Preventing HOA Problems, Restoring justice, and Holding HOAs accountable

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

Keep in mind that HOAs benefit stakeholders in the real estate industry and state and local government, but not necessarily housing consumers. This is why it’s so challenging to meaningfully regulate the behavior of HOA developers, homeowner board members, management companies and the attorneys that represent HOAs.

Legislative change is important. But your state Legislature is only one front on the battle to protect and uphold property and Constitutional rights of more than 70 million homeowners and residents in more than 320,000 HOA-governed communities.

Consider several other non-legislative solutions to HOA problems.

Create competition for HOA-governed communities. Stop creating new HOA-governed communities.

It’s not that home buyers and renters demand dense urban neighborhoods and planned communities. On the contrary, many — if not most — Americans would prefer to avoid HOAs of all types and sizes. 

Most new development plans, especially for residential real estate, are complex business deals between local government, urban planners, and land developers. And future buyers don’t get a seat at the negotiating table. 

As a result, the seeds of HOA problems are planted when local planning and zoning offices recommend collectively-owned and privately-managed residential and mixed use communities.

For several reasons explained in the first part of this series, this dysfunctional, unconstitutional approach to housing development and economic growth is typically rubber-stamped with the approval of city, town, and county councils. 

Give homebuyers more options to avoid HOAs

The 2020 election season has revealed a growing cohort of Americans fighting against a political trend toward socialism — or even communism — in our country. And there’s no question that the foundation of HOA-governance supports socialistic and communistic tenets at the hyper-local level.

Consider the following qualities of common interest development, typically governed by HOAs. To one degree or another, the following characteristic qualities are common.

  • an emphasis on shared ownership of common property,
  • the erosion of private property ownership and the rights that come with it,
  • devaluation individual thought and expression,
  • strong values places on group think and conformity to covenants, restrictions, and rules
  • members of the community have limited or no say in how the community is managed or governed,
  • conditions that favor the rise and reign of authoritarian community leaders, who make up the HOA board

Reference: Socialism: Characteristics, Pros, Cons, Examples and Types by Anastasia BelyhLast updated on September 25, 2019 Add to favorites

Not only is competition from non-HOA homebuilders essential to holding the HOA industry accountable. Avoiding an HOA is also the only way homeowners can retain their full bundle of property rights, without interference from overbearing HOA boards or passive-aggressive neighbors.

When homebuyers have no choice — when it’s next to impossible to find a home that ins’t governed by an HOA — then the industry and their political allies have no motivation to relinquish control to housing consumers.

Therefore, we must end the status quo practice of restricting homeowner rights in new residential development. It’s time to stop building homes, condos, and co-ops that are burdened by restrictive covenants and corporate-style HOA-governance.  

Put simply, public policy must support individual homeownership rather than collective ownership. 

Bottom line: If our local government leaders won’t stop creating new HOA-governed communities, then it’s time to support and elect new leaders. 

Revive two important roles of local government — public service and civic duty

It’s no secret that government leadership at all levels (local, state, and federal) seems to have forgotten that their job is to work for the benefit of “we the people.”

And, as Americans, tens of millions are fed up with government overreach and excessive control over our basic freedoms and daily lives. We want real and useful public services in return for our hard-earned tax dollars.

In a free country, the job of government leaders is to serve others, not themselves.

HOAs aren’t better than government

Forty years ago, influential political thinkers successfully convinced a majority of policy makers that private organizations could do almost anything better than government. 

That’s when industry talking heads constantly began reminding us that HOAs are private organizations, mostly corporations, led by unpaid volunteers. In the early years of community association development, homebuyers were sold on the HOA social experiment with an absurd promise. 

Buyers were told that, as members of a private community, they’d have more local control over their quality of life. 

However, with more than four decades of hindsight, we now know that residents typically have less control over their properties, livelihoods, and personal lives. We also know that the vast majority of governing boards for private housing communities are ill-equipped to provide high-quality public services.  Many struggle to provide services that are barely adequate.

Professional management won’t fix HOA problems. 

For decades we’ve also been told that professional management can provide “expertise” and improve service, while taking the burden off of HOA boards. 

But HOA management services are expensive. And, the truth is, most managers aren’t any more knowledgeable than the homeowners on the board. Management agents typically collect their fees from HOA members, and then delegate work or purchase financial services from their favored list of affiliated providers. 

The Big Players in the HOA management industry team up with HOA attorneys, HOA insurance brokers, and financial institutions, creating multiple revenue streams for professionals, but little added value for homeowners.

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But professional management isn’t even an issue for for nearly half of HOAs. Many are small communities of less than a few dozen housing units. Even if their members were inclined to do so, homeowners in small communities cannot afford to hire a manager. 

There’s no convincing evidence that professionally managed HOAs fare any better or worse than self-managed HOAS. Sooner or later, virtually all HOA-governed communities experience the same problems. 

