I do have the general impression that replacing aging water and sewer systems for towns is a big expense. However, it seems like an article that makes a financial argument should have some numbers...
I do have the general impression that replacing aging water and sewer systems for towns is a big expense. However, it seems like an article that makes a financial argument should have some numbers in it. It would be interesting to see how the finances work, or don't work. How does an HOA make anything less expensive?
It is always a challenge to thread the needle between detailed analysis and an approachable blog post. I suggest you look at this article The Real Reason Your City Has No Money by Charles Marohn,...
It is always a challenge to thread the needle between detailed analysis and an approachable blog post. I suggest you look at this article The Real Reason Your City Has No Money by Charles Marohn, and most of Strong Town's material in general.
This post was in reaction to a CNBC video. The video explained that cities often require HOAs for all new developments, but it didn't go into great detail about what pressures cities are under to do so. In this post, I wanted to embed this discussion of HOAs and their spread to broader issues of fiscal sustainability of US cities.
HOAs make things less expensive for cities because they can offload many city costs. If the HOA requires people to mow their lawns, that's less expense for the city. If the HOA has a pool and park, the citizens of that development will not demand access to a municipal pool or park, while at the same time they still pay full city taxes. Some HOAs even own the streets inside developments and take on all the long-term maintenance costs of them. Homeowners in HOAs expect less services from cities while still paying full municipal taxes.
Okay, thanks, this is making more sense. It seems like HOA’s are a way of charging more (via an additional fee) in a way people will accept. Raising taxes city-wide, on existing residents, would...
Okay, thanks, this is making more sense.
It seems like HOA’s are a way of charging more (via an additional fee) in a way people will accept. Raising taxes city-wide, on existing residents, would presumably be more politically difficult. The HOA only applies to new residents who never saw lower rates.
I’m wondering how requiring people to mow their lawns saves money for the city, though? I thought it was more about raising property values.
Cities also have maintenance standards. In most cities, you can't let your lawn become an unkempt jungle, aren't allowed to have cars on blocks, etc. They're not as strict as HOAs; they're not...
Cities also have maintenance standards. In most cities, you can't let your lawn become an unkempt jungle, aren't allowed to have cars on blocks, etc. They're not as strict as HOAs; they're not going to demand your paint your house a specific color. But while city regulations are not as strict as HOAs, they do exist. And enforcing them costs money. Cities can get some revenue from fines, but it's often a "blood from a stone" situation. The guy who turns his lot into a junkyard likely doesn't have a ton of cash sitting around to pay a fine, and if he does, you're not getting it easily. You can ultimately enforce fines by foreclosing on properties, but that's very unpopular politically. No one wants to live next door to the junkyard guy, but no one wants to see the city take his house from him either. Cities can invest in active enforcement offices that can deal with these complex situations, but it's a drain on city finances.
In short, code enforcement is another cost a city must bear. All cities have some standards for how you must maintain your property. Enforcing those standards costs cities money. HOAs simultaneously hold their neighborhoods to a standard higher than that required by their cities while also covering all the enforcement costs. Additionally, if an HOA foreclosures on someone's home for unpaid fines, no one shows up at a City Council meeting to protest.
Okay, makes sense. I’m wondering how expensive code enforcement actually is, though? Seems like a lot of cities don’t really do it? Poorer cities have a lot of trouble with urban blight, abandoned...
Okay, makes sense. I’m wondering how expensive code enforcement actually is, though? Seems like a lot of cities don’t really do it? Poorer cities have a lot of trouble with urban blight, abandoned buildings, and so on.
And that might be the real upside: a guarantee (they hope) that the city won’t have to deal with it for a newer subdivision, if it has an HOA.
I was interested to learn that Colorado recently passed laws limiting what an HOA can do:
For violations that do not threaten public safety or health that the unit owner does not cure within the 30 days, the fine for such violation may not exceed $500. In addition, an HOA may no longer pursue foreclosure against a unit owner based solely on fines owed, whether for violations that threaten public safety or health or not.
Seems like that’s going to change the balance of power there? Maybe the city has to do more because the HOA can’t.
This article was very light on details. I've seen a few in the last few years that did get into the levels of effective property taxes needed to plug these budget gaps. Not pretty. Sorry, I don't...
