Category Archives: HOA Issues

Community Associations Institute (CAI) presents the “Verdict:

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guest blog by Deborah Goonan

Community Associations Institute (CAI) presents the “Verdict: Americans Grade their Associations, Board Members, and Community Managers,” a 2014 survey of CIC residents, as evidence of “overwhelming” CIC resident satisfaction. CIC is an acronym for Common Interest Communities, industry-speak for homeowners’ and condominium associations, cooperatives, and variations such as planned communities, property owners’ associations, and other marketing catch-all phrases. I have blogged before about the results of this biannual survey, but, honestly, one has to take any market “research” conducted by an organization for its own benefit with more than a grain of salt. There are plenty of reasons to be skeptical about the validity and reliability of the statistics CAI presents to the media, and good reason to doubt the ability to generalize conclusions drawn by CAI to over 64 million people.

In today’s blog, I merely play along with the assumption that CAI is the authority when it comes to CICs, because I know these survey summaries are presented as “authoritative” research to legislatures across the nation. The brief CAI summary presented in their surveys and statistical summaries gives disinterested legislators a seemingly valid reason to ignore constituent bill proposals for state level regulation of CICs. “Look how satisfied most residents are, ignore those few ‘unfair’ attacks upon our well-meaning volunteer Board members and well-trained community association managers, because residents do not want more government control.”

So the industry says to validate its own existence.

Let’s look again at the industry’s own research, for what it’s worth.

When we look at the real estate industry’s OWN market research, we discover that there is little demand for HOA governance. There IS demand for newer homes with modern features such as extra bathrooms, efficient heating and cooling systems, and upgraded finishes. It just so happens that, due to political cooperation and/or demands from local governments, CICs are the only type of new construction or urban redevelopment permitted. If we as buyers want a newer home, we get a CIC by default. Increasingly, tenants end up in CICs, too, due to a shortage of rental properties in some markets.

When we compare 2012 and 2014 “Verdict” data on supposed overall satisfaction, we note that positive ratings dropped by nearly 9% (from 70%to 64%).  At the same time, respondents rating their overall CIC experience as Negative increased by 25% (from 8% to 10%). Neutrals increased by 15% (from 22% to 26%).  If we combine neutrals with negatives, and compare to 2012, there has been a 20% increase (from 30% to 36%)  in the number of residents who cannot rate their overall experience as positive.

Note that these surveys only included a sample of current residents – one can assume that a significant proportion of dissatisfied or neutral residents that did not care for the CIC moved and then became FORMER residents. Was there an exit interview or poll taken for these folks?  How many unhappy people just got out of Dodge?

The 2014 survey also compares data from previous surveys as far back as 2005. In 2005, 22% of respondents said that the Rules in their communities had NO impact upon or were harmful for property values. That figure jumped to 30% in 2014! That represents a whopping 36% increase in the number of CURRENT RESIDENTS who see no real value in the rules and architectural standards. At the same time, the percentage of residents who said rules and restrictions protect property values dropped from 78% in 2005,  to 70% in 2014. That represents an 11.4% drop in confidence of the value of all those rules and restrictions.

Now let’s look at the National Asssociation of Home Builders report of What Home Buyers Really Want.

The 2013 NAHB survey indicated the following percentages of buyers that DO NOT WANT the following features in a new home, all of them synonymous with CICs:

70% – elevator (in condos)

66% – golf community

56% – high density community

48% – gated community

44% – mixed use community

Under current development policies throughout the US, none of these community housing features can exist without the establishment of an Association to cover costs of construction and ongoing maintenance.

When you combine NAHB data with the 36% of respondents whose overall CIC experience is either negative or neutral, there is a pattern that emerges: at LEAST one third of current residents are prone to make a change by moving out, or would be open to options and/or improvements in their communities. And more than half of buyers are not interested in a CIC with closely spaced housing, multifamily housing, a security gate or expensive common amenities. (The bulk of what has been constructed and continues to be constructed)

So, if market demand were driving the housing market then at least one third of new construction would be in non-CIC developments – i.e. in new public communities such as municipalities or special districts, or within existing municipalities. In fact, the data points to a pent up demand for such free communities, since almost nothing without CCRs and deed restrictions has been constructed in the last 20+ years – especially in the states with the highest population growth. Why not put a moratorium on CIC construction, to give the housing market time to self-correct?

