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It's the weeds. I'm John Colonyl.
It may sound corny, but you really see the effects of policy everywhere.
Once you start paying attention, you see the way it creeps in.
Recently, I was catching up with my friends Jasmine and Chris.
I didn't expect it to be a conversation about housing policy, but at the root,
that's exactly what it was. I've known Jasmine since we were teenagers.
We met through church. We were actually roommates on a mission trip to Alaska.
Years later, when we both found out we were going to Howard and staying in the same dorm,
we decided to do the roommate thing again. That's also around the time we met Chris.
Yes, they're all at Howard and then this is the second day of the freshman week.
So not even everybody else is there and they had a party on the yard,
breakfast city party on the yard. We went and I saw Jasmine making fun of this thank you leg
and I joined in. Then we all just became a group. After that party, we went to McDonald's
and I think that we solidified our friendship over big Macs and McNuggets that night.
Yeah, only this was back when I was a pescatarian, so I was definitely only eating fries.
It's flail fish. Oh, did I order? I don't remember if you did, but I wouldn't even put that
slander out there if you had ordered a flail fish. Though our friendship remains the same,
we now have much different challenges than we did when we were 18 years old.
I'm an adult, but y'all y'all have like a child at a home, so y'all have unlocked a next level
that I have not yet. Like I'm paying taxes, but I'm not that grown.
Jasmine and Chris are married and raising their family in Texas, where they bought a house
right before the pandemic hit. They told me about a challenge that was unfamiliar to me,
but probably sounds very common to many homeowners across the country.
Yes, so we do have an HOA in our neighborhood.
An HOA, it's a homeowners association. Even though they're private entities,
they act as kind of a local government for neighborhoods. The status as a private entity can
be a source of drama at times. Most HOAs are a volunteer run by people who live in the neighborhood,
but usually development companies run them before homeowners take over.
That's the case for Jasmine and Chris. They were one of the first families to move into their
subdivision. When we first got here, they gave you all the paperwork, and I was reading the articles
and I was like, man, they're really strict. But at the same time, I was like, I really want the
house, so we'll deal with it. Initially, their association did things like take care of their
front yard and maintain the neighborhood pool. But after a while, they told me the management got
more and more lax, even as their HOA feet went up and up. Jasmine and Chris live outside Dallas,
and are paying $1,836 a year for their HOA. That's a fee on top of their mortgage.
Now, the average HOA in Dallas is $98 a month, which puts you a little over $1100 a year,
and the national average for a single family home can run you between $200 and $300 a month.
That's not a small amount of money. One of our issues is that we had a tree die in our front yard.
I thought they were in charge of the maintenance and the watering of it, but
something happened and the disconnect, so it died. And I went through several channels to try
to get it replaced. So at first, I'm emailing them and then nobody answers. So then I call and
they're like, everybody's out. So put a work order in. So I put a work order in. And it takes
months for anybody to get back to me, months and years, actually. So from the time my first email
to the time of putting a work order in was a year of the tree already being gone, because I was
able to get it removed. So then fast forward to me putting in the work order, it took months to
even hear back from them. And when I did, it was just, oh, we'll get to you. So when it came to
the live meeting that happened in 2023, the April of 2023, I hadn't had a tree since 2021. And it took
Chris basically reading them their rights in front of the entire neighborhood for the lead person
of the HOA to then finally reach out and get our situation going of replacing our tree. And then
next thing you know, all the work orders are updated. So it's like, you got all of my correspondence,
but you just decided to be haphazard about responding to us. And yet you want my money on time
every time at the beginning of the month. I made me feel old because I'm fighting with the HOA feels
like 55 plus activity. I don't, I'm raising a young child. Yeah, I don't, I don't have the time
to be at home all day, emailing and following up for you for something that you're employed to do.