This article was very light on details. I've seen a few in the last few years that did get into the levels of effective property taxes needed to plug these budget gaps. Not pretty. Sorry, I don't have a link handy right now. I guess I'm just saying that there are lots of details available on this particular challenge if you want to chase the granular financial details!
I've seen HOAs that charge $300 a month to mow 10sqft of grass and city crews still out working those streets. HOAs are everywhere because Americans (and cities) view them as 'protecting the...
I've seen HOAs that charge $300 a month to mow 10sqft of grass and city crews still out working those streets.
HOAs are everywhere because Americans (and cities) view them as 'protecting the investment' by being able to get rid of the weirdo with three Trans Ams parked up on his lawn. Property values don't go down because of a few bad eggs and the city gets to keep charging more and more for taxes.
I've NEVER heard of or seen an HOA take over city duties - maybe they're forced to hire city crews to do the work? The only HOAs that make sense are condo ones and, as economically infeasible as low density 'fully featured suburbs' are, the rest of the world shows that it's purely an American solution to an American problem.
It really depends on the HOA. HOA burgets are public, and their board members are voted in. $300 per month isn't the kind of cost people will just ignore. Members of an HOA will dig into a charge...
I've seen HOAs that charge $300 a month to mow 10sqft of grass and city crews still out working those streets.
It really depends on the HOA. HOA burgets are public, and their board members are voted in. $300 per month isn't the kind of cost people will just ignore. Members of an HOA will dig into a charge that large and ask where the money's going.
That money is going somewhere. Maybe it's to maintain all the common areas. Maybe they have an HOA pool and parks. Maybe they cover all the landscaping for houses. Or maybe, the money is mostly going into a fund to pay for long-term infrastructure costs. Maybe they contract with the city for filling potholes, but when the whole street needs to be repaved, it's the HOA's responsibility.
Lots of possibilities exist, as they can be structured differently. But the money ultimately must be going somewhere, and most of those possible somewheres represent costs the city won't have to pay.
You would think, but I distinctly remember one of my accounting professors talking about his work for his condo's HOA. Every time he double-checked to ensure an invoice was for authorized work (as...
$300 per month isn't the kind of cost people will just ignore. Members of an HOA will dig into a charge that large and ask where the money's going.
You would think, but I distinctly remember one of my accounting professors talking about his work for his condo's HOA. Every time he double-checked to ensure an invoice was for authorized work (as opposed to the classic fake invoice scam), people acted like he was a burden, because who would bother scamming such a small HOA? (With an attitude like that, it's only a matter of time...)
I can't speak to how many other countries favor low density suburban development and have done since the 1940s, but the US definitely qualifies and US cities are in a financial hole because of it.
I can't speak to how many other countries favor low density suburban development and have done since the 1940s, but the US definitely qualifies and US cities are in a financial hole because of it.
They are trying to break out in Canada too but aside from condo associations they are not nearly as prevalent. At least from what I've seen in Western Canada. I don't think they have nearly as...
They are trying to break out in Canada too but aside from condo associations they are not nearly as prevalent. At least from what I've seen in Western Canada. I don't think they have nearly as much power as they do in the USA either.
I do have the general impression that replacing aging water and sewer systems for towns is a big expense. However, it seems like an article that makes a financial argument should have some numbers in it. It would be interesting to see how the finances work, or don't work. How does an HOA make anything less expensive?
It is always a challenge to thread the needle between detailed analysis and an approachable blog post. I suggest you look at this article The Real Reason Your City Has No Money by Charles Marohn, and most of Strong Town's material in general.
This post was in reaction to a CNBC video. The video explained that cities often require HOAs for all new developments, but it didn't go into great detail about what pressures cities are under to do so. In this post, I wanted to embed this discussion of HOAs and their spread to broader issues of fiscal sustainability of US cities.
HOAs make things less expensive for cities because they can offload many city costs. If the HOA requires people to mow their lawns, that's less expense for the city. If the HOA has a pool and park, the citizens of that development will not demand access to a municipal pool or park, while at the same time they still pay full city taxes. Some HOAs even own the streets inside developments and take on all the long-term maintenance costs of them. Homeowners in HOAs expect less services from cities while still paying full municipal taxes.
Okay, thanks, this is making more sense.