Our elected officials should seriously reconsider their laissez faire approach when it comes to CIC legislation, because a significant portion of their voters are not as satisfied as CAI claims in its self-promotion campaign.  More importantly, our state and local leaders need to put an end to continued creation of privately governed corporate communities – that’s what CICs are – and return property rights to homeowners. It is high time to end land use policies favoring deed-restricted HOAs in planned developments and condominiums.

(link to CAI 2014 Verdict survey summary)

(link to National Association of Home Builder’s survey of what buyers want)

 

 

 

Who or What is The Community Association Institute? (CAI)

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guest blog by Stan Hrincevich, (www.coloradohoaforum.com)

Homeowners Associations (HOAs) are comprised of three entities: home owners, HOA Boards and their legal counsel, and the property management company (PMC). Problems can arise from any of these but for those who follow HOA issues the involvement of PMCs can be most problematic. PMCs affect HOA governance with their direct involvement in operational and financial matters and through their trade organization, the Community Association Institute (CAI), which has undue influence in HOA legislative activities that craft HOA law. For decades the sole source for Homeowners Association (HOA) information for the media and the State Legislature has been the CAI. Why not? Their name implies they represent the concerns of community associations and home owners: aka HOAs. Legislators “trust” this organization to represent home owners and citizen interests but most have no idea who or what they represent.

Legislators actually think their membership and funding comes from HOA home owners and HOAs: WRONG. They have trusted this organization for decades and have allowed them to set the rules in HOA governance and financial management. Yes, they craft the legislation that sets the rules for their industry and interests and ensure through their actions that HOA State law and HOA governing documents are highly enforceable from the HOA Board’s and PMC perspective and very weak for home owners. Due to this close relationship between the CAI and legislators across the country, HOA legislative reform has been very difficult and the few Bills that have passed have been watered, are more cosmetic than effective, and in no way help with enforcing home owner’s right

If you visit CAI or their legal affiliate web sites and read their literature you would think they represent HOA home owner interests. Wrong! Their membership is mostly comprised of PMCs and lawyers. The CAI is an organization that derives most of its’ income from selling their educational classes. Nothing wrong with this but read below on how they commingle this business with legislation. Then there is CAI “the trade organization” for PMCs. Nothing wrong with this either except that they have ensured all State HOA laws aren’t written to hold PMCs accountable for their actions.

Then there is the connection between the CAI and HOA lawyers who have ensured through their legislative influence that no binding, affordable, and accessible out of court dispute resolution process is available to resolve HOA home owner complaints. This of course ensures HOA legal enforcement from the home owners perspective against abusive HOA Boards and PMCs remains in our litigious, time consuming, pay-to-play court system making HOA law mostly ineffective.

The CAI and the entities they represent and work with in State legislatures have thwarted HOA legislative reform for decades. Recent examples:

*killing an HOA Transfer Fee Bill that would have limited the fee and required explanation and justification of the fee (this costs home owners in Colorado $10 million a year);

*opposition to a Bill that would have required HOA home owners to approve the use of HOA funds prior to entering into expensive legal actions;

* opposing an out of court binding dispute resolution process for home owner complaints (leaving home owners with only our pay to play court system for the most minor dispute resolution);

*their involvement in writing Colorado legislation to license property managers resulted in using such legislation to promote their sales of educational courses and hence drive up the cost of such required educational courses for property managers;

*opposing the limiting of HOA fees, fines, and administrative and legal fees on HOA debt; opposing term limits on Board members when others are available to serve;

*obstructing legislation on protections of home owners against liens and foreclosure for HOA debt; attempts to promote legislation that would expand the independent authority of Boards in governing HOA operations (without home owner approval); and the list goes on and all anti-home owner.

You can blame the CAI for the lack of HOA reform with their legislative intervention but much blame also goes to our political process that makes money the name of the legislative game and places unfunded citizen groups at a disadvantage.

The CAI and its constituents are the most anti HOA home owner group in the nation and in Colorado they most certainly are a wolf in sheep’s clothing and our legislators and the media are only beginning to realize their role. The beginning of HOA legislative reform and improved governance thus begins with dispelling the belief that the CAI represents home owners; revealing their history and actions in HOA legislative reform; curtailing the CAI’s influence with our Government agencies, media, and legislators; and having HOA home owner groups recognized in our legislature and in the media to offer a home owner centric perspective to improving HOA governance.