So I really don't want that hassle next time around. So what's next for y'all in your home owner
journey if you don't mind? Yeah, so we're probably going to move into an apartment while I do
like the space that a house provides. Number one, the HOA was not helpful. Like it felt like a
thing that we just had to pay into and then they would often police us but wouldn't necessarily
help. Like so if we left our trash can out a day later, they would come by and take a picture of
it and then email it to you and say you need to you know, pay this. Or if you're a day late
on paying HOA, they would call you or email you. Hey, you're just past two. But when you're asking
for things of them, they weren't very helpful. And then just to add it, you know, the responsibility
of a homeowner, if something goes awry in the house, you're making those calls like you are the
repairman. And so it's difficult with just kind of the schedule that we have and the business
of life and having a little boy, it would just be easier to have a maintenance person. Honestly,
a whole bunch of things that we have to deal with. At least for for now, we don't not saying forever
will never own a home again, but the comfort of an apartment does sound quite nice compared to
the responsibility of home ownership right now. Yeah, I consider it taking a break from home ownership.
At first glance, this may seem like a non-issue. Just one of the facts of life, like death and taxes.
But HOAs are more than an occasional headache and potential fodder for neighborhood gossip.
This is housing policy and it's been decades in the making.
My name is Evan McKenzie and I'm a professor of political science and on the law faculty
at University of Illinois at Chicago. Evan's also the author of Not One, but two books on the topic
of HOAs. The first is Privatopia, homeowner associations and the rise of residential government.
The other one is, you guessed it, beyond Privatopia, rethinking residential private government.
I was surprised to learn just how widespread HOAs are in the US.
It's it's about 20% of the US population. It lives in some form of common interest housing.
And they are very widespread. They are in every state across the country. They all have HOAs,
they all have condos. They are especially prevalent across the Sun Belt from coast to coast from
California to Florida and in between. Almost every place where a lot of housing has been built
in the last 50 years, you will find a high concentration of homeowner and condominium associations
because the real estate industry turned toward building housing this way in the 60s and 70s and
it's just gotten more that way by the decade. Why are they so common here in the United States?
They were very few of them until the 1960s. There were maybe a total of a few hundred,
maybe fewer than 500 according to the survey in 1964. But then they began to take off
in large numbers in the 70s and 80s and 90s and through the present. And they became the dominant
form of new housing construction in most of the major rapidly growing parts of the country during
those decades. And the main reasons are because they are very lucrative for local governments and
they are very lucrative for real estate developers. Local governments can get new housing and new
property taxpayers who pay a full share of property tax but they don't have to deliver the same
kinds of services that they have to deliver if you didn't have an HOA. So as one city manager
wants to put it, the cash cows, HOA is only cash cows for local government because all the residents
are paying all these taxes but they're not getting the services that taxes pay for instead they're
getting paying privately for a lot of the same services. I don't know, I think of the local
government. It's like you have to pay these roads, you have to do these sidewalks. Do they just
come to the agreement of like, okay, the city steps away? Yes, the way development in big subdivisions
works is there's what's called the development agreement where the developer will propose to local
government, hey, I would like to build X number of houses. And then the local government is always
thinking, well, what's it going to cost us? Well, in traditional pre HOA subdivisions, the way
they used to do it, the city would have to build the streets and the sewer system and the water
system and parks and all that sort of thing. And they were responsible for that. And if they wanted
all those taxpayers, they had to provide the infrastructure and the services. But now developers
came up with this brilliant idea starting in the 60s and 70s. Well, wait a minute, we'll build all
that privately. We'll pass the cost of it onto the home buyers who will pay for it and will maintain
it forever. And guess what local government? You don't have to do all that and pay for all that.
And you can just, it's just pure gravy, you know. These extra property taxpayers are just a
benefit, but they're not much of a burden with this type of construction. And it has become very
attractive, particularly since local governments got hit in the late 70s and 80s with all these
property tax revolts, you know, tax resistance and limitations on what they can spend in borrow,
which we call in the business tax and expenditure limitations or tells. So local governments
are saying, well, wait a minute, how do we, where do we get new revenues from? We can't raise property
taxes. We can't borrow. We can't do this. Well, guess what? You can make a deal with a developer
to do this type of development. And it kind of turns them into almost a fiscal or taxing
instrument for them. I want to get into costs. So there are a lot of costs that come with home
ownership. You know, you have your mortgage, you have property taxes. And then you have upkeep,
like, it seems like there's something always going wrong. There's always something to fix.
But there are also HOA fees. What do those types of fees look like? They vary widely from,
depending upon, you know, what the, the association has to maintain. The fees are for maintaining
the common areas of the project, which is often, and it can vary, but it could be streets, roads,
well, that can be very expensive. You know, streets have to be resurfaced periodically,
and that can cost a lot of money. Often water, things like legs, ponds, retention ponds,
detention ponds. There can be many other types of things. Recreation centers, parks, of course,
are very common. All these things require maintenance. Many associations have private water systems.
