The Other Government: The Residential Community Association

The Other Government: The Residential Community Association
Byron Hanke, the chief land planner for the Federal Housing Administration, changed the landscape of homeowner associations.

APRIL 1, 2022|12:01 AM,TheAmericanConservative.Com
Most Americans take for granted the rise of the residential community association, a whole new level of government. Today, an estimated 74 million Americans in 30 million homes live under the jurisdiction of 347,000 residential community associations, which annually dispose of about $50 billion and have reserves of about $47 billion. Residential community association budgets are larger than those of townships; about one sixth those of counties; about one tenth those of school districts; and about one twelfth those of municipalities. Some states provided for public enforcement of their covenants; others required that they be notified of various proposed actions by public authority; while still others provided their residents with various tax dispensations in recognition of the associations’ expenditures.

The person most responsible for this development is not a historic founder, like John Winthrop, John Locke, or Thomas Jefferson, nor a 19th century reformer like Joseph Pulitzer or William Leggett, but rather an obscure 20th century bureaucrat in what can only be described as a fourth-level bureaucratic position. Byron Hanke was not an elected official, or a cabinet member, or even an agency head. He was the chief land planner for the Federal Housing Administration from 1945 to 1972. He was born in 1911, took an undergraduate degree at Colgate and trained as a landscape architect. At Harvard, he received a master’s degree in landscape architecture in 1937 and became the Charles Eliot Travelling Fellow in Europe in 1938 and received a second master’s degree in urban planning in 1940. He was familiar with Ebenezer Howard’s ideas and visited Radburn, New Jersey in this period. Thereafter, he worked briefly for the Tennessee Valley Authority before becoming a land planning consultant on wartime housing for the Federal Housing Administration in 1940, and Chief Land Planner in 1945.

Prior to his advent, there had been a few localized experiences with homeowners’ associations using deed covenants, the first involving Louisburg Square in Boston in 1826, then Gramercy Square in New York in 1831. There had been an earlier development of the same type governing Leicester Square in London in 1734, the covenants for which were enforced in the famous Tulk v. Moxhay case in 1848. In 1870, a Methodist camp meeting on similar lines had been established at Ocean Grove in New Jersey (the strictness of whose regulations caused it to be later referred to as “the grove of Sunday silence”). In 1871, there was a similar development at Squirrel Island in Maine.

The first large-scale development was that of Roland Park in Baltimore in 1891, followed by other subdivisions in Baltimore, Guilford (1912), Homeland (1924) and Northwood (1932). There then ensued the Forest Gardens development in Queens, New York in 1913, the Country Club District in Kansas City in 1914, Sunnyside Gardens in Queens in 1924 and Radburn in New Jersey in 1929, and a small development known as Scientist’s Cliffs in Calvert County Maryland in 1937, where Hanke bought a lot in 1949. Later developments with similar idiosyncratic origins were Irvine, California (1971), Columbia, Maryland (1967) and Reston, Virginia (1965). There were about 500 community associations in existence as of 1962.

In his master’s thesis in 1937, Hanke had urged developments with curvilinear street systems, neighborhood parks, and recreation facilities. In 1941, he contributed several chapters to an influential book on subdivision regulations, including a chapter on dedicated open space which cited the examples of the Country Club District and Radburn. In 1952, Hanke and Andre Faure of the FHA wrote a booklet on Suggested Land Subdivision Regulations, reprinted in 1959, 1960, and 1962. This included an outline of model covenants, though without provision for charges and for a community association. This had much to do with the layout of postwar American suburbs, with their repudiation of grid street patterns and their use of undulating roads. It included as a suggestion: “In developments where adequate public maintenance of park areas, streets or other facilities is not available, it is advisable to establish a property owners’ maintenance association with adequate powers to provide maintenance and to assess the benefiting property owners at a reasonable rate and collect such assessments.

Modifications to the National Housing Act extended FHA insurance coverage to cooperatives in 1950 and to condominiums in 1961; in 1955, Congress provided the FHA commissioner with a special assistant for cooperative housing. Cooperative housing was largely confined, then as now, to New York City and usually was the product of private agreements outside a statutory framework. Condominium housing, in which each apartment owner had deeded ownership of record, not merely a lease and shares of stock, is said to have been referred to in the Napoleonic Code of 1804 as “co-proprietare.” It received statutory recognition in Brazil in 1928, in Chile in 1937 and in most Latin American countries in the 1940s and 1950s followed by Mexico in 1967-68. Its use in Puerto Rico was recognized in Section 234 of the National Housing Act of 1961. As of mid-1968, the FHA had insured 1163 condominiums for a total of $21.7 million; of these, 818 units totaling $16.6 million were in Puerto Rico, the others being in California, the District of Columbia, Florida, and Michigan.