Are Cities Exploiting HOA Owners?

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guest blog by Robert Frank, Colonel, USAF (Ret.)

Will Over-Taxing & Under-Maintaining Infrastructures Lead To Disasters?

Many cities claim to promote long-run ‘sustainability objectives’ following U.N. Agenda 21 policies. But, Homeowners Associations, CICs, CIDs, Condo Associations, acting as ‘private, quasi-governments’ wind up being over-taxed and under-maintained by cities.

The predicted results are windfall profits for industry and government, and failed CIDs. Is this yet another reason the HOA industry and local government is so hostile to those who question their policies and frequent overreaches?

We know that cities or counties charge the same property tax rates for all home owners. But, the costs to support HOA/Condo private property is much less than non-CIDs. This is particularly true in gated HOAs.

So, it can be reasonably argued that the local government organizations who dictate the requirements for CIDs and profit from receiving excessive taxes should either refund the surpluses to unit owners, or reserve the surpluses for future bailouts of failed CIDs.

Spending the surpluses for such unjustified things as vastly increased government worker salaries and pensions while the older CIDs are heading towards failure is unwise, selfish and immoral. This failing CID infrastructure situation for developments over 20 years old is well known.

Professor Evan McKenzie and others offer advice on CIDs to local governments and the industry. IMO those who create and highly profit from the terms, conditions and taxes created through the CID’s master plans cannot shed all responsibilities for helping to bail out failing CIDs.

We all want to avoid the kind of urban blight that happened (for somewhat different reasons) in Detroit, Michigan. But, CID common property structures seem to be designed to fail or require major (unaffordable) renovations within 20 to 50 years. This seems particularly true for gated CIDs and Condos. it seems that inventors and profiteers of such CID plans should be held at least partially responsible for enabling CIDs to sustain themselves over the long-run.

Is it not unreasonable, or at least unrealistic, to dump the total costs of common property replacement infrastructure on the backs of future unit owners using the almost unlimited power of CC&Rs during the last decades of structural life? What will that do to unit values in cities during those final decades?

As industry leaders have written, the future of CIDs is a predictable train wreck. If the HOA/Condo market is to be sustained, major changes are needed NOW in the master plans.

And, community planning is required NOW to build a balance of non-CIDs units where owners are individually responsible for their long-range planning?

Where are the better options? Industry and government demands for maintaining the “CID status quo” appears to be a formula for home owner disasters in our lifetimes!

California Does The Right Thing During Drought

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We discussed this recently: the California bill to forbid Homeowners Associations from fining homeowners who allow their lawns to go brown.

The drought in the Southwest is historic, with water to Southern California all but going dry. The Central Valley is dry, the Colorado River is almost a dry basin. Commercial irrigation in much of the state has evaporated. People in Los Angeles County who suddenly can’t get drinking water from the tap are going to be astonished.

Despite the water disaster, arrogant HOA boards have been fining homeowners who don’t water their lawns enough. It took a state law to forbid HOAs, their management companies and their lawyers from ordering homeowners to ignore drought warnings. And now all those board members are whining that they have a new law they have to obey.

Strange that HOA boards can be so short-sighted. No concience, I guess.

But that’s why we keep electing them, right?

(link to story on drought legislation)

 

 

What’ll The Tipping Point Be?

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Yes, once again here’s the old bloviator talking about an impending crash in the housing market.

Economists have been predicting a mortgage and financial collapse many times greater than the nightmare of 2008-2009. The indicators are there. The national budget is raging out of control. Interest rates are far too low to sustain the banking industry. Investors are losing their shirts betting on the U.S. economy. China now owns a huge percentage of America’s debt. Mortgage companies at some point will have to massively raise the requirements on all new mortgages. If this happens the value of homes, starting with all those in Homeowners Associations, will crash.

In a recent blog I mentioned that this whole cascade of events will start with a minor story, a pebble being dislodged from an already unsteady dam.

The story linked below is more than a loose pebble. And it should be read and absorbed by absolutely every person with even a minor link to the Homeowners Association industry.

(Las Vegas running out of water)