Do property owners’ associations (POAs) and homeowner associations (HOAs) really protect home values and communities, or do they simply add another layer of bureaucrats and cost communities money?
I personally think the world would be a better place if most HOAs and POAs were dissolved.
Let me first set the stage. If you wanted to legally build a small house you have to deal with many layers of local government bureaucrats who all have a vested interest in enforcing the rules and regulations that have been handed down to them from policy makers. Typically the policies that are created do not actually address the core requirement, the need, but instead go onto dictating a common solution.
Core requirements are things like:
- A renewable water source,
- A low impact waste water system, and
- A power system to meet the needs of the homeowner.
Instead they typically tell you exactly what kind of water, waste, and power options you must use, with no exceptions. This initial roadblock, and the associated costs, typically results in making the property unbuildable by making it too costly.
But no property is unbuildable if your clever enough, and humans are a clever critters. The trouble is that the bureaucrats have been handed a strict rule book that lists specific solutions like:
- A municipal water hookup, or well,
- A municipal sewer hookup, or engineered septic system, and
- A grid power connection.
In other words, the bureaucrats aren’t always allowed to consider new or alternative solutions like:
- A rain water collection system,
- A composting toilet and grey water system, and
- An off-grid power system.
Luckily the off-grid power system alternative is starting to get more traction, but the others are still mostly unrecognized as viable options.
Another Layer to the Bureaucratic Cake
To add insult to injury the HOA/POA jumps in and adds more bureaucratic muck with their own set of rules, regulations, and dictated solutions. All of this is done in the name of protecting the community.
Sadly making changes to how local government is run is very difficult. On the bright side dissolving your HOA/POA could be just a vote away, although it’s probably best to consult an outside independent attorney and accounting firm prior to pulling the plug.
Case Study – California Pines Property Owners’ Association
A case in point might be the California Pines Property Owners’ Association. I’ve been doing a lot of research about this notorious real estate subdivision in Modoc County, California. Construction began on California Pines in late 1960’s and by the time they were done cutting roads through the wilderness, they had 15,000 one-acre lots. Most of them remain vacant today.
I guess like so many people I’ve been attracted by the super low prices. At the upcoming tax defaulted land auction it looks like you might be able to buy one of the more remote lots for about $2,000.
Since that sounded like a deal too good to be true, I did quite a bit of digging and discovered that the California Pines POA may be unintentionally contributing to the project’s apparent failure.
There are other obvious reasons for this enormous subdivision’s flop. It’s clear that in a county of 9,900 people, a 15,000 lot subdivision is totally unnecessary. Other contributing factors are things like the lack of utilities to most lots, a vast maze of dirt roads to maintain, inaccessibility in winter, little to do but hunt and hike, and the remote location in the northeast corner of California.
As a careful shopper I was on the lookout for red flags. I found some in old copy of the CC&Rs, (Covenants, Conditions, and Restrictions), but a local realtor was able to fill in the rest. She told me that to build a home at California Pines, the POA requires that an engineered septic system ($20,000) and well ($10,000) must be built. The county doesn’t require an engineered septic and sounds friendly to owner-builders with reasonable proposals.
If the property has no grid power connection you’ll also need to spend money on an solar electric system ($5,000 to $15,000+). Wind turbines may also be an option, but I couldn’t get confirmation on that. By the time you’re ready to break ground on your remote off-grid house you’ve already shelled out approximately $35,000 to $45,000 in required improvements.
If I owned land there I’d want a POA that was bending over backwards to make it a viable place to own a cabin. Instead I found a POA that was 700 miles away in Anaheim, California that wasn’t able or willing to answer basic questions about the place over the telephone. They also refused to share a copy of the CC&Rs or organizations financials with me, a prospective buyer.
Unfortunately the main problem with dissolving this particular POA is that the property owners are scattered to the four winds and have had no way to connect with each other. So even if the majority agreed that dissolving or fixing this particular POA was the right thing to do, they can’t do it easily without the POAs help.
Every year the California Pines Property Owners’ Association collects a small $75 fee from property owners. When you do the math, that turns out to be $1,125,000 a year. Since they are a non-profit organization I checked online at the IRS to see how much they have reported in income, and this estimate was surprisingly accurate.
If you want to see you’re HOA/POAs tax returns, and they are a non-profit organization, you can go the extra step complete a form 4506-A and request inspection copies from the IRS directly.
No HOA/POA is perfect. But all community based organizations need to remain connected to the community and remain transparent to its members. Anytime an organization closes it doors to its members a changing of the guard and a full accounting is warranted.
If you own land at California Pines and want to connect with other property owners online I’ve setup a brand new blog and Facebook community to help you connect with connect past, future, and current property owners.
While I don’t want to turn this case study and general topic into a raking over the coals for the California Pines Property Owners’ Association, this cursory investigation has turned up a lot more questions than answers. Actually it’s beginning to seem like a great news story for an investigative reporter to pick up and explore. (hint hint)
At the very least this research has solidified my opinion that more bureaucracy only adds more murkiness to our lives, and that this kind of additional governance costs more than it pays.
I’ll conclude by saying that if your HOA/POA is not performing up to your expectations, confront them. If they are no longer serving the community consider moving to dissolve the organization. Begin by uniting with your neighbors and be sure to consult outside independent professional advisors, both legal and financial. Take control of the HOA/POA though a changing of the guard and then make it’s final act and expenditure its own dissolution.
We don’t need more bureaucrats in the world; we need more open minds and clever solutions especially around housing issues. Dissolve your HOA/POA today!