In December 1963, Hanke organized a study of cluster housing and common property ownership at the Urban Land Institute, for which Hanke secured funds from the FHA, the National Association of Home Builders and four other federal agencies. The resulting 64-page study was released in December 1963 at the annual convention of the National Association of Home Builders. More than 50,000 copies of this document were distributed. The brochure described the requirements for qualifying for FHA insurance where cluster development was resorted to. It revealed that there might be higher initial costs, but greater appeal to buyers. FHA insurance standards were modified to allow greater flexibility in land planning, through use of a new concept of “land use intensity” to measure density which “automatically provides open space in an amount related to total floor space or number of people.” It required that all cluster developments have an automatic membership homes association holding the common property with association charges as liens and lot owner voting rights to assure that the community association could survive separately from the developer.

Hanke’s insight was elsewhere expressed by legal scholar Carol Rose: “In the absence of the socializing activities that take place on ‘inherently public property,’ the public is a shapeless mob, whose members neither trade nor converse nor play, but only fight, in a setting where life is, in Hobbes’ all too famous phrase, solitary, poor, nasty, brutish and short.” The FHA and Urban Land Institute thereafter published as Urban Land Institute Technical Bulletin 50 a Homes Association Handbook of 422 pages. The bulletin urged that associations be formed quickly and assume responsibilities early, to give residents experience in administration. The book anticipated virtually all the problems which arise in the operations of homeowners’ associations and has been aptly described as “part marketing research, part legal analysis, part architectural design, and part organizational theory.” What it produced was “a consumer product sold by a profit-making firm, a legal device, a corporation reliant on both coercive powers and voluntary cooperation, a philosophy, a democracy, and a lifestyle.” It was later said that “this book has had a greater impact on the land use patterns of American cities than any other book in our nation’s history. It told how and why the patterns established by the traditional residential subdivision could be improved upon by clustering housing in planned unit developments. It triggered a change in the way of life of hundreds of communities and home builders.” In the words of Robert Nelson: “If RCAs were to become the prevailing mode of social organization for the local community, this development could be as important as the adoption of the private corporate form for business property.”

RCAs were of a size viewed as almost ideal for community life by a myriad of political theorists and social scientists. Thus, for example, Rousseau in Chapter 4 of The Social Contract:

In the first place the state must be sufficiently small to make it possible to call the whole people together without difficulty and each citizen must be in a position to know all his neighbors. In the second place, manners must be so simple that business will be kept to a minimum and thorny questions avoided. There should be too considerable equality in fortune and rank, for otherwise there will not long be equality in rights and authority. Finally, there must be little or no luxury, because…it corrupts both the rich and the poor, the rich through their possessions, the poor through their lust to possess.

Among functions for which RCAs may possess a competitive advantage are street cleaning, refuse collection, street paving, janitorial service, and traffic signal and swimming pool maintenance, as well as day care and elder care, demand-response transportation, cooperative purchasing, neighborhood watch, and the operation of health clinics and chartering of convenience stores. They have the capacity to integrate the services of volunteers and paid workers. They may properly be given a role in reviewing land use applications. Early cases barring requirements that neighbors consent have been supplanted by cases allowing local referenda. Neighbors are entitled to some assurance that the status quo in land use will continue.

A variety of technical bulletins were later published. In November 1971, Hanke wrote “A Proposal for a National Council of Homes Associations,” which became a reality in 1973; it now has 30,000 members. In 1976, while at CAI after his retirement he published Creating a Community Association: The Developer’s Role in Community and Homeowner Associations. He envisioned CAI as a research and education institute with three classes of members:

homeowners, associations and developers. Under CAI’s constitution, concurrence of representatives of each group was requisite to the taking of a formal position. Later, he wrote a short pamphlet designed to minimize highly publicized conflicts between owners and community association arising from design review covenants.

In 1964, during the Nixon administration, the FHA with Hanke’s guidance began to promote a program known as CHOICE, an acronym for Cost Effective Home Ownership and Improved Contemporary Environment. The program included townhouses on 2500 square foot lots with 32 acres of open space, designed to sell for about two thirds the median home price. In Hanke’s words: “HUD Secretary George Romney folded the CHOICE program into his Operation Breakthrough to help his ill-fated program for manufactured housing.” In the early 1980s the scheme was revived under HUD Secretary Jack Kemp as a Housing Cost Reduction Demonstration.

