Hidden Housing Opportunities--It Happened in Houston

Earlier this year we wrote about re-developing older community associations into new, higher density housing located in or near newly expanding urban cores (see February post: "Back to the Housing Future".) And now, we have a real instance of that happening--in Houston. 108 condo units have been consolidated for sale to a developer who will build a high-rise on that 5 acre parcel. 

To read more, click the title link above.

The Condo Conversion Budget

How do you Learn the Truth?

We have written on these pages before about the economic crisis that can befall the buyers of condominiums converted from old apartment buildings.[1] Buyers wake up to find that the home they thought could be owned and maintained with an attractively low monthly assessment turns out to be a nightmare of hidden expense. Understandably, they want to know the truth, and the truth is that a 25-30 year-old building just cannot be evaluated with the same criteria that you would use for a new one, and the financial plan used to maintain it also cannot be the same as one used for new construction...

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Predicting the Future of Community Associations

An Outline for the Next 50 Years

Co-operative, private maintenance of commonly owned land and structures in small villages and towns has been around for thousands of years. But in California, “common area,” and the community associations that maintain it, have only been regulated by statute for a few decades. The California Condominium Act was enacted in 1963. The Davis-Stirling Act, in use today, was enacted in 1985. We began seeing condominiums massed produced for California consumers in the early Sixties when the McKuen Corporation started building their ubiquitous fourplex buildings throughout California...

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A Reader Reports Back

Here is a letter I received from one of our readers:

Tyler,

The pen is mightier than the sword. I have seen it work on our association that was far less than noble.I took the advice of the association's attorney given to me several years back; and that was to embarrass the bad members of the board. I published several letters called the HOA Observer and only recorded the facts, and the facts where the board was not meeting the law.

Eventually the management company became more compliant in obeying the law and refused to do illegal activities as they once did with the board. My letters generated interest by other good people in the association that had no idea what the board was doing. I campaigned for them in my monthly letters and two were elected by the membership and the membership discarded the bad director(s).We now have a board that will walk "the straight and narrow", and will obey all of the state statutes, or CC&R's and the bylaws.

This victory was accomplished with only honesty and the good old fashioned way of American democracy. We did it without litigation or other legal enforcement; without intimidation, coercion or any corrupt or with legal council.We now will conduct all of the board's business at the board's regular meetings in an orderly manner, and the exceptions will be handled by legal means. We are living in a democracy; all we need to do is to use the democratic laws we already have; they actually work; they really do!We have never foreclosed on anyone's home and won't. The banks have foreclosed on homes but we have not.

We have only put liens on back monthly dies which is paid when the property is sold; to be fair to the rest on the membership.I do not see that our situation is unique and this would work with countless other associations with similar problems.I have attached the reserve irregularities report I made to the board and distributed to the membership along with the campaign newsletter.I have also included a chart of the regression analysis of the last eight years on our operating expenses. It shows that inflation is killing us. I excluded the earthquake premium which was canceled two years ago that would have skewed the data. The professional accountant and I will work on and make the least painful way to improve the reserve account funding.

The accountant has your book.I owe a lot to you and your book on "The Uncertain Future of Homeowners Association." That book may have saved us from an uncertain future.

Sub-Prime Backlash?

Will New Lender Rules Cut Availability of Condo Loans?

Last month we asked the question: “Will the sub-prime crisis impact community associations?” (www.condoissues.com, March 20, 2008) We predicted that mounting foreclosures of condominiums and town homes would greatly impact community association budgets as owners abandoned properties leaving unpaid assessments. Lenders holding first mortgages on these properties would have no obligation to homeowners associations to cover these deficiencies, leaving large gaps in association funding.

Now, a new issue is looming. Rules for government-backed mortgages and some private mortgage insurers are being re-written to toughen lending standards for condominiums. ..

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The Board's Dilemma

I had a call the other day from a woman (let’s call her Mrs. X) who was very troubled over recent increases in her homeowners’ association assessment. “I probably can’t live here much longer if this keeps up!” she said. Turns out the board of directors had raised the assessments by 20% on top of similar increases a year ago. They also levied a special assessment to fix some unexpected problems with the buildings. “You know what they did when I complained?” She said, “They handed me your book and said to read it!” She was referring to the treatise we wrote a couple of years ago entitled “The Uncertain Future of Community Associations” (See link on the left) a discussion of the perils of under funding association reserves. According to my caller, the board was using the book as at least part of the justification for the assessment increases...

Read the Full Publication: "The Board's Dilemma" --Click the Title link or Download link on the left...

If Density is the Key to Economic Growth; Are Condos the Key to Density?

We recently wrote that older suburbs may become the new urban cities if public policy in those areas would favor density (See below, "Will the old suburbs become the new urban core?).  Now, Richard Florida, writing in The Wall Street Journal, April 12, 2008 gives us the economic justification for such policies, he states: "...our public policy must work toward, not against, density. Nearly every expert on the subject agrees that innovation and productivity are driven by density. For the better part of a century, we've subsidized suburbanization."  He goes on to show that big cities and economic "mega-regions" are the primary creators of wealth.  Suburban areas with low density populations consume, but rarely produce sufficiently to meet their own consumption. 

If so, condominiums and multi-family rental housing are the key to higher density and conversion of old inefficient suburbs to productive, high energy economic zones. We're talking urban condominiums, however, not suburban projects that spread over acres of open space without proximity to transportation and jobs. Urban, high-rise condominiums fit the model of the new urban areas we discussed earlier, and if, as Florida holds, higher density produces more innovation, then greater use of high-rise housing in an urban environment should be a national priority.