Privatopia: Homeowner Associations and the Rise of Residential Private Government. - book reviews

Reason, August-Sept, 1995 by John McClaughry

In the dark misty years after the collapse of Roman Britain, Germanic tribes migrated west to the island now known as England. They brought with them a mixed public-private system of land tenure and civic administration called voluntary feudalism. In this system, the proprietary landlord owned the land and organized the defense of the settlement. The freemen owned their farms and homes on a leasehold basis, paying the proprietor in produce, labor, and military service. In the ninth century, this system gave way to predatory political states, ending with the Norman Conquest and autocratic rule.

But the operative principle of voluntary feudalism survives and flourishes in various forms today, most commonly as residential community associations (RCAs). As of 1990, there were 130,000 RCAs operating in the United States, with over 30 million residents. The Community Associations Institute projects that more than 50 percent of all housing for sale in the nation's 50 largest urban areas - and nearly all new residential development in California, Florida, Texas, New York, and suburban Washington, D.C. - is organized in RCAs. By the year 2000, the number of associations is expected to climb to 225,000. If the new ones average the same number of residents as the old ones, over 50 million people, almost one-fifth of the U.S. population, will live in an RCA of one sort or another.

The rise of the RCA can be attributed to a large number of reasons, some of them springing from natural human preferences, and some of them the result of government action. The origin of the modem RCA can be dated to 1743, when the descendants of the Earl of Leicester tried to preserve a fenced-in private park in Leicester Square, London, by requiring those who bought or leased property around the park to pay a tax for its upkeep.

The prototype RCA in the United States appeared in 1831, at Gramercy Park in Manhattan. But a more fully developed example was Louisburg Square on Boston's elite Beacon Hill. In 1844, the landowners formed a Committee of Proprietors to preserve the common park area. Throughout the next 100 years, use and occupancy restrictions on residential deeds, an important feature of RCAs, steadily grew in popularity, often as a technique of preventing a feared reduction in property values from an influx of "Negroes, Irish, Mongolians," and other non-WASP racial and ethnic groups. The use of deed restrictions for such nefarious purposes was struck down by the Supreme Court in 1948.

In 1902, the Englishman Ebenezer Howard published Garden Cities of Tomorrow, which provided the model for the self-contained suburban community of gardens, fresh air, winding streets, and happy neighbors. The man who made it happen in the United States was J.C. Nichols, the first of the great "community builders." His Country Club District development in Kansas City, begun in 1905, became the template for the modern homeowners association. By 1964, when the Country Club District was essentially completed, the development contained 6,000 acres, 12,000 homes, 11 shopping centers, 50,000 people, and 29 homeowners associations organized into a giant RCA federation.

Unlike earlier small-scale builders, who wanted nothing to do with government, Nichols perceived that government could make a large-scale community development into a very profitable venture. This required planning - not only planning by the developer, but planning by the local government for streets, water, sewers, schools, parks, and police and fire protection. It is somewhat ironic that modem land-use planning and controls came not from assorted socialists and utopians, but from hard-nosed business people whose eyes were glued to the main chance and who probably voted gladly for McKinley.

From a legal standpoint, there are three types of RCA. The most common (61 percent) is the condominium association. These are most commonly multi-family, multi-story buildings where the residents own their individual apartments plus an undivided interest in the common areas (lobby, elevators, hallways, pool, garage, etc.). These common areas are managed, but not owned, by a condominium association made up of and controlled by the individual unit owners.

The homeowners association form of RCA (35 percent) is typically found in suburban developments of detached single family homes or townhouses. The homeowners own their own dwelling unit and its yard and garage and their association, unlike a condo association, owns the common property, including streets, parks, golf courses, and retail centers.

The third form of RCA, the cooperative (4 percent), has never really caught on in the United States. In the coop, usually but not always an apartment building, residents own no property individually. They own only a long-term, renewable leasehold in their apartment, plus a divisible interest in a tenant-managed corporation that owns all the common areas. The main drawback of the coop is that each cooperator is liable for all of the mortgage. If there are vacant units or if a cooperator defaults, the residents must pay their share of the corporation's liabilities.