They are paying a private water company to deliver the water. They don't have municipal water,
or private sewer systems. Those things have to be maintained. And, and so the association
dues every month are supposed to cover operating expenses that the association has every month,
and also a contribution to what we call a reserve fund for eventually repairing and maintaining
these facilities as needed. Other things that you may have to pay for are attorney fees. Because
if associations get involved in litigation, which is quite common, you know, with residents,
with, whoever, with a developer, you have to pay your share of those attorney fees. And that can
be, that can be a lot of money. And occasionally, there will be something really important, like,
for example, a government agency says, well, you have to dredge your lake because it's got something
in it, and you're responsible for it. And then they have to do a big special assessment, make
everyone pay extra money for that. So it varies from one place to another. It can go from 40,
50 bucks a month to hundreds and hundreds of dollars, or in the case of some situations,
even tens of thousands of dollars. Can you get into the sorts of rules these HOAs tend to have
what can and do they tell homeowners to do? The U.S. Constitution and the Bill of Rights limit
the kinds of things that a local government can do or a state or national government, because
that's what our Bill of Rights does. It limits the actions of government, but it does not limit
the activities of private corporations like these not-for-profit corporations that are HOAs.
So they can regulate almost anything they want, unless there's a state law against it. So, for
example, there are all kinds of detailed rules about pets. If your drapes are visible from the
outside, they can regulate what color, not only what color you can paint your house, but what color
your drapes can be. They can tell you where you can park your car. They can tell you can't park
on the street. You can't park in the driveway. They have told people they can't have pickup
trucks. Satellite dishes are a big source of controversy. They had to pass a federal law about
that to allow satellite dishes. And many things involving behavior, grills, barbecues, pets,
fences. And sometimes these things lead to tremendous controversies, parties, noise, all that sort
of thing. You not only have local government rules about that, but the private rules are much,
much more restrictive. They're often much more restrictive. They can be, because the idea is
it's voluntary. That's the way it's viewed by the law. Well, you know, you don't have to live
there. You could live someplace else that has different rules. We know who establishes HOAs,
and that's these developers. But who runs them? Do they run them also? And like, what's the job
requirement for running in HOA? For the first few years of a project, the developers in charge of
the association. They are allowed to control it so that they can sell out without having any
problems. Once the developer is sold out, the members, the owners have to staff the association
of themselves. People have to run for association director, for president, for vice president,
and they are then in charge of the whole project. I guess one thing I struggle with is, though,
is like, why do people care? Is it about home value? Like, what is this about?
Yes, and that's a really important part of this. Many people, and many people in the building
industry have been saying this, and many, and certain percentage of the public believes this,
that uniformity and sameness in a neighborhood is good for property values. And I'm sure there
is a segment of the buying public that thinks, look, all these houses, the way they look right now,
right after they're created and built by the developer, that's the way they have to look forever.
Because the HOA has to make sure that this can never change. And I guess there are people who
feel that that is good for property values. There are those who think that. There are others who
don't. But the problem is that there's so little choice in the new housing market now. In most
major parts of the country, 70 to 80% of the new housing is in homeowners associations or condo
associations. And so if you're one of those people who doesn't want that type of life,
you may have a very hard time finding anything in the new housing market at all that you can buy.
You may have to settle for an older house in an older neighborhood.
One of the reasons HOAs get buy-in from homeowners is the fact that they're supposed to increase
home value. Do we actually see that increase in home value for HOAs in practice?
At the outset, I think it is true that neighborhoods that have HOAs, the initial
sale prices are going to be higher than they would be if it was a comparable neighborhood
without the HOA. And that is because the initial sales price includes having to pay for all the
private streets and roads and all the other things we talked about. That's built into the sales
price. So they start off costing people more. And then the monthly costs are more because of the
monthly assessments that everyone has to pay to maintain all that. So yeah, that's true.
Now the real questions always, do you get more property value appreciation in an HOA neighborhood
than you would in a non-HHOA neighborhood? That's the question. Do the prices go up faster?