It seems like HOA’s are a way of charging more (via an additional fee) in a way people will accept. Raising taxes city-wide, on existing residents, would presumably be more politically difficult. The HOA only applies to new residents who never saw lower rates.
I’m wondering how requiring people to mow their lawns saves money for the city, though? I thought it was more about raising property values.
Cities also have maintenance standards. In most cities, you can't let your lawn become an unkempt jungle, aren't allowed to have cars on blocks, etc. They're not as strict as HOAs; they're not going to demand your paint your house a specific color. But while city regulations are not as strict as HOAs, they do exist. And enforcing them costs money. Cities can get some revenue from fines, but it's often a "blood from a stone" situation. The guy who turns his lot into a junkyard likely doesn't have a ton of cash sitting around to pay a fine, and if he does, you're not getting it easily. You can ultimately enforce fines by foreclosing on properties, but that's very unpopular politically. No one wants to live next door to the junkyard guy, but no one wants to see the city take his house from him either. Cities can invest in active enforcement offices that can deal with these complex situations, but it's a drain on city finances.
In short, code enforcement is another cost a city must bear. All cities have some standards for how you must maintain your property. Enforcing those standards costs cities money. HOAs simultaneously hold their neighborhoods to a standard higher than that required by their cities while also covering all the enforcement costs. Additionally, if an HOA foreclosures on someone's home for unpaid fines, no one shows up at a City Council meeting to protest.
Okay, makes sense. I’m wondering how expensive code enforcement actually is, though? Seems like a lot of cities don’t really do it? Poorer cities have a lot of trouble with urban blight, abandoned buildings, and so on.
And that might be the real upside: a guarantee (they hope) that the city won’t have to deal with it for a newer subdivision, if it has an HOA.
I was interested to learn that Colorado recently passed laws limiting what an HOA can do:
Seems like that’s going to change the balance of power there? Maybe the city has to do more because the HOA can’t.
This article was very light on details. I've seen a few in the last few years that did get into the levels of effective property taxes needed to plug these budget gaps. Not pretty. Sorry, I don't have a link handy right now. I guess I'm just saying that there are lots of details available on this particular challenge if you want to chase the granular financial details!
I've seen HOAs that charge $300 a month to mow 10sqft of grass and city crews still out working those streets.
HOAs are everywhere because Americans (and cities) view them as 'protecting the investment' by being able to get rid of the weirdo with three Trans Ams parked up on his lawn. Property values don't go down because of a few bad eggs and the city gets to keep charging more and more for taxes.
I've NEVER heard of or seen an HOA take over city duties - maybe they're forced to hire city crews to do the work? The only HOAs that make sense are condo ones and, as economically infeasible as low density 'fully featured suburbs' are, the rest of the world shows that it's purely an American solution to an American problem.
My HOA has to maintain the retention ponds. These are overflow for the city, pretty crazy IMO
It really depends on the HOA. HOA burgets are public, and their board members are voted in. $300 per month isn't the kind of cost people will just ignore. Members of an HOA will dig into a charge that large and ask where the money's going.
That money is going somewhere. Maybe it's to maintain all the common areas. Maybe they have an HOA pool and parks. Maybe they cover all the landscaping for houses. Or maybe, the money is mostly going into a fund to pay for long-term infrastructure costs. Maybe they contract with the city for filling potholes, but when the whole street needs to be repaved, it's the HOA's responsibility.
Lots of possibilities exist, as they can be structured differently. But the money ultimately must be going somewhere, and most of those possible somewheres represent costs the city won't have to pay.
You would think, but I distinctly remember one of my accounting professors talking about his work for his condo's HOA. Every time he double-checked to ensure an invoice was for authorized work (as opposed to the classic fake invoice scam), people acted like he was a burden, because who would bother scamming such a small HOA? (With an attitude like that, it's only a matter of time...)
Similarly, John Oliver did a segment on the rise of HOA's that everyone should see.
Link
They’re not. They seem to be another US only oddity.
Well yeah, this is a US article
I can't speak to how many other countries favor low density suburban development and have done since the 1940s, but the US definitely qualifies and US cities are in a financial hole because of it.
@mycketforvirrad, maybe this post needs a
ustag? Thanks ;)Okidoke.
They are trying to break out in Canada too but aside from condo associations they are not nearly as prevalent. At least from what I've seen in Western Canada. I don't think they have nearly as much power as they do in the USA either.