The acceptance of RCAs was such that municipalities as well as the FHA began to require that all new developments have RCAs. 450 Puerto Rico, a densely populated territory with many apartment-dwellers, had introduced the condominium device familiar in a number of Latin American countries. Developers of Puerto Rican condominiums sought federal mortgage insurance and in 1961 Section 234 of the National Housing Act made mortgage insurance available to Puerto Rican condominiums; in 1964 the act was further amended to eliminate any requirement that the developer have first been insured under another program. By 1968, federal mortgage insurance had been extended to about 400 condominium projects in Puerto Rico, the District of Columbia, and three states, California, Florida, and Michigan which had followed Puerto Rico in enacting condominium acts. The FHA in 1961 distributed model condominium legislation, variants of which were adopted in all 50 states by 1967. By 1987 there were 4.2 million units of condominium housing in the United States. Timesharing of condominiums, which began in Ticino, Switzerland in 1963 and in Hawaii in 1968 was also a widely authorized and practiced phenomenon; by 1999, there were 1608 timeshare developments in the United States and 5156 worldwide, with 4.5 million owners worldwide. The British authorized condominium housing by enactment of the Commonhold and Leasehold Reform Act, Chapter 15 of the Acts of 2002, the first creation of a new property interest since 1925, though the device has been little used there since.

The Federal Housing Administration was concerned with the burden cast on municipalities by decaying infrastructure in cheaply built tract developments. Its interest in community associations had been stimulated by Hanke, a man who exerted a major influence on the shape of suburban America. In 1941, as shown by Donald Stabile, he contributed to a study of subdivision regulations promoting the use of curvilinear streets and park areas. In 1959, he prepared an FHA booklet on subdivision regulations suggesting in passing the use of community associations with assessment powers to maintain park areas. In 1963, as previously noted, the FHA published a handbook, Planned Unit Development With a Home Association, requiring that developers of planned unit developments establish homeowners’ associations with assessment powers by deed covenants: “There are certain legal musts which FHA requires in connection with an agency approval of a planned unit development. The [documents] must legally create an automatic-membership nonprofit homes association [and] place an association charge on each lot.” The authority for this sort of requirement was conferred by Section 203(c) of the National Housing Act of 1934: “No mortgage shall be accepted for insurance…unless the Administrator finds that the project with respect to which the mortgage is executed is economically sound.” In the words of Evan McKenzie, “Forty to fifty thousand copies of the publication were circulated, and it was a major factor in the PUD boom that followed…the document was distributed at the NAHB [National Association of Home Builders] meeting. Its impact was enormous…’The industry grabbed the idea, and local government accepted it, and FHA insured it, and the concept took off like wildfire.’”

In 1964, the Urban Land Institute published a 422 page Homes Association Handbook edited by Hanke, 10,000 copies of which were distributed over the ensuing 10 years. The work was described by a former president of the Urban Land Institute as having “had a greater impact on the land use patterns of American cities than any other book in our nation’s history.” Shortly thereafter, organization of such associations was required in order for lenders on new developments to obtain federal mortgage
insurance. By 1988, there were 130,000 residential community and condominium associations covering some 29 million people, about 12 percent of the population. In 1998, there were 205,000 associations with 42 million residents, about 15 percent of the population. By 2010, there were more than 300,000 associations with 24.8 million homes and 62 million residents, 20 percent of the population; by 2021 there were 347,000 associations with 71 million residents, 22 percent of the population. Roughly half of new construction is in associations. In some rapidly growing portions of Southern California, 70 percent of the population lived under the jurisdiction of a residential community association. Some 55 percent of the associations governed condominiums, 15 percent of them governed detached tract housing and 39 percent townhouse developments. The average association fee was $867 annually, the median fee $336. Ninety-four percent of the associations maintained outdoor areas, 72 percent undertook trash collection, 67 percent maintained swimming pools, and 31 percent maintained security patrols.