And the evidence on that is really unclear. And it's partly because it's so hard to get comparable
neighborhoods. I mean, because there's so many differences, it's hard to find really truly comparable
HOA and non-HHOA neighborhoods that are right in the same place that are really that similar.
They're different. And the lot sizes are different. Like you're not going to find a non-HHOA
development that has little tiny lots like the HOAs do. They're different. And so if they're
really always apples and oranges comparisons, and I just think it's not completely clear.
We've been talking about HOAs and those are home owners associations. And I'm going to be honest
the way these interest rates are set up. I do not know if I will ever get to be a home owner,
but I do still hold on to this dream of owning a sexy condo in the city. Like, I don't know,
I just imagine it painting the walls, different colors, changing light fixtures,
just living a brand new non-apartment life. How are condo associations different from HOAs?
They're very different in the way they're organized. With the Home Owners Association,
the association actually owns property. It owns everything that's called the common areas.
So what you own as the owner, as the unit owner, is you own your house. You actually own a real
physical house, and you own a piece of land around it. And that's in an HOA. And the association
owns the common areas, and you control that by virtue of your vote in the association, and you
maintain it. So it's part yours, see. But the association actually has title to all that property,
the streets, roads, etc. In a condominium, it's really different. Condominiums did not even exist
anywhere in the United States until the early 1960s, because they're very unusual. With a condominium,
your individual ownership interest is literally an airspace. It is almost a fictional thing.
You own the airspace within your unit, and you own the inner finished surfaces of the walls. You
own the paint on the walls. You own the carpeting, or the floor, the floors. But you don't own the
actual structure of the unit. You don't own that individually. You don't own the walls. You don't
own the ceiling. You don't own the concrete subfloor. Because the whole building is in common
ownership. So you have 100% ownership of your airspace, and you have a percentage of ownership
in the entire building, all of it, every aspect of it. And so that's the way condos work. And
that's why condo association directors may have a much more complicated job in the HOA directors,
because they have to manage all the systems of a building, you know, like the water system,
the electrical, everything about it, the plumbing, and on and on is all under the boiler, etc.
The roof, it's like managing an entire multi-unit building, because that's what it is.
What about co-ops? How do those factor into all of this?
The co-op is the third main form of common interest housing, and there are lots of them in New
York City. There are several hundred of them here in Chicago. And there are other parts of the
country as well. There are nowhere near as common as condominiums. But the way they operate is what
you own is a share of stock. Your individual ownership is a share of stock in a corporation,
and the corporation is the cooperative corporation. And you have a lease, it's called a proprietary lease,
as the unit owner, what you own is the share of stock, and you have a lease to exclusive the
occupy your unit. But the corporation, the cooperative corporation literally owns everything.
So it's a really different way of doing things where you don't actually have any true real estate
yourself. But in practice, it's a lot like a condominium in the sense that you do get to vote in
all of the associations affairs and make many of the same decisions. So functionally in a lot of
ways it's similar, but legal ownership is quite different. So that's how HOAs function. But
how exactly did we end up with all these tiny governments in the first place? That's next.
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And we're back. It's the weeds. I'm John Colonhill. And today, we're talking about HOAs.
At the end of the day, this really is a policy story. Whether you see it as filling a necessary
gap in what the local government does, or if you see it as creating unnecessary policy hurdles,
I asked Evan how far back these kind of common interest housing agreements go.
The Homeowners Association goes way back. We had in the United States, we had
early homeowners associations in the mid-1800s. But, you know, the basic idea of the way they
construct these things, the way they are, the rules are put together, goes back really to the
1300s in England. The idea is that when you sell a piece of property, you are allowed to put
restrictions on it. So you can say, I'll sell you this property. But here's the deal. If you buy it,
you have to promise that you'll sing in the Lawrence Christmas dinner every year for the next 20
years. Now, yeah, that's a real case. And that actually happened. And the reason was because
you're the owner, you're selling your property. And the developer is the same in that position.
They are the ones selling the property. And they're basically selling it subject to you accepting
these restrictions. So in the 1800s, they started coming up with a lot of restrictions, like
getting people to pay, to maintain beautiful parks and lakes and things like that. And then we have
the private streets. And then on into the late 1800s and early 20th century, developers started
to say, you know what, we can make property more valuable if we restrict the way it can be used.
