Want to regulate the HOA industry? Be prepared for the long haul

Big challenges for homeowner, housing advocates

By Deborah Goonan, Independent American Communities debgoonan@icloud.com

This article is part two of a three part series. Part 1 explains why state government often avoids regulation of HOAs. This article, Part 2, summarizes specific challenges faced by advocates working toward legislative reform. Part 3 explores housing policy solutions and alternatives to traditional regulatory legislation.

Trade groups, and their lobbyists, heavily influence state legislation

State Legislators often struggle with the dilemma of how to appease one group of constituents (homeowners) without alienating another group (real estate developers, home builders, HOA managers and service providers).  

And, because lawmakers must consider policy on a variety of topics, they often rely on experts to  explain the pros and cons of each bill under consideration.

Trade groups representing the HOA-industry are well organized, with plenty of experts to steer legislators toward their agenda.  The most influential trade groups include Community Associations Institute (CAI), National Association of Home Builders (NAHB), and National Association of Realtors (NAR). At the federal level, the Urban Land Institute (ULI) impacts financial policy and promotes higher density, multifamily, mixed use, and common interest development in the U.S. and worldwide.

It’s all about the bottom line

Not surprisingly, real estate trade groups support legislation that protects their financial interests. That’s why states often enact laws that are contrary to the best interests of housing consumers.

Here’s a brief summary.

State laws create obstacles to lawsuits and warranty claims for homeowners and HOAs. These laws make it more difficult for consumers to recover their financial losses due to defective construction or poor workmanship of developers and home builders. In recent years, a few states have pushed back on some of the most egregious developer-friendly policies. But homeowners continue to bear the brunt of costs when developers cut corners or exploit long periods of control over HOA-governed communities.

HOA management companies aggressively protect their rights to funnel business to their affiliated service providers, while HOA lawyers work to ensure they can generate high fees for collection of HOA fees and enforcement of restrictions on behalf of HOAs. Any consumer protection efforts to limit conflicts of interest or professional fees are met with stiff opposition, and such bills are rarely considered at the state level.

Realtor associations work hard to protect the interests of investors, by opposing legislation that limits the rights of owners to rent their properties, particularly income-producing short-term rentals. While short-term rentals may be appropriate for vacation or resort communities, they tend to degrade quality of life for owners of property in communities designed for normal residential use.


Related posts:

New ULI report offers insight into the HOA-industry’s agenda (2019)

4 RISKS FOR HOMEOWNERS IN DEVELOPER-CONTROLLED HOA COMMUNITIES

POLITICAL INFLUENCE OF REAL ESTATE DEVELOPERS: THE HEART OF THE HOA BEAST

HOA RESIDENTS’ INTERESTS OFTEN CLASH WITH TRADE GROUP


HOA industry attorneys write — or amend — most HOA regulations

Several years ago, I learned that uniform common interest ownership acts (Community Association/HOA laws) were written by and for the major stakeholders of the HOA industry. And, notably, these acts, known as UCIOA, were crafted without input from typical owners of property in HOA-governed housing communities. 

Uniform Laws create a framework for writing state legislation applicable to planned communities, condominiums and housing cooperatives. And, in this case, that framework vests a great deal of power and control in the hands of HOA boards. 

At the same time, the HOA-industry’s legal framework prevents individual property owners from meaningful participation in their community’s self-governance. 

So, in other words, lobbyists for the HOA-industry begin with a blueprint for their own legislative success. And, in addition to CAI state and regional chapters, home builders, HOA managers and HOA attorneys also hold membership in national trade groups that coordinate legislative efforts across the U.S. 

Challenges for homeowner, housing advocates 

By contrast, official state level homeowner and housing advocacy groups that focus on HOA legislation are practically non-existent. 

There are a few notable exceptions. Arizona, California, and Florida each have active advocacy groups representing the interests of homeowners. However, most other states do not have a well-established organization.

From time to time, I’ve observed some loosely organized homeowner groups uniting for the cause of HOA regulation. A few have established small non-profit organizations. But to compete with industry trade groups, homeowner and consumer-focused organization will need access to substantial legal, financial, and technical resources to achieve their goals. 

Another big disadvantage for housing consumers: at this time, there is no national advocacy group that specifically addresses HOA community association issues from the perspective of individual housing consumers

Legislative change is often ineffective at protecting housing consumers

Sadly, over the past seven years, I have observed that state legislation usually doesn’t result in long-term, effective regulation of HOAs. 

