need for the services of their professionals, as if the U.S. would go to hell in a handbasket, without the existence of HOAs.

One prime example is the following opinion letter in the Arizona Capital Times, written by a community association management company CEO on behalf of the Arizona Association of Community Managers (AACM).

Legislators should protect abundance of jobs in HOA industry

 

The article ends with:

At the Arizona Association of Community Managers, we do all that we can to support our management company members and their goal of providing excellent employment opportunities, and we look to our state legislators to help drive economic growth and to protect the industries, including the HOA industry, which provide tens of thousands of jobs within the great state of Arizona through sound policy decisions and effective legislation. — Linda Lang is CEO of the Arizona Association of Community Managers.

 

Is this a “too big to fail” argument in favor of the HOA empire?

It sure sounds like it.

The writer’s message to state Legislators is clear: you must protect the HOA industry, so we don’t lose our jobs.

What this opinion letter tells us is that the HOA industry, in particular the management industry, is increasingly taking a defensive stance against the many critics of dysfunctional, often corrupt HOAs.

It’s proof that, as homeowner groups solidify and organize themselves in Arizona, they are demanding that state Legislators represent all the people who live and own property in Arizona, not just a few thousand corporate trade group members, who are more concerned with maximizing profits than serving the public interest.

For example, informed Arizona homeowners know that stakeholders for the HOA industry (management companies and law firms) drafted provisions (in SB1531) that would, among other things, reverse the current order of applying homeowner payments to past-due accounts.

Fortunately, thanks to dozens of involved Arizona homeowner citizens, several Arizona Senators of the Government Committee pressed AACM managers on the issues of:

  •  “no-cost” collection firms,
  • insufficient written notice to homeowner of HOA debt, lien, and pending foreclosure,
  • Applying payment of fines, attorney fees, and collection costs ahead of unpaid assessments.

After lengthy committee discussion, the committee agreed (5-2) to pass SB 1531, with the promise of making several floor amendments.

By the end of the Committee meeting, several Senators pressed AACM to agree to future amendments that would give homeowners the opportunity to catch up on their past due payments, so they don’t lose their homes to HOA foreclosure. (See video of hearing on Feb. 18, 2019)

But at least AACM clearly represents itself as a trade group for HOA management companies.

Another HOA industry group keeps trying to reinvent itself as homeowner-friendly: Community Associations Institute (CAI).

 

Does CAI really represent all HOAs and homeowners who live in HOA-governed communities?

The evidence says NO.

CAI is, first and foremost, a trade group that represents the interests of its management and business partner members.

And this is despite CAI’s efforts to prop up its paid “homeowner leader” memberships.

Most readers will be surprised to learn that, in 2017, CAI “restructured” their membership fees to encourage HOAs to sign up 3 to 15 of their board members for one flat fee. Now CAI can claim it has more “homeowner leaders” as members, even though the trade group is not necessarily representing more “community associations.”

Regardless of CAI’s efforts to recruit more “homeowner leaders,” community managers and HOA attorneys still exert overwhelming influence on the organization’s public policy, legislative advocacy, and peer-to-peer training. Homeowner membership is still limited to two Board Trustees.

As of 2019, CAI’s 15-member Board of Trustees breaks down as follows:

8 community association managers
3 attorneys, 1 of whom is an insurance specialist
1 CPA,CFE (Certified Fraud Examiner)
1 Reserve Specialists
2 “Homeowner leaders,” both from 55+ communities in California, who also serve on their CAI local chapter boards

CAI still maintains three Membership Representation Groups (MRGs)

  • Business Partners CouncilTwelve members including attorneys and various HOA service professionals
  • Community Association Managers CouncilTwelve members, consisting of management company CEOs and community association managers
  • Homeowner Leaders Council Six members, which CAI claims to “represent community association volunteer leaders and homeowner members.”

 

Let’s put this into a housing consumer perspective.

CAI’s leadership is advised by 24 MRG members who represent professionals and service providers — the bulk of CAI’s 40,000 members who make their living selling products and services to HOA board members.

Only 6 MRG members are “homeowner leaders” (i.e. current or former HOA board members). And, as a group, “homeowner leaders” get only 2 out of 15 votes on the Board of Trustees.

Now remember that, according to CAI, roughly 70 million Americans reside in association-governed communities. Are we supposed to believe that 6 homeowners on an advisory group actually represent the needs and desires of millions of all other homeowners and residents in HOAvilles across the nation?

I’m not buying it.

Do the math: these 6 homeowners represent 0.00000857% of the population that resides in common interest communities under HOA, condo, or co-op governance.

 

Is CAI using homeowners in your HOA-governed community to buy political influence?

To answer this provocative question, consider CAI’s “buck-a-door” fundraising campaign.

Here’s how it works: CAI member managers encourage their HOA board members to make an official resolution to donate $1 per residence in their communities to their local CAI Legislative Action Committee. The LAC then uses HOA money to lobby for legislation that, in the opinion of many informed constituents, goes against the interests of homeowners/housing consumers.

(Skeptical? See the CAI promo video here.)

I wonder how many homeowners know that their HOA is using a portion of their assessments and fees to pay for a CAI lobbyist to either:

a) promote HOA legislation that puts more power in the hands of board members, or

b) oppose or kill HOA bills that would hold board members and community association members accountable for mismanagement, conflicts of interest, corruption, or fraud and theft?

 

Should Legislators protect the management industry?

In my opinion, and many voters agree, it’s not the job of the Legislators to protect the backs of business and corporate interests, at the expense of all other constituents.

It’s encouraging to see some small steps toward progress from Arizona Senators, particularly the two who were courageous enough to vote “no” on SB 1531, despite promises to amend the bill in the Committee of the Whole.

There’s no doubt in my mind that personalized and informative emails and phone calls from homeowners got the attention of their state Senators.

But homeowners across the U.S. must understand that a multinational group such as CAI, with all of its state-level LACs, by and large, continues to own the HOA Legislative process.

The only way to change that dynamic is increased involvement of well-informed homeowners and residents of HOA-governed communities.