So they'd say, we're going to, everyone who buys into the subdivision, you can never have a
business on your property. It has to be totally residential. And that would be the restriction.
You buy it, you're agreeing to that. And then they started imposing racial restrictions saying,
oh, this property will be worth more if we exclude certain people, not just certain uses,
like gas stations, we're going to exclude certain people. So they would exclude, you know, African
Americans or Asians or, you know, any number of groups, they did all kinds of really detailed,
you know, bands on certain types of people. So you're saying, when you buy, you promise you will
never sell, you know, to anyone except, you know, basically a white person. And they did that until
the Supreme Court outlawed those restrictions in 1948. But for a long time, you know, the segregated
housing patterns in many cities around the United States were in part created by Homer's associations
who were created to enforce those bands against everybody just as they now say, you know, you
can't have a 40 pound dog. Well, you know, for a long time, they were going to court. They were
taking people to court saying, you can't sell your house to this person. And so the idea was,
you know, you restrict the use of property and makes it more valuable. That was the logic of it.
Even the federal government believed that for a long time in the 1930s and 40s. They had their own
race restrictive covenants that were propagated by the federal housing administration. And
this is a, it's a very unfortunate part of the history of these associations that they were
a lot of them were created to do that. What can you tell us about Shelley V. Kramer, the Supreme
Court case that gets at a lot of this? Yeah, Shelley versus Kramer is a, the case that says that
these race restrictive covenants, these promises that you'll never sell your house to an African
American are unenforceable in court that they are, you know, in violation of fundamental public
policies and that they cannot be enforced in our courts. And Supreme Court did that in 1948.
And that's, that's when it forced developers to change the way they practiced exclusion because
they still did. They found, they tried to find ways around Shelley versus Kramer. So they couldn't
go, they couldn't write those explicitly racial bands and then go to court and have somebody
enforce them because they would be unenforceable. But they tried to find other ways to accomplish
the same things. Can you talk about those other ways because there is that period of time between
Shelley versus Kramer and the Fair House housing act? You've got like literally 20 years. What's
happening in those 20 years? During that, that 20 year period approximately, developers began to
find ways to practice exclusion without using racial terms explicitly. They would say, for example,
you, in order to buy a house in the subdivision, you have to be a member of the country club.
But the country club would have a membership board and they would say, no, I'm sorry, we,
you know, we can't accept you for memberships and now you can't buy a house.
And the other thing is, it needs to be kept in mind. One reason for the creation of all these
private community swimming pools was because of Brown versus Board of Education in 1954,
when the Supreme Court said that public accommodations, schools, swimming pools, etc, cannot be
made one race only by law. You can't prohibit people on the basis of race from using public
accommodations. You can't have separate but equal. And so that meant that things like swimming pools
and parks and so forth that were owned by the public were all going to be integrated. There were
not many white only parks and pools and etc. And this is one of the reasons why developers found
it attractive to buyers to be able to create private swimming pools in private subdivisions and
private parks, etc. Because their view was, when now we're exempt, you know, we're not, this is
not governmental. Now we have private pools. We have private parks. We have private this private
that. So as you said, up until you get to fair housing law that bans private racial segregation,
that's in the 60s. But for a long time, HOAs were able to enforce these exclusions by saying,
well, you know, this is a private facility. What did the Fair Housing Act change about the way
this works? Well, the Fair Housing Act changes everything really because it bans private racial
discrimination in the sale or rental of housing in all its forms. And so, you know, if there are all
kinds of practices, very kind of subtle practices that are not explicitly based on race.
And the Fair Housing Act, it's not perfect, but it is a step in the direction of trying to
make it hard, very hard to enforce racial segregation anymore. I mean, and other things like
community reinvestment act, other federal laws as well, that tried to ban the practices of
redlining and other things that that we're keeping African Americans and others from accessing
the full housing market in major metro areas in cities. We've talked about racial discrimination
just because there's such a long history of it in this country, but I'm also curious what other
groups have seen barriers to housing. You know, I'm thinking gender or disability, like, what are
we seeing? Well, the most obvious one is age because private communities are actually allowed
under state and federal law to discriminate on the basis of age. And so, you can create a
seniors community, and if you restrict it to people 55 and over, that is actually allowed.