For the most part, HOA regulation fits one of two categories.

“Window Dressing”

Regulation that has a catchy name, and that, on the surface, appears to be helpful to property owners/housing consumers, but really isn’t. It is mostly helpful to industry stakeholders, and it’s not opposed by trade group Community Associations Institute (CAI) and others in the industry because it gives them cover. 

When the HOA-industry supports regulation, it’s usually very weak and unenforceable. Nonetheless, showing their support lends an appearance of “caring” about the people, even as the industry continues exploit homeowners and housing consumers. 

“The Naive Knee-Jerk Reaction”

Regulation driven by homeowners and their state legislator allies, often in response to serious complaints. Serious efforts to rein in abuse or hold HOA boards and industry stakeholders accountable are vehemently opposed by CAI, home builders, and realtor associations.

Inexperienced advocates are often unprepared when industry-friendly lobbyists to descend upon the state Legislature to suggest (demand?) changes to the original draft of their bill. More often than not, industry lobbyists are successful at neutralizing any meaningful protections for homeowners and housing consumers. Even worse, sometimes the revised language completely reverses the original intent of the bill or existing law, making matters worse for HOA residents, not better.

In this case, the more uneducated and naive the homeowners and their legislative allies are, the worse the outcome for consumers. 

HOA legislative reform not for the weak

Make no mistake. Even for the well-educated and organized state advocacy groups, it’s extremely challenging and exhausting to make positive change through regulatory legislation. Just as soon as the homeowner advocates claim victory, the HOA industry works to defeat the advocates by “fixing” or “cleaning up” the “erroneous” parts of the law in a future legislative session.

HOA industry trade groups dedicate dozens of staff members, each of whom spend thousands of hours annually refining their legal agendas.

Thus, the battle for rights of residential homeowners and housing consumers is ongoing.

Enacting or amending a law can take years

Most HOA reform bills wind their way through two or three legislative sessions before a bill becomes law.

And the end product often bears little resemblance to the first draft of the bill.

And, during the lawmaking process, HOA industry players engage in several dirty tricks to advance their agenda. HOA Reform Advocates must be aware of the following tactical maneuvers by HOA lobbyists:

  • Changing the definition of key legal terms, such as “common interest community” or HOA “assessments” (for example, to include unpaid fines), “official records” of the HOA, etc.
  • Addition of key exceptions to a new regulation, removing requirements for existing HOAs to comply
  • Delaying the effective date of new regulation for several years, or making a regulatory agency or licensing requirement temporary, to expire in three to five years
  • Filing their desired amendments to an entirely unrelated bill

Related posts:

Read CAM Licensure extension bill vetoed by Gov. Polis (CO), HOA Mandatory Mediation/Solar Energy bill dies in conference committee (IN) and Prevention of frivolous construction defect claims; limiting application of WUCIOA (WA) on this June 2019 legislative update

FLORIDA LEGISLATURE REDUCES IMPACT OF HOA EQUAL PROTECTION BILL (March 2020)


What is the solution to HOA abuse and dysfunction?

At the heart of it, HOAs regulate homeowners (and small business owners in mixed use HOAs). As I noted earlier in Part 1 of this series, HOAs exert their control over homeowners and residents with the blessing of the state.

That’s because HOAs make it possible for municipal and county governments to avoid much of the messy work of governing. So, I’ll restate a fact: HOAs are a win-win for stakeholders in the real estate industry (corporate interests) and local/state government. 

Despite clever advertising and public relations campaigns, HOAs do not exist for the benefit of residents, and HOAs don’t guarantee higher property values.

Here’s why true HOA reform is so elusive:

Legislation that regulates HOAs, in effect, is a futile attempt to regulate our community regulators. 

Therefore, it’s my opinion that the only viable solution is to essentially overthrow the HOA regulators of American home life. While we cannot simply abolish every HOA over night, I believe we can take important steps to break free from the HOA trap. 

In Part 3, I present my Big Picture viewpoint on how to eliminate and prevent HOA abuse and dysfunction.

References:

Community Associations Institute policy on Support for the Uniform Acts

UCIOA (2008)

Deborah Goonan

is the creator of Independent American Communities (IAC), a Housing Consumer Education blog focusing on HOA governed Common Interest Developments.
IAC documents legal, social, and economic challenges — and explores solutions to problems — in U.S. HOA-governed common interest communities.