Does an alternative to HOAs exist?
Is there an alternative to HOAs? One where the homeowner has more control over his own home, but where the common areas (Open Spaces) are paid for and maintained by the homeowners?
– Need alternative to HOAs
Dear Need Alternative to HOAs.
The answer is YES. An alternative to HOAs is the Improvement District.
What is an Improvement District?
Single family housing can be managed by either public management or private management (contractual governance schemes) called HOAs.
Prior to the 1960’s overwhelmingly all single family housing was managed through local governments paid through local property taxes with only a few hundred voluntarily created HOAs in existence. This changed in the mid 1960’s as the economics of land, the entrance of large corporate builders and government intervention forever changed the future of housing as the era of public/private partnerships began.
…But local HOA mandates aren’t the only governmental intervention. For decades, the Federal Housing Administration has indirectly subsidized the creation of HOAs by giving buyers easier access to mortgage financing when buying into an HOA community.
Government policies have caused developers to oversupply HOAs to meet artificial demand for HOA communities. When HOAs are created to satiate government bureaucrats, rather than homeowners, it shouldn’t be surprising that many HOA communities are neither well-crafted nor homeowner-friendly. But, the solution to the HOA problem is not more government intervention. It is less. The first step is for government to stop mandating and subsidizing the creation of HOAs.
Nick Dranias holds the Goldwater Institute, January 14, 2009
As corporate builders and government intervention grew, consumers no longer dictated the type of housing management to be used. Instead local governments decided a “one form of private governance fits all” housing policy would be best.
Who are HOAs best for?
For decade’s local governments have denied builders the choice of building single family housing without areas owned in common and instead mandated that all housing have common areas which automatically requires an HOA entity to be formed to own and maintain these areas. Why? It’s not because HOAs were formed to protect property values, that’s a false marketing claim perpetuated by the housing industry to mislead home buyers into accepting HOAs. Instead the primary reason for a HOAs creation is:
“What most people don’t realize is that the main purpose of a community association is to defer municipal financial and maintenance responsibilities from the public sector, by placing these obligations in the hands of the residents of the community,” Bolen said. “This privatization of public functions allows the continued development of housing and infrastructure without having to increase taxes for a municipality’s citizens.” Josh Bolen, esq., a litigation partner for Carpenter, Hazlewood, Delgado & Bolen, PLC.
Some forms of housing such as Condominiums and town-homes must have private governance and some single family housing such as ones with private streets and special amenities also need HOA governance. Because most local governments require subdivisions that are gated to have an HOA because the local governments cannot regulate and maintain private streets. Also subdivisions with special amenities such as air parks, large lakes, golf courses and those that own commercial property are all examples where privatize housing would be the best practice because local governments don’t what to own and maintains these specialized amenities.
SB1402: Homeowners to take back control of their homes:
SB1402 is about Improvement Districts. The goal is to return CHOICE to the housing marketplace after being denied control for decades in an effort to satiate local bureaucrats at the cost of meeting the demands of the consumer market place.
Even after consumers in independent surveys have said 60% to 80% of the time that they want single family housing not under the control of a private association. Because after decades of use consumers have come to realize that HOA managed housing is a big liability with ever increasing expenses and abuses instead of the industry claimed “To make better Community” or “To protect property values.” In addition a recent local survey has shown that housing under Improvement District management has overall higher property values then homes located in HOA managed neighborhoods. Which also means that local governments have lost both property and sales tax revenues by not having more housing under Improvement District control and because of that they have lost millions and likely tens of millions over the years for not doing so.
Improvement Districts not HOAs
Finally, although private housing management through HOAs has proven to be a “fundamentally unworkable” solution, local governments have refused to reevaluate their decade’s old housing policy and use other forms of housing available to them. SB1402 attempts to change today’s, one sided housing policy by mandating that local governments provide an alternate zoning code that allows builders to build single family housing neighborhoods without land owned in common. However someone still must own and maintain the landscaped areas, retention basis, street rights-of-ways, entrance monuments, parkways and parks etc. so public funds don’t have to be used.
This has been successfully accomplished in the past through “Improvement Districts” that don’t have Boards, or architectural rules or eliminate the Homestead protection of the lot owners. Simply stated: Improvement Districts provide ownership and maintenance services paid for by a district tax that is significantly lower in cost than an Associations assessment. With participation from District residence and managed by public managers but without all the other baggage, liabilities and higher expenses that comes with HOA management.
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If you are referring to Alternatives to HOA Management, i’d like an answer as well. Such as, Is anyone self governing? I’ve thought about maybe having an Accountant take over the bills and dues and go to self govern. Has anyone done this?
there are greater than 9500 HOA’s and Condo’s in Arizona. About 5000 are professionally managed by Management companies that belong either AACM or CAI . The remainder are either managed by management companies without professional affiliation and many times training and certification. The remainder are self managed. Where the board does the work them selves or simply hires a CPA to do the financials and a secretary to manage the records. While professional management with organizations certified by one of the two trade organizations is better than the fly by night organizations I’ve seen too many incompetent certified community managers to put much faith in them. Being self managed by board members that truly want to help the organization and do things in the best interest of the community would be far better than trusting your money and community to the fly by night management companies.