HOA Money troubles

With few exceptions, HOAs operate on very limited and poorly managed financial resources. Their sole source of revenue is HOA fees collected from property owners. 

Not surprisingly, most homeowners prefer to keep HOA fees as low as possible. Likewise, most homeowners don’t plan for long-term repairs and maintenance of the common property. In fact, many owners look after their own selfish interests. They plan to sell their home or condo unit and move on long before big HOA bills come due. 

That’s why, over the long term, professionally-managed or not, most HOAs do not adequately maintain their infrastructure. 

Large planned communities tend to experience typical growing pains: heavy traffic, a shortage of parking spaces, overcrowding, an increase in public nuisances, and a uptick in crime. 

Naturally, as communities age with deferred maintenance and inadequate public service, residents begin to experience a decline in community health and safety standards, and overall, a lower quality of life.

A not-so-radical concept: public service

The solution to this problem is obvious. Local and state lawmakers must stop delegating important public services to HOAs. 

Specifically, local government should be maintaining infrastructure (roads, stormwater ponds and drainage systems, public parks, conservation areas) and providing essential services such a local law enforcement, administration of public health and safety policies, and direct enforcement of building codes. 

Bear in mind that taxpayers who own HOA-governed property are already paying for these services for residents of non-HOA communities. 

Shouldn’t all residents of a city, town, or county be entitled to the same level of essential public service?

By shifting HOA community service back to taxpayer-funded public service, we can eliminate the primary reason for mandatory-membership HOAs in planned communities. That is, we will no longer need an HOA to pay for certain essential services.

The return to public service would give homeowners the option of voluntary participation in their existing HOA. Some might even choose to abolish (dissolve) their HOA entirely.

What better way to eliminate HOA problems?

Require local and state government administrative leadership and support for multifamily community associations

Condominium and housing coop boards have a duty to focus their attention on properly maintaining multifamily buildings. But, with few exceptions, HOA boards need assistance fulfilling this duty. And, as previously noted, professional management isn’t necessarily the best solution. 

Consider this alternative. With some simple guidance from local government housing administrators, HOA boards can avoid the high cost of fee-based management services.

Here’s my proposal.

For multifamily housing communities, local or state government would provide an annual financial budget and ongoing building maintenance workshop/manual for board members. Ideally, this plan would begin from the inception of the community. A financial plan would be in place before the project even breaks ground. 

Armed with a written reference manual, condo and co-op boards would no longer be able to plead ignorance. They could no longer excuse incompetence or negligence by saying they didn’t know what to do. Best of all, condo and HOA board would no longer have to hire an expensive management company to do reserve studies. 

Theoretically, this is a workable solution. Government should want to make it easy and foolproof for volunteer homeowners to maintain building(s) and community infrastructure. After all, government ends up paying when the condo or homeowners association becomes blighted or unsafe for habitation. Local government also pays for low quality HOAs in the form of declining net tax revenue.

As a result of depressed property values, poorly managed HOAs become a drain on public resources. Dysfunctional communities require more frequent code enforcement, generate more calls to local police. Accidental fires and arson are more frequent, and, eventually, the local government must condemn housing or common property that is beyond repair. 

Abolish inappropriate powers of HOAs. 

In my opinion, majority of HOA abuse and internal conflict could be prevented by simply revoking and prohibiting certain excessive powers of HOAs. Several knowledgeable homeowner and housing advocates agree.

Specifically, state legislation should be amended to severely curtain or even prohibit the following unilateral (unchecked) HOA powers:

  • to fine owners and residents for violation of restrictive covenants, rules and regulations, 
  • to foreclose on a home or condo, in the same manner as a bank foreclosure, to collect HOA liens,
  • to collect rent from an owner’s tenant, when, according to the HOA, the home/unit owner owes money to the HOA,
  • to write tickets for parking on a public streets located within HOA boundaries, 

All of these HOA police powers exist for only one reason. State leaders have enacted enabling legislation conferring powers to HOA boards within the past decade or so. Legislatures caved under the political influence of HOA industry trade groups who profit handsomely by providing two lucrative HOA services — covenant and rule enforcement and HOA fee collections. 

Common threads in HOA reform

The common threads of all HOA policy reform should be to prevent problems that lead to internal conflict among members and between HOAs and the board. As summarized in this essay, this proactive goal can be accomplished in three ways:

  • Restricting or prohibiting HOA police powers,
  • Reducing finacial, maintenance and security responsibility of HOAs,
  • Substantially reducing the percentage share of HOA-governed housing on the market

This approach to reform stands in stark contrast to current ad hoc efforts of housing advocates. Most current HOA legislative reform is characterized by homeowners who attempt to regulate the regulators, HOA boards and real estate developers who should not be regulating or properties or our lives in the first place. 

Further reading, and even more ways to rein in HOA abuse and dysfunction, see WHAT CAN BE DONE ABOUT HOA PROBLEMS AND DYSFUNCTION?

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