Community Housing and the Public Interest

Banks are issuing loans for homes located in "underwater" associations in poorly managed communities, simply because they can resell the mortgage and divert all risk to taxpayers.

Owners are liable for all of the association's debts, loans, lawsuits, settlements, liabilities, construction defects and disaster rebuilds.

Unfair business practices, lack of transparency, and no limitations on conflicts of interest expose 70 million homeowners and other residents to financial stress, along with related health and safety problems.

How Does Community Housing Policy Affect The Public Interest?

 

Financial Risks to Taxpayers

 

The homeowner association (HOA) industry currently lacks national standards for financial disclosure, administrative support, and oversight. Properties in HOA communities backed by taxpayer dollars (the Federal Housing Finance Agency's Fannie Mae and Freddie Mac) are exposing the American economy to excessive future financial risk. Banks are issuing loans for homes located in "underwater" associations in poorly managed communities, simply because they can resell the mortgage and divert all risk to taxpayers.

 

Affordability at Risk Due to Unanticipated Catastrophic Loss

 

One in five American property owners in more than 330,000 common interest communities stand to bear the brunt of this financial risk. Individual owners become a guarantor for all of the association's debts, loans, lawsuits, settlements, liabilities, construction defects and disaster rebuilds.

 

Unregulated Condominium and Homeowners Associations

 

The industry -- including real estate developers, investment firms, community management companies, law firms, insurance companies, and other community service providers -- lacks adequate regulation. Unfair business practices, lack of transparency, and no limitations on conflicts of interest expose 70 million homeowners and other residents to financial stress, along with related health and safety problems.

 

Problems affecting public health and welfare include:

 

  • Construction defects.

  • Inadequate or deferred infrastructure maintenance.

  • Increased crime and blight.

  • Poor long-term financial planning.

  • Housing discrimination.

  • Unfair trade practices.

  • Substitution of unregulated private security for publicly funded crime prevention and traffic control.

  • Multiple undisclosed conflicts of interest.

  • Inadequate financial disclosure for buyers and homeowners.

  • Voting irregularities.

  • Hostile corporate takeovers of associations that force sale of units at significant loss to owners.

  • Abuse of landlord-tenant laws.

  • A severe shortage of competent homeowner association board leadership.

  • Erosion of property rights and equity. 

     

These effects radiate to the national economic climate far beyond the gates and boundaries of the communities.

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