HOAs are not the norm in older, more affluent neighborhoods or condos in northeast. I have owned or co-owned five properties. One was an old house in an established inner-city neighborhood in Minneapolis. The city and the neighbors minded their own business unless you were posing a public hazard or nuisance.
Properties 2-4 were condos in Boston. We were self-managed, all of us had access to the financials, and if something was broken we worked together to hire competent help to fix it. We paid nothing out of pocket—all maintenance came out of reserves. Rarely there would be a minor assessment increase for large assessments, but they were always small.
My fifth property is in Chicago. It is no larger than my last property in Boston with 12 units and one rental, but is “professionally managed.” It has been a nightmare. The Board is corrupt or stupid or both. They fix nothing, but when they do, ythey defer to the management company which hires substandard contractors that over charge us. My monthly dues have skyrocketed. The building is dilapidated and my unit is damaged so badly that I will not be able to rent or sell.
Property Management Companies control a powerful lobby and they bribe judges and politicians to protect them. Their goal is to make homeownership untenable so that owners will be driven to deconvert (they will buy you out, sometimes forcibly) or forced to sell home at a loss due to poor maintenance and neglect.
HOAs are not the problem. Property Management Companies, HOA attorneys, corrupt politicians, and inexperienced owners are the problem. Also, investors are a problem. My advice: 1. Avoid property management companies. Require owners to take a self-management course. Hire your own cleaning services and contractors using Angie’s List. Learn to communicate with your neighbors. Use reserves only for necessary repairs and maintenance. Make all transactions transparent. Hire a CPA once a year to audit your books. 2. Impose rental caps and vet renters. 3. Do not permit sales to investor-owners. 4. Require all owners to attend meetings. Record all meetings. 5. Don’t be an asshole.
Being self managed is surely an option for smaller HOA’s or Condo’s, but you must do that with your eyes wide open. This takes real work, managing records and business contracts as well as supporting the needs of your community, it is not just about getting an accountant to handle the finances. It also takes a commitment to know and understand the laws and the community documents. While we see issues with many if not most so called professional management companies, the possibility of even worse issues come up with self managed communities because the board members do not take or have the time to stay current with the laws governing you community, and in doing so infringe on the rights and due process due each homeowner.
What the article is however dealing with as a viable option to HOA’s in total called improvement districts. The only municipality that we know of in the state is the City of Gilbert that allows these options for developers. We have tried for three years now to make communities at least allow this option to any developer building one of these common interest communities, but so far have been unsuccessful at getting these bills passed.
In Nevada, an alternative to the standard-issue HOA — per Nevada Revised Statutes (NRS 116) and Nevada Administrative Code (NAC 116) — is the “Limited Purpose Association.”
Here’s some information:
NAC 116.090 “Limited-purpose association” interpreted. (NRS 116.1201, 116.615)
1. An association is a limited-purpose association pursuant to subparagraph (1) of paragraph (a) of subsection 6 of NRS 116.1201 if:
(a) The association has been created for the sole purpose of maintaining the common elements consisting of landscaping, public lighting or security walls, or trails, parks and open space;
(b) The declaration states that the association has been created as a landscape maintenance association; and
(c) The declaration expressly prohibits:
(1) The association, and not a unit’s owner, from enforcing a use restriction against a unit’s owner;
(2) The association from adopting any rules or regulations concerning the enforcement of a use restriction against a unit’s owner; and
(3) The imposition of a fine or any other penalty against a unit’s owner for a violation of a use restriction.
2. An association is a limited-purpose association pursuant to subparagraph (2) of paragraph (a) of subsection 6 of NRS 116.1201 if the association is created for the sole purpose of maintaining:
(a) Areas on an official plat that are designated as unsuitable for building;
(b) Areas required by the governing body to be designated as floodways, natural drainage or spillways; or
(c) Other areas that the governing body requires to be used for the purpose of collecting, facilitating, retaining or channeling storm water drainage of the residential property of the common-interest community.
3. An association is a limited-purpose association pursuant to subparagraph (3) of paragraph (a) of subsection 6 of NRS 116.1201 if:
(a) The association has been created as a rural agricultural residential common-interest community;
(b) The residential lots in the common-interest community are a minimum of 1 acre and are zoned for agricultural purposes by the county in which the community is located; and
(c) The governing documents of the association authorize the residents to farm or raise livestock on the residential lots.
4. As used in this section:
(a) “Governing body” has the meaning ascribed to it in NRS 278.015.
(b) “Landscaping” has the meaning ascribed to it in NRS 278.4781.
(c) “Public lighting” has the meaning ascribed to it in NRS 278.4783.
(d) “Security wall” has the meaning ascribed to it in NRS 271.203.
(e) “Trails, parks and open space” means trails, parks and open space that provide a substantial public benefit or are required by the governing body for the primary use of the public. The term does not include a private street or roadway, gated entry, swimming pool, gazebo, clubhouse, pond, tennis court, miniature golf course or frisbee golf course.