The associations have many advantages as providers of services. They are small enough to be able to enlist the volunteer labor of their members, to engage in what public administration scholars call “co-production” of services. They have no bureaucracies of their own, and thus have no conflicts of interest when they contract for services with third parties; they are “pure provision units.” They thus can contract out services like road repair and trash collection and acquire such services much more cheaply than municipalities with their unionized workforces. Increasingly, in recognition of this, municipalities are according them credits against property taxes for services thus assumed; there are statutes in Montgomery County, Maryland, and in New Jersey requiring such credits. While dues paid to these private associations are not tax deductible, that limitation is increasingly being circumvented through the incorporation of parallel taxing districts with the same land are to render services which are municipal in character and which therefore attract tax deductibility; this device is widely employed in Anne Arundel County, Maryland, and in some places in Pennsylvania and Connecticut. Increasingly, such private associations are being accorded the power to waive public zoning restrictions; more than a dozen states have authorized associations to waive zoning-imposed prohibitions of day care centers.

A new model covenant published by Wayne Hyatt of Atlanta, perhaps the nation’s leading practitioner of community association law, would expressly allow associations to render various social services such as day care and demand-response transportation, provided the services are financed with user charges. The Uniform Common Interests Act promulgated by the National Conference of Commissioners on Uniform Laws has been amended to allow 80 percent of residents to modify use restrictions or impose new restrictions provided they are not applied to current unit owners; the amended model covenants also allow landlords to agree in a lease to give a tenant voting rights. Typically, a super-majority of all residents is needed for major changes, such as special assessments; because many associations are located in vacation areas; the UCIA imposes only a 20 percent quorum requirement for meetings.

The American Law Institute Restatement of Servitudes contains provisions designed to discourage litigation by making resort to alternative dispute resolution mandatory. Problems of corruption have been avoided by the provision in state condominium and residential association laws of provisions rendering annual private audits mandatory. A private organization known as the Community Associations Institute with 40,000 members offers training courses and publishes manuals of good practice. It was organized in the early 1970s with the encouragement of the late Elliot Richardson. By giving suburban residents a sense of control over their immediate environment and maintaining infrastructure, the associations have done much to maintain their residents’ satisfaction with suburban life, and to avoid the creation of feelings of alienation which would otherwise have been directed at frequently remote town and county governments. Regrettably, the organization of school districts in most places precludes the associations being given a formal role in governing the local elementary school and lending support to it.

In Britain, by contrast, the lowest level of government, the parish council, may elect a member of the board of governors of the nearest elementary school. A critic of community associations, McKenzie has lamented the fact that “the role of government has been largely permissive and promotional rather than regulatory or directive.” That is the secret of the success of the concept. The government’s efforts to construct new communities, both during the New Deal and in connection with the Johnson Administration’s Model Cities Program foundered on lack of management flexibility and disregard of consumer preferences. Only three small towns, each with less than a thousand units were built during the New Deal; they became upper middle-class developments because of cost overruns. Twelve of the 13 Model Cities developments with 250,000 projected units ran out of money, the program ultimately costing the government $561 million. The 300,000 community associations have nearly 2 million board members enjoying significant rights of civic participation and gaining thereby greater understanding of appropriate political behavior. In many large suburban counties with remote county governments and few municipalities (Baltimore County, Maryland, for example) there would be far more political and social alienation but for Byron Hanke’s social inventions.

The FHA and the federal mortgage guarantee institutions have fallen into the hands of unconstructive bureaucrats, some of them seriously corrupt. Hanke’s guides to development and required development conditions have gone unmodified, even though ample scope exists for modifications, which would involve no innovations in principle. The width of required collector roads can be decreased to reflect the demise of the gas-guzzler era; regulations of required curbs and lighting can be relaxed. More important, the inclusion in at least larger new developments of such amenities as accessory apartments, very small convenience stores in residences, old age clubs, preschool playgroups, charter schools, and zip cars or other forms of demand-response transportation can be usefully considered to accommodate recent dramatic changes in demography and family structure. The FHA no longer has the potential influence it once did when it insured the lion’s share of residential mortgage; that share fell to only 3 percent in 2006, though under the impact of the foreclosure crisis it has risen to 11 percent in 2019.

George Liebmann is the author of America’s Political Inventors: The Lost Art of Legislation (Bloomsbury 2019), which discusses Byron Hanke and nine other American historical figures, now available in a paperback edition.This New Urbanism series is supported by the Richard H. Driehaus Foundation. Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place.

Posted in: Economic Regulation, Efficiency in Government, Judiciary and Legal Issues, Markets and Privatization, State and Local Politics, Urban Affairs

Tags: , , , , , , , , , , , , , , ,