Yeah. And so, that's kind of interesting because, you know, that's a whole class of people
under the age of 55, people with kids and so forth, who you are, excluding from membership
in communities and from certain parts of the housing stock. And, you know, Florida is kind of
notorious for this. Sometimes we joke about it, you know, but there are gigantic seniors communities
in Florida, tens of thousands of people, and there isn't anyone under the age of 55 anywhere
in the community. And that's if you stop and think about it, that's a bit odd, you know. And then
there are, you know, the types of units that are constructed, the types of housing that is
presented. It's not all the same, but, you know, they can create phases in a subdivision.
And one phase can be like three and four bedroom houses. And another could be small condos,
you know, with one bedroom or two bedrooms. Well, obviously, you know, they're going to attract
different types of people. And so, you are kind of steering people toward the homogeneous neighborhoods.
One of the things I think we can say with certainty about
all forms of communist housing is they tend to produce homogeneous neighborhoods.
And as you say, it's not always based on race, but they are homogeneous in certain ways, certain
types of people, age groups, income distribution. You know, they advertise this phase of a subdivision
or a whole subdivision. And all the houses are between 425 and 450,000. I mean, you know, this is
very common that there's this, this homogeneity of uniformity in terms of the incomes
and the professional status of the financial abilities of people in certain neighborhoods.
And it's a type of homogeneity that, you know, we really didn't have, you know, 100 years ago,
or even 50 years ago. On one hand, I can see the appeal of a homogeneous community, like,
for instance, living around a bunch of other 30-somethings with similar lifestyles,
does sound appealing. But on the other hand, it feels like that completely changes the nature
of what it means to live in a neighborhood, you know? The families are different sizes.
Some people live by themselves, someone, you know, next door, maybe older and retired.
It's nice to be able to see and say hello to people in all these different stages of life.
Well, I think that's exactly what's happening. That the idea of a neighborhood
has always, until HOAs came along, has always involved some some notion of change, you know,
change being inevitable and a certain amount of diversity. You know, I realized that there have always
been also been homogeneous neighborhoods. There've always been rich people who had their own
communities. It's always happened. But what the way I look at it is this was the sort of thing
that only rich people had. If you went back to, you know, 50, 100 years ago, there were homogeneous
communities full of rich people. But there weren't a lot of homogeneous communities where everyone
was in the middle class, you know, and looked exactly the same and their houses looked the same.
This is a type of housing, these private communities, that were once the province of rich people,
you know, places like Bel-Air in Los Angeles and other places around the country. They had
lavish private communities. There were a few hundred of them in the 1960s. But what has happened
is the development industry has packaged this into a less expensive commodity that allows them to
create really high density. And they have kind of trickled down. It's like trickled down privatization.
They have trickled down this private community idea to the middle classes, the upper middle class,
the middle class. And so it is spread so widely that, you know, it is taking away what you were
describing earlier, the idea of this sort of the organic neighborhood where you have people in
their 60s and 70s living in one house and a couple doors down the street. There's some kids playing
baseball and in the street. And by the way, this is not fictitious because we actually live in a
place like that. And we live in Oak Park, Illinois, so it's not just outside Chicago. And this is
what we see all the time. You know, kids walk into school, playing in the street, you know, we find
baseballs in our backyard all the time. That's fun. We just throw them back over the fence. But
and there are many communities that Oak Park was laid out in the 1900s, early 1900s and 1920.
And the newer communities that are being built around the country are really quite different.
Because they are not set up to be these organically growing, changing communities that have a
diverse population. And diverse in all the ways, as you were saying, diverse in a lot of ways.
You know, age, occupation, housing type, housing price, you know, that has been the norm,
that type of diversity for most of us, not for the wealthy, but for most of us. And now,
that whole uniformity idea and the private government has been trickling down and
pervading the entire housing market. And it really is changing the nature of I think of neighborhoods.
I guess in the back of my mind, I'm like, why? Like, you know, people buy a house, the whole
re, I don't know, I'm living apartment life and just the idea of being able to, you know, paint
my walls and not have to worry about painting them back is very, very attractive to me.
Why are HOA so strict and why are people signing up to be told what to do?