(f) “Use restriction” means any provision of the governing documents of an association that restricts a unit’s owner in the use of his or her unit.
(Added to NAC by Real Estate Div. by R114-99, eff. 5-5-2000; A by Comm’n for Common-Interest Communities by R129-04, 4-14-2005; R205-05, 9-18-2006)
Thanks Jenn for your comment. While I’m constantly searching other state statutes for possible relevance and applicability for Arizona. This concept would apply mostly for what we call Property Owners associations in Rural Arizona, that are currently governed under Planned community statutes. The one concern is the primary expense for our property owners associations are roads and road maintenance is excluded in Nevada’s Limited purpose associations. While the concept is interesting any attempt to create such an option could never be applied to existing communities and I cannot see a major land owner subdividing his/her land and creating an organization with maintenance responsibility with covenants that are not enforceable by the association. Our improvement district would not have an association providing the maintenance it would have a municipality, and covenant enforcement would be done by homeowners just like your limited purpose association.
Self-Management is easy as pie. Is “improvement district” a fancy name for the next racket? I have owned 5 properties and the only nightmare has been the one whete we hired “help” in the form of management companies, which is what you are talking about. lol
Thank you Dennis for all that you are doing and your comment above.
The Limited Purpose Association concept could be applied to existing communities, but they would have to amend their Declarations, which is exceedingly challenging of course. But, theoretically, it is possible in some cases. Accomplishing similar was my brief Norma Rae-esque fantasy at one stage in my HOA ordeal. I did speak with a Planning official in my town who told me that there was “no requirement” that an HOA exist in the case of mine (in part because it was not part of a larger, master association). She also informed me about a nearby similarly-aged development that is, in fact, only a “Landscape Association.”
I am for anything — Improvement Districts, Landscape Associations, anything — to stop the CC&Rs extortion racket and the high-stakes abuse of innocent good-faith homeowners like me.
I also don’t think critical infrastructure like public roads should be in the purview of an HOA, but that is a whole ‘nother huge topic. I now, mercifully, live in a non-HOA neighborhood; the City repaved our roads about a year-and-a-half ago, the street sweeper comes by every week, the trash gets picked up, the sewers are tended, etc. It works great, and I don’t have to be tormented and threatened by psycho board members, unscrupulous management companies, and crooked HOA lawyers.
You must be an hoa or contract attorney? We always self-managed, worked together, and kept out of eachothers faces. These issues never come up when people are transparent, cooprrate, and do the right thing. Something people in states where hoa attorneys and property management companies reign supreme.
Who are HOAs good for? They are very good for submissive people who let tyrants push them around. If you are an independent thinker EVEN when willing to comply with HOA governing documents you are NOT a good fit for an HOA. Why? Because boards will create more problems for you when you push back!
Clearly not all boards or associations are created equal. The boards and associations that you have lived in are particularly bad, but I’ve also seen far worse. I don’t tent to hear a lot about good boards that truly try hard to do the right things for their community. Unfortunately as my home page states these boards have absolute power over your community and absolute power corrupts absolutely. With this power even good boards can change and lose site of what they are there to do, work only in the best interest of the association and the community as a whole. Every board is one board member away from creating a nightmare in their communities. The best that we can do is stay engages, and organize the community as best you can to demand what you need from the board or to simply replace them with members that will listen to the needs of the community.
There will always be HOAs that are worse. All are dependent on the character of the people on the Board. Imho and experience it is a myth that people do NOT wan to serve on the board. All I see is people clamoring to get on the board and those are the tyrant types. It’s important to push back on these people as soon as possible. The saddest part about the Arizona Dept of Real Estate and Office of Administration Hearings is that they don’t seem to be able to do much to help w/CC&Rs as those are left to be interpreted by the tyrants however they want. That’s exactly where we need to get control. the abuse comes from loose language in CC&Rs.
First thanks for letting me join this group, while I do not live in Arizona, I do have friends that do, HOA all across the United States have the same issues, the stories have a familiar ring of abuse, over power board of directors who seem to never have term limits, and with many HOA management and attonerys who actually are members of CAI “Community Association Institute” who have large lobbying power in every state of the union they are a problem child, they do not represent homeowners but that of the HOA industry (Trade groups) whose sole purpose is to make a lively hood off of millions of homeowners who live in homeowner association who in most cases go out of their way to isolate or indoctrinate those board members into this HOA Industry ideology. HOAs over the course of decades has eroded home ownership, as to many whose very civil/property and most of all our very “Constitutional Rights”, thereby creating minor states within a state thereby they are Unconstitutional in ever since of the words within our “Constitution” of the United States. Every homeowner in the United States that lives in one of these HOA must come together to push back since each State as very little oversights with poor outcomes even in a court of law to where a homeowner will always be on the losing side the injustices are far to great. Its over due that property owners take back the American Dream of homeownership to be the lord of their of homeowner suffrage to an industry that makes billions of dollars off every HOA that exist today.
Founder of “American Coalition of HOA Homeowners” – Facebook page.