guest blog by Deborah Goonan
There may be a tendency on the Neighbors At War website to concentrate on warning people in Homeowners Associations. But that may be too narrow a scope.
Don’t limit our audience to HOA owners. Include tenants, who make up more than 30% of HOA residents in many communities. Include home and condo buyers, particularly those who are looking for a home and true quality of life.
Savvy real estate investors who really want the HOA model and know how to work the system: We can leave them out of the equation.
But an important audience of people who SHOULD be paying attention to the big picture are the owners of non-HOA properties. You see, all taxpayers are eventually going to foot the bill for the next approaching crisis in housing, as aging, failing HOAs with insufficient funds to maintain the infrastructure turn to traditional government to solve their problems. When HOAs cannot be maintained, blight and crime increase. Property tax bases decrease along with property values.
Evan McKenzie has explained this well in Beyond Privatopia. Local governments will have to pick up at least some responsibility – and cost – of repairing crumbling roads, correcting poor drainage that leads to flooding, increased police protection for crime-infested areas, increased strain on the courts related to crime and HOA-related lawsuits, etc.
I will give you a real life example. My former HOA in Florida had a developer-owned water & sewer utility which was recently sold to the local municipality and County under an inter-local agreement.
According to the pre-purchase County-funded Engineer evaluation, the water/sewer system was in shambles, the sewer system out of compliance with FDEP since 2010, the water system with a history of sporadic water quality violations and boil water advisories. Two out of four wells were unusable, and two wells were barely enough to meet demand. The entire system needs to be rebuilt – potable and sewer treatment system, lift stations, wells, etc. The system lacks redundancy – meaning there is NO back up if a major component fails. So redundancy must be built in to bring the system up to current code. This will cost in excess of $11 million. There are about 1500 homes and a handful of commercial customers (who threaten to connect to a different utility provider). After the purchase last fall, owners received a 47% rate hike. More increases will follow. So far, it has only been HOA owners affected.
But the local news recently reported that the city who purchased the utility is “broke” and they blame the high cost of acquiring the water utility from the HOA! They are reporting there will be tax increases for City residents! So you see, the people in this municipality are going to have to pay for the former HOA developer’s deferred maintenance of a water/sewer system that is not even used by non-HOA residents.
I recently read that Fairfax County VA is seriously considering taking over maintenance of “larger” storm water ponds in HOAs. Why? Because the HOAs cannot afford to maintain them, and downstream flooding is resulting due to lack of maintenance. Who will pay for this? Fairfax County homeowners, even if they do not live in an HOA.
So, should the Neighbors at War message be aimed only at those who own homes in Homeowners Associations? My answer would be “NO!” It’s a problem for all American homeowners. You will eventually be taxed for the misdeeds of the out-of-control Homeowners Association Industry.
Thank you, Deborah for a strong message well-delivered.
Like you, I have long felt everybody (HOA and not) was going to suffer the consequences of allowing HOAs to build on every square inch of vacant land within the city or county.
In time, I see these cities that are so heavily populated with HOAs taking a nosedive. The party will be over. The cookie is going to crumble. It will be a very sad day for the city planners. There will be a massively devastating lesson learned. Sadly, it’s all been very predictable.
It’s almost as if the non-HOA homeowners are the co-signers on the HOAs. When the HOAs go down the drain…the co-signers go with them! It makes the entire HOA concept seem even more stupid than it already is.
That’s some pretty good info! It’s disturbing that we can only sue and sell, and when we sell, we can still get stuck paying for them! I have been doing some research and out of only 5 hoas, I found 2 had big assessments…more hoas are going to have them, they just have their heads in the sand.
It either comes in the form of big assessments or massive debt. Either way the homeowners take a big hit.
My HOA board borrowed $1,000,000.00. Add the interest onto that and it comes with a payback of nearly double that figure. And that’s if every payment is paid on time, but that has already been a problem starting with the very first payment. So, they paid $5,000 per month for 12 months; interest only payments. Down the drain went another $60,000.00. HOAs have not learned you cannot spend yourself out of debt.
2 out of 5 is 40%. If that small sample applies across the board and there are 350,000 HOAs in America that’s 140,000 HOAs that are hitting homeowners with big assessments. Not one dime of which is tax deductible like county taxes are unless it’s being paid on rental property.
I wonder what percentage of people are losing their houses because they can’t pay those big assessments?
So have HOA’s run by Professionals instead of homeowner volunteer’s who, most have no clue on what the association needs and what needs to be reserved for future expenditures. You wouldn’t trust your financial future on your landscaper or plumber. So why would you expect “Joe homeowner”, to manage your community of thousands if not millions of dollars? It’s a rare Board member that serves for the good of all. A thankless job where everyone expects you to fix everything and where states keep changing the laws that make things harder to enforce. Most have an agenda or that they are working an angle that benefits them and their family.
“A thankless job where everyone expects you to fix everything and where states keep changing the laws that make things harder to enforce.”
Tasha, could you please provide the name of the states and the statute numbers, please? I would like to read those laws.
Board members often make the claim of a “thankless” job yet they want to stay on the board for decades. I need some help understanding why somebody would volunteer to serve on an HOA board without pay or compensation for years if it is so utterly thankless. Something does not jive. Yes, they often do find a way to take better care of their own property than all the others in the HOA. And some create businesses to self-deal projects for the HOA through those “companies” but then it’s a profitable endeavor for them, correct?
The HOAs that have reserve studies know what is needed, and still don’t follow the reserve study (2/3 of them are underfunded, half of which are extremely underfunded). And according to my CCRs they have breached their fiduciary duty for at least a decade. The PMC is not a professional, they are not licensed or regulated. Why would I want to let them spend my HOA money hiring their friends to do the work for more than it should cost…buying a condo is not carefree living, owners must watch and much be involved to make changes to the current crisis. The huge special assessment epidemic has started and is only going to get worse.
I live in an HOA in Illinois and years ago our HOA sold the water plant to a company called Consumer Illinois Water. It changed its name later to Aqua Illinois..look up Aqua Illinois a water profiteer and you will see how damaging this is.
Needless to say due to a board’s bad decision it has cost home owners dearly. This contract was to cost us a sewer rate of approximately $80 per month until upgrades were made which was to last a couple of years. Well I’m here to tell you over 10 years now we have the highest water rate in the surrounding area. We pay on the low end $114 per month this includes the sewer rate of $80 then water usage. This company, even after upgrades to the plant, has now pumped sewage into our lake and continues to do so during heavy rain.
We have 1800 homes in our HOA so add that up. We need to do something about this scam on the American people or do away with the HOA system all together. I would personally rather pay more taxes. If you add the dues and water I would actually save money living outside the HOA.