Well, there are people who feel like they would be willing to give up some of their freedom
in exchange for making sure that their neighbors don't have that freedom because they are worried
about what their neighbors are going to do with their property. So they'll, some people are happy
to have all these rules because they know their neighbors can't, for example, put a car up on
blocks in the front yard. They're afraid of things like that or paint their house, you know,
bright orange. And so because they're afraid of what the neighbors might do, they will give up
voluntarily some of their own freedom. So that's how HOA shape neighborhoods. Up next,
regulation, reform, and oversight. Stick with us.
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I think the vast majority of people do not understand what HOAs and condo associations are about
or how they work. The way they are marketed by the real estate industry is, oh look, this
all these things are going to be taken care of for you. You've got an association that's going
to manage things. And so that's as much as they know. What they don't know is that they themselves
are responsible for maintaining the association. And if they don't run for office, somebody else will
because it's run by them. It's their association. It's run by the owners. And I don't think they
understand it. I don't think most people read the declarations and the rules, which can be hundreds
and hundreds of pages before they enter. And that's why often their expectations are disappointed
because they say, well, I thought I could do this or that. And they discover, you mean, I can't
put a ham radio antenna on my roof. Well, that's the problem. See, they aren't paying attention
to it because they don't understand how pervasive it can be. But the choice issue, I think,
is really critical because I know there are some people who are attracted to this type of living.
That's a fact. I know some people want it because they want to control their neighbors and they
want the uniformity. But the lack of choice in the housing market around the country where 70 to
80% of the new housing in most rapidly growing parts of the country is in HOAs and condo associations.
70 to 80%. The vast majority of the new housing is in these associations. And that means that
it's hard to find a place to live once you found a location, a school district, etc. You may find
yourself choosing between new homes that are in HOAs, all of them, and going to an older house
because there just isn't any new housing that is available to you or very little. And what might
be available could be expensive custom homes that you can't even afford. Now, that lack of choice
to me is a huge issue. And local governments could control this. They could influence that because
they are the ones who decide what gets built. They are the ones who issue the building permits.
And for a variety of reasons, you know, financial reasons and the financial benefits local
government, they often go right ahead. In fact, in some parts of the country, they mandate that
all new housing has to be in HOAs. And that is the case in many parts of Arizona, Texas,
and elsewhere in the West where they simply say, look, if you want to build more than three houses
or five houses, they have to be in an HOA. They make the developers do it. So they're basically
guaranteeing that all the new housing is going to be in associations. And that's taking certain type
of choice right out of the market. So what kind of power can these boards yield? In particular,
I'm thinking legally, like what legal recourse do these boards have? Because I don't know, in my mind,
you know, say if I want to garden full of flowers, that pollinators like, and everyone is like,
no, you have to keep your grass cut short. If I don't do that, like, what can they do to me legally?
They have a very, very real and very strong enforcement powers. It's the associations have not
just the power but the duty to enforce the declaration against all the owners. That's what their job
is. They are required to enforce it. And they can do all kinds of things. They can find people.
This is the case all over the country. They can impose fines for misconduct. If you don't pay
your assessments, for example, at a protest or whatever reason or for whatever reason, you owe them
money, fines or overdue assessments. They can put a lien on your house for unpaid assessments
and or rural violations, money that you owe them for parking violations or whatever. They can actually
collect these through a lien on the house. A lien is like a legal right to the property.
So you will find that you can't sell the property effectively because whoever buys it has to pay
off the lien. But they can also for close. So in particularly for unpaid assessments,
that associations can for close on your property, they can sell your house out from under you
against your will and collect their money that way. And it happens all the time all across the
country, HOA for closures and many law firms specialize in assessment collection and enforcement
actions and imposing these liens and foreclosing if people don't pay them.
Are there things that any local governments do to regulate HOAs? I mean, they're private entities,
but are there any examples in reform that we're seeing across the country?
