« Long Term Contracts - Be Very Wary | Main | Assessment Allocation - Is it Equal or Based on Square Footage Or What Mother Thinks It Should Be? »

August 13, 2007

LOW INCOME HOUSING PROTECTION BILL - IS IT A GOOD ANSWER?

AB 952 is currently before the California Legislature. It would essentially give unit owners of "affordable housing" (often called "BMR" or below market rate units) the power to veto any regular or special assessment that is proposed in an HOA in California. You may want to look into this and pose your views to your legislators, and the California Legislative Action Committee Arm of Community Associations Institute makes it easy for you to do this on its website at caicalif.org (navigate to "HOT BILLs").

Anyway, if you have not heard of this bill, here is my take on it, which has been shared with reporters, industry professionals and the legislators in my district.

_____________________

Letter to Legislators voting on AB952 August 20

I am an attorney in California that is active in all of the industry groups in the State and have some National affiliations as well. I have written two books, have ongoing publications, have written many, many articles, have spoken to many groups, and write an ongoing blog. I have addressed the question of "affordability" of common interest development housing therein. I have a website (www.californiacondoguru.com) that offers a wealth of education for homeowners, managers, board members, realtors and anyone interested in the subject matter. There are times I feel like I am doing more than the State of California to "enlighten" the general public about CID living and its pros and cons.

I have provided pro bono services for a person who lives in a BMR unit in the South San Francisco Bay Area - trying to work with his association and also with the City to find a resolution to the question as to how these people who are "lucky enough" be able to get into this housing are supposed to cope with rising assessments and special assessments. In his association, the members were facing an assessment to upgrade the garage doors, and it is something he would not be able to benefit from. The Association's response was, of course (and as expected) - a tough luck type of answer - we are sorry but we did not buy with the expectation of subsizing the BMR units and it is not our responsibility. The answer of the City was more or less a tough luck answer - we will let him get a roommate if he cannot afford to live there. It was a very frustrating experience trying to help him.

It is true that BMR unit owners do not reap the same benefits that non-BMR unit owners would reap by such an improvement. And since there are two BMR units in his complex, he and his other BMR neighbor could, if the passage of AB952 were to occur, essentially block this kind of thing in the future.

But - how fair is that to the owners that have a real estate investment and want to improve their property? How fair is that if his association needs an assessment to replace the roofs to supplement the reserves, and cannot get it approved? It is a real catch 22 and I find that articles written by reporters looking for the sensational story, and someone to blame, find it way too easy to point the finger at HOAs and tag them as - "the enemy".

I have written many articles about problems in HOAs and one appears on my website that explains what happens when a board pinches a penny too tightly. It's a serious problem in this state and a large percentage of the homeowner associations are seriously underfunded, hence, large special assessments are needed to make long overdue repairs. A very common problem HOAs face is preparing for a paint job or roofing job and finding out there is dry rot rampant underneath, because of years of deferred maintenance. Associations that look good on the outside aren't immune from the problems. Beauty is truly skin deep in many situations.

So why not be fair and real in your assessment of things, and recognize that hobbling boards of directors further is collecting money sufficient to pay the association expenses (as required by Civil Code Section 1366.1) is not the answer to the dilemma the BMR unit owners face.

Housing in California is not affordable! It will not ever be. Allowing lenders to squeeze owners in who cannot afford Condo Units and townhomes with subprime lending has caused disastrous results in assessment collections for HOAs - really disastrous. Increasing compliance costs fostered by more "consumer friendly" legislation has forced increases in assessments, and tougher laws on reserves has created funding efforts that are draining homeowners in many instances - but that are necessary to alleviate future suffering in the form of large special assessments. Creating "BMR" units has created a very difficult situation and the passage of AB 952 will exacerbate the problem in California with already underfunded associations. Someone has to get real about this situation, make an honest assessment of things, and look for a solution to the overall dilemma.

There are better solutions than giving the owners of BMR units the ability to veto assessments that are needed to maintain the HOA infrastructure in this state. Being honest about whether "affordable housing" is a reality - or not - is closer to the answer of what needs to be done. My suggestion is that if a City is going to require BMRs, that it force developers to write into the documents that owners understand that the assessments for the BMRs have more limitations on them, because their ability to withstand assessments is hampered, and their ability to capitalize on the improvements is hampered, and allow the general public to subsidize a few BMR units in each association by picking up the slack for the extra overage in special assessments. A fair and honest disclosure needs to be made to potential purchasers. Honestly, this might be less painful than picking up the slack for the foreclosed unit owner that could not pay the special assessment and was forced out of his or her opportunity for "home ownership." And it certainly is less painful than preventing HOA boards from being able to raise money sufficient to meet its legal obligations.

Hopefully, we are a society of people that would step up, if the burden is not too heavy (limited number of BMR units). And if not, maybe the myth of "affordable housing" should die. It is a term that should be reconsidered.

Sincerely,

BETH GRIMM

Posted by Beth Grimm at August 13, 2007 10:22 PM