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Tales from a Condominium Association: Caps on renters and the dynamics of decision-making

As some of you know, aside from my day job developing policy and research, I am also a president of a homeowners association - specifically a multi-building condominium association.  I've been on the board for years, and I enjoy the fact that it keeps me honest - although I am looking at the wide national policy lens in the daytime, I have to face the day-to-day realities of the smallest local government in the evenings.  While I am the lead author of AARP's policy on housing issues and I am responsible for the policy direction of the American Planning Association's Planning and the Black Community Division, I am also heading up a homeowners association in an area that's been hit hard by the Great Recession.  That means that I need to think at the 30,000 foot level, but I have to keep a foot on the ground at the same time.

The latest example of this was Monday night (thanks to my TiVo, I didn't have to miss the call heard 'round the world by the replacement refs to end that controversial Monday Night Football game). We had our quarterly association meeting and the subject came up of our rental cap within the condominium development. In response to our earlier conversations, I found myself briefly explaining the FHA guidelines related to owner-occupied units.  According to the 2011 FHA condominium guide, keeping FHA approval requires that at least half of the units be owner-occupied.  There are several other requirements - as a group, these are intended to ensure that the FHA guarantees loans on stable properties. As I had been looking at FHA regulations earlier, it seemed reasonable to share these with the group - maintaining our status as an FHA-approved property is certainly good for property owners.  I was happy to use some knowledge from my day job to help the community members.

As I explained these requirements to the group. I also had in mind the increased pressure on both renters and homeowners since the recession.  My report "Housing for Older Adults: Impacts of the Recession" covered the issue, focusing on older adults, but these same market forces and decreased affordability have impacted renters and homeowners of all ages. The unevenness of the housing market's recovery means that some pockets are still at or near their lowest value in recent years - in some suburban Maryland neighborhoods, homes are still 50% below their peak value.  As a result, homeowners who lose their jobs may find themselves forced to put their units on the rental market, attempt a short sale or enter foreclosure.

In our community, many of the long-time homeowners are rightly concerned with property values and quality of life issues. Some of them see a rising percentage of rental units as the sign of a declining community, and felt strongly that we should lower the rental cap to minimize the number of renters. On the other hand, as I have said often, "renters are better than foreclosures."  This discussion and decision-making process forced me to balance the results of research, policy ideals, and the reality on the ground.  My goal, as always, was to make the best decision that I could for the homeowners in the development - they are the constituency that I represent.

In the end, we decided to keep our current cap in place - it would allow us to maintain our FHA-approved status, but will also allow for a few more rental units in case homeowners need that flexibility. We considered a few programs to make it easier for everyone to maintain their properties and the common grounds, and will likely implement some of them later (if the budget allows.) We did our best not let the discussion to lapse into one set of homeowners blaming another set for their actions, or the same general complaints without ideas.  We wanted all thoughts about solutions out on the table in public before a decision was made. This was a good meeting, but this process doesn't happen everywhere.

For common interest associations such as homeowner's associations, good, fair decision-making requires a thoughtful, well-informed and well-meaning board.  Over time, I have heard horror stories from many other places, starting with poor decision making, and at times extending to shady deal-making and general misuses of power.  Six years ago, AARP Public Policy Institute developed a Bill of Rights for Homeowners in Associations to guide states in regulating these smallest of local governments. The principles are good ones, and would help curtail many of the abuses that can happen.  However, this (and all forms of government) requires that people with good intentions, the right information, and the ability to make fair decisions are in the positions of power.  In places where few people volunteer, it can be hard to find that quality of leadership.  Although I was slow to volunteer for this board four years ago, I am glad that I can contribute my talents to it - I saw a need in my community and stepped up to fill it.

The burden of citizenship falls on all of us - whether it is a HOA board position, school board position, representative, councilperson, mayor, or any other position in local government, we need people to step up and volunteer their talents for these roles.  We then need to elect good people, hold them accountable for misdeeds and poor decisions, and offer our good thoughts, ideas and efforts. I'm disheartened by the small number of people that show up for our meetings, but I am invigorated by the care that they have for their community. When a colleague shares another story about abuse of power, I am reminded about the worst-case scenario and rededicate myself to doing the best that I can - I can only hope that local elected officials feel the same way.

What do you think are good principles for homeowners associations?  Share your thoughts below or @drurbanpolicy

Comments

  1. Eagle-eyed reader Ryan Wilson pointed out that the FHA's mortgagee letter from two weeks ago, available at: http://portal.hud.gov/hudportal/documents/huddoc?id=12-18ml.pdf, changed some of the 2011 guidelines.

    This is correct, but since I have yet to see a revised guidebok, I'll keep the old link in the post. There were changes to several requirements that will make things easier for condo associations, but there was no change to the guidelines about percentage of renters.

    For a good summary of the new changes, you can see Ken Harney's blog at http://www.inman.com/buyers-sellers/columnists/kenharney/real-estate-industry-welcomes-changes-fha-condo-rules

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