Yes, and it's mostly happening at the state level. I think local governments should take a much
stronger hand in helping associations resolve their conflicts. To resolve their internal conflicts
at low cost without recourse to the courts, I think local governments could really do a lot
in that regard. But what we are seeing now, particularly since the collapse of the
Champlain Tower's self-acondominium building in Surfside and Florida, we are starting to see
some movement toward regulating particularly the finances and the building maintenance and inspection
practices of condominiums, especially. But this is an issue all across the country that I've been
concerned about for many years, which is that there's very little oversight of the property
management practices and the budgeting practices and the banking, so to speak, financial practices
of associations. And this can lead to real problems, where suddenly they have a major expense and
they don't have the money to pay for it because they have not planned properly. So we're starting
to see emergence of more state laws regulating those practices and saying, hey, you have to do a
reserve study to find out how much money you should be setting aside, have an expert tell you,
you should be setting aside how much per month per year so that you'll be ready when the roof fails
on your condo building or the lake has to be dredged. You'll be ready with some money there and you
won't be hitting people with $75,000 special assessments that cause them to lose their homes.
And so there is some regulation on that front. I have not seen what I would like to see and I'm
hoping it happens, which is greater regulation of the developers to get the association set up
properly at the outset to get them set up with some financial practices from the time they are
launched. And I think that's something local government could certainly take a stronger hand in
and I certainly hope they do. So they could take a stronger hand, but it seems like this is a pretty
sweet deal, both for governments and these developers. Is there any incentive for local governments
to regulate these organizations? Well, that is the key question. The way things stand, I think
there really is a very limited concern on their part. Where the concern happens is where they are
worried about something like what happened in Surfside, Florida or Miami Beach area where
people start to look at buildings and say, wait a minute, there may be a lot of condo buildings
that either have become dangerous or that are going to require major repairs because that can
affect the market. And I think where local governments certainly get concerned is when they start
thinking that the local real estate market could be threatened because if people are worried,
wait a minute, if you go in this area, maybe saltwater is going to be a problem. And so I think that's
one area where there are concerns and obviously they're concerned with safety as well. And I think
until recently they have not realized local governments have just turned a blind eye to this,
they have not been worrying about these issues and hopefully now they're going to take a look at it.
The other area where they, I think, have an interest is in environmental retrofits because a lot
of states, New York, California and a number of other states have said, we have to reduce our
carbon footprint. Well, that can't be done without doing something about existing buildings
that are have a much larger carbon footprint. The city of New York is trying to get all existing
condos and co-ops and apartment buildings to reduce their carbon footprint. And that's going
to be expensive. But they have an interest in it. Why? Because state and local policy says this
is something we have to start doing. We have to meet some of these carbon reduction goals.
Existing buildings have to be retrofitted. That's going to cost money. And so I'm hoping that
this among other things is going to cause the national and state governments to start making
resources available to condos and certainly some of HOAs so that they can retrofit. And that in turn
should, I think, lead to more oversight of their finances generally. And I think that would be
a very good thing for everybody. So, HOAs, condos and co-ops, it does not seem like they will be
going anywhere anytime soon or that they will be losing the amount of power they have anytime soon.
What should listeners be aware of when they're looking at a property like this?
Well, I think you're right that they're not going anywhere because the urban land is so expensive
and housing prices are so high that the density issue drives a lot of what is happening with
common interest housing. This density is necessary to keep prices anywhere near affordable.
But if you're moving into this market, if you're going to buy into a condo or an HOA,
I think it's very important to think not just about the unit, the house or the condo unit,
which is very important, but it is to look at the overall picture of the community,
to find out about the association and as soon as you possibly can to get hold of the association's
financial records, to make sure that you're not going to walk into an underfunded association
where they will immediately be demanding a lot more money from you than you anticipated.
You really need to read the rules and make sure you can live with them because you can't live with
the rules. If they have restrictions on pets and pools and parking and other things that you don't
like, you need to know that upfront because those are enforceable and they almost certainly will
be enforced. And if you aren't happy with anything about the finances or the lifestyle rules,
you need to clarify that before you end up owning the unit.
All right, Evan McKinsey. Thank you so much for joining us on the leads.
My pleasure. Thank you.
That's all for us today. A special thank you to my colleague, Emily Stewart, who wrote the article
that inspired today's episode. When your neighbors become your overlords, you can read that
and all of Emily's reporting at box.com. Thank you to Evan McKinsey, Jasmine Francois and Chris
Francois for joining me. Our producer is Sophie Lalonde, Vince Fairchild engineered this episode,
Colleen Barrett and Caitlin McKinsey Moog fact-checked it, our editorial director is AIM Hall,
and I'm your host, John Guilin Hill. The weeds is part of the Fox Media Podcast Network.
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