By Deborah Goonan, Independent American Communities
We’re well into legislative season across the U.S., as dozens of states consider bills that affect the rights of homeowners and residents of association-governed communities.
And, as usual, stakeholders in the real estate industry continue to promote legislation that protects their profits, while opposing bills that offer consumer protection.
Real estate developers, home builders, mortgage banks, and Realtor associations have the ears of many state and federal Legislators. They promote laws and policies to keep interest rates low, to reduce regulation on lending and new construction, and to protect the rights of investors to reap profits from short-term rentals.
But today, I’ll focus on the frontline trade group for the HOA industry, Community Associations Institute (CAI).
If you aren’t familiar with CAI, you can read about the trade group here:
Trade group boasts about membership increase
According to its 2018 annual report, CAI claims the organization saw a 28% growth in “homeowner leader” membership. CAI uses the term “homeowner leaders” to describe board members or committee volunteers of homeowners, condominium, and cooperative associations.
Early this year, CAI’s CEO, Tom Skiba, reported that the Institute had 12,438 HOA homeowner members in Sept 2017 , and added 3,457 in 2018, for a year-end total of 15,895.
In a more recent February 2019 press release, CAI announced total membership of 40,389, up from 34,555 in October 2017. That translates to a 14 percent increase in CAI’s overall membership, with a 34 percent increase for homeowner leaders.
See screenshot for Tom Skiba’s 2018 report from January 2019.
Wow, more than 3,500. That’s quite an increase in homeowner leader members in one short year.
But here’s how CAI did it — the trade group restructured their membership fees in October 2017. See this 2017 annual report screenshot for details, spelled out in the yellow box.
CAI is a 501(c)(6) organization, which the IRS classifies as a “business league.”
A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Trade associations and professional associations are business leagues.
Source: IRS, Business League
New membership fee structure
Starting October 2017, CAI restructured its membership categories and fees, allowing an HOA board to enroll up to 15 of its members for a flat membership fee of $250. Prior to October 2017, each “homeowner leader” member paid separate annual dues.
And in addition to the membership fee, each member must also contribute to a mandatory “advocacy support fee,” which CAI distributes to dozens of its Legislative Action Committees (LACs) dispersed throughout the U.S.
So 2018 was the first full year that an HOA could purchase CAI membership for all of its board members, instead of just 2 or 3, for about the same price.
By example, let’s say your board has 9 members. Before the price restructure, the HOA paid for two CAI memberships. But now they can sign up 3 or more board members to CAI for the low, low price of $250, plus a mandatory $45 LAC fee, for a grand total of $295.
In 2017, your HOA had 2 CAI members. But in 2018, your HOA has 9 CAI members for about the same price.
How’s that for voodoo math?
Even if CAI had not recruited a single new HOA, their new flat fee membership structure resulted in an instant increase in “homeowner leader” members in the trade group.
Yet despite an increase in membership, CAI’s annual audit for 2018 posted a net operating loss of $18,347.
Mandatory LAC contributions, plus donations
On CAI’s Homeowner Leader (HOA board member) application form, mandatory LAC fees are $15 for one member, $30 for two members, and $45 for 3 to 15 board members.
Now it’s easy to understand why CAI chose to restructure its membership categories and fee structure. I have a hunch that HOA boards balked at the idea of paying an additional $15 “advocacy support” fee, on top of membership dues for each board member.
But it’s important for readers to note that, if homeowner boards are paying for CAI membership fees with Association funds, then each HOA member is, by extension, paying for LAC contributions, too.
And CAI uses LAC funds to promote HOA legislation, written by and for the benefit of many of their trade group professionals — primarily community association managers and attorneys. LACs also lobby against legislative proposals that would offer greater consumer protection, uphold private property rights, and protect Constitutional rights of housing consumers.
Some LACs, such at this one in Orange County, California, conduct a “Buck A Door” donation campaign, asking HOA boards to resolve to donate at least one dollar per unit or parcel to CAI legislative lobbies.
As a homeowner, do you approve of your HOA contributing even one penny of your assessment dollars to promote legislation that works against your best interests?
If you’re appalled by the idea of helping the HOA industry to exploit homeowners to their advantage, now’s the time for you and your neighbors to demand that your board stop sending your money to CAI and its LACs.
Voluntary contributions to CAI research foundation
Believe it or not, there’s more.
CAI membership applications also ask for voluntary contributions of $10 to $15 for the Foundation for Community Association Research. That money is used to conduct CAI’s infamous HOA satisfaction survey every two years.
CAI uses this self-funded research to “prove” how well HOAs work, and to spread the dubious “news” that most residents are “overwhelmingly satisfied” with their experience of living in association governed communities.
Considering the source, the savvy housing consumer or legislator knows that such self-funded, self-reported data is prone to bias, and that CAI cherry picks the survey data it wants to report.
Homeowner leaders under-represented on CAI board of trustees
Despite the steep increase in homeowner leader members, these volunteers still only get two votes on the 15-member national CAI board of trustees. CAI’s volunteer leader council has only 6 members, compared to 24 members of the Management and Business Partner councils combined.
In true corporation fashion, homeowner leader voting interests are far outnumbered, just as homeowners are outvoted by the Declarant (developer) in all newly established HOA governed communities.
Bottom line: HOA industry stakeholders still control the trade group, with very limited input from homeowner volunteers.
And let’s not overlook the fact that CAI collects most of its membership dues from industry professionals and organizations — about $600 annually from each Management Company and Business Partner, and $10,745 from each National Corporate Member.
As of 2016, more than $6 million in membership dues flowed into CAI’s coffers, plus another $7 million for education, conferences & seminars, fees, ads, publication sales, and more.
That’s a lot of money! (By the way, I couldn’t find the 2017 and 2018 audit reports posted anywhere on CAI’s website.)
So why is CAI funneling additional LAC fees and donations from unsuspecting homeowner members of HOA governed communities?
Perhaps it’s because no one’s stopping them. ♦♦
CAI REPORTS RECORD-SETTING MEMBERSHIP GROWTH
2/22/2019 – Falls Church, VA
CAI 2018 report (Common Ground, Jan./Feb. 2019)
CAI 2017 Report (Common Ground, Jan./Feb. 2018)