Beyond Privatopia Casts Critical Eye on Homeowners Associations

Beyond Privatopia Casts Critical Eye on Homeowners Associations
August 17, 2011

Review of Beyond Privatopia: Rethinking Residential Private Government, by Evan McKenzie, Urban Institute Press (ISBN 978-0-87766-769-8, paperback, 164 pages, $26.50)

Homeowners associations must be more transparent and accountable to residents, argues political scientist, lawyer, and real estate expert Evan McKenzie in his new Urban Institute Press book, Beyond Privatopia.

To date, too many of these associations have failed to deliver on their promise of efficient self-governance, are subject to onerous rules imposed by developers, and sometimes saddle local governments with cleaning up their failed finances.

Beyond Privatopia: Rethinking Residential Private Government describes the rise of community interest housing developments (CIDs)—home to more than 60 million people (or a fifth of the U.S. population) amid a dizzying array of single-family, condominium, and townhouse arrangements. McKenzie evaluates CIDs’ philosophical and political foundations, explains how they converge with local governments, reviews recent state reforms, and proposes solutions to the problems created by private government’s limits.

Lots of Power, Little Oversight

“These private governments have considerable power but little government oversight, and they often intrude into areas that many, if not most, Americans believe fall within a homeowner’s sphere of privacy. They represent an increase in the total amount of local governance rather than its replacement by private governance,” says McKenzie, an associate professor of political science at the University of Illinois at Chicago.

McKenzie identifies problems stemming from the CIDs’ imperfect integration with local governments. For example, many condominium and homeowners associations use residential fees to cover services traditional government handles, such as maintaining streets, removing snow and leaves, taking care of ponds and playgrounds, and operating private water systems. Yet the residents must still pay full property taxes.

Forced Communities

As a result, some local governments view CIDs as cash cows and have started to force all new residential developments into private communities. McKenzie contends this move limits residents’ choices in two important ways. Their membership in community associations is mandatory, and they are bound by nonnegotiable governing documents over which they had no influence.

Scanning theoretical views of common interest housing, McKenzie argues mandatory participation in associations runs counter to the neoclassical view that they are free markets in which individuals make voluntary choices about how and where to live. He also notes CIDs can intrude into areas otherwise protected from government interference by the Constitution, such as banning political signs.

Unpaid, Untrained, Unqualified

CIDs rely heavily on homeowners’ economic resources, McKenzie points out, but are run by unpaid, untrained, and often unqualified directors who have no institutional support from government at any level. And when funds are mismanaged or an association’s obligations for major repairs or damage payments are unmet, local governments often are expected to step in and use their own limited revenue to fix the problem.

In addition, McKenzie writes, the only dispute-resolution mechanism for aggrieved owners is civil litigation, a costly and uncertain way to solve problems.

As the burdens of private governance become heavier than private resources alone can bear, CIDs will seek closer involvement with local governments, McKenzie argues. State legislatures, he notes, are shifting away from their laissez-faire approach toward CIDs and starting to increase regulation of these associations, their boards, and the professionals who serve them.

McKenzie proposes allowing CIDs only limited government powers and requiring them to adopt owners’ bills of rights guaranteeing the equal treatment of owners, freedom of speech on political and religious matters, and other such rights.

Simona Combi (scombi@urban.org) is a public affairs associate at the Urban Institute.

Internet Info

Beyond Privatopia is available from the Urban Institute Press. Order online at http://www.uipress.org, call 410-516-6956, or dial 1-800-537-5487 toll free.