Proprietary Communities

Private Idahoes

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Public Goods and Private Communities, by Fred Foldvary, Fairfax, VA: The Locke Institute, 212 pages, $47.96

Privatopia: Homeowner Associations and the Rise of Residential Private Government, by Evan McKenzie, New Haven: Yale University Press, 197 pages, $30.00

Neighborhood Politics: Residential Community Associations in American Governance, by Robert Jay Dilger, New York: New York University Press, 162 pages, $40.00

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 modern 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 modern 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.

Not included in these statistics are around 50 community land trusts (CLTs). A CLT is a democratically run RCA which owns and makes rules for dwelling on the land in conformity to a charter. Individuals can own and bequeath renewable 99-year leaseholds, and can sell the improvements made upon the land. Typically, the CLT retains a first option to buy the improvements at inflation-adjusted cost, less depreciation, so that upon sale the trust captures the increase in value due to community services or general appreciation.

The modern RCA performs four basic functions. Through a board of directors elected by the homeowners, it maintains the common areas. Like a government, it provides, either directly or through contracting, property-related services such as trash collection, snowplowing, and security patrols. It collects assessments from homeowners to pay its costs. And it enforces the covenants, conditions, and restrictions (CC&Rs) which protect the community and its property values against anti-social acts (any act which might diminish resale values). An unspoken fifth function is to organize political action efforts to get the municipal government to respond to the RCA's interests, making the RCA into a sometimes formidable special-interest group.

Government provided much of the impetus for the growth of RCAs. Although Nichols's Kansas City project antedated extensive government land-use controls, the rise of those controls created an important and costly barrier to land development. Developers found it easier and cheaper, per unit, to invest the time and money to secure approval for a large project than for a small one. The larger the project, of course, the more profit was expected, making possible larger contributions to supportive politicians.

In response to the building industry's pleas, the Federal Housing Administration in 1963 became an aggressive booster of RCAs. For FHA bureaucrats, planned and controlled RCAs made it easy to predict the economic viability, and thus the insurability, of a development 20 or 30 years down the road. It was also easier to impress Congress by "running up the numbers" when the developers built and sold 1,000 homes at a crack. The larger the project, the more interested members of Congress were in seeing that it got FHA approval.

From the standpoint of local government, at least initially, RCAs offered a terrific deal. A private developer would build needed new housing, which would add to the tax base. In return for receiving permission to exist, the RCA would provide many of its own municipal services at the homeowners' expense, thus protecting the municipality from additional costs. In some jurisdictions local governments even offer a property tax rebate to RCA members to offset their RCA assessments for services provided elsewhere by the municipality.

To prospective home buyers, RCAs promise certainty in a world of unforeseeable change, especially in protecting the homeowner's investment against depreciation. They promise a high quality of life, where sound planning and attractive amenities respond to the home buyer's desires. They offer resident control of many "public" services—a touchy point to critics—instead of leaving the homeowner at the mercy of the larger municipality, which may be controlled politically by people from the other side of town. They offer a social life in a relatively homogeneous community, an opportunity for town-meeting-style democracy, and a strong sense of personal efficacy.

Indeed, the success of RCA-type experiments as diverse as Arden, Delaware, Ft. Ellsworth Condominiums and Reston, Virginia, and the private city streets of St. Louis prove to public-choice economist Fred Foldvary that it is feasible, as well as infinitely desirable, to organize the proprietary delivery of "public" services on a territorial basis. Drawing on the work of Spencer Heath and his grandson, Spencer Heath MacCallum, Foldvary's Public Goods and Private Communities offers the proprietary community as the model for a happy future: All services performed in support of property by governments can be delivered far better through the use of contract, covenants, and user fees than by politicized government bureaucracies. He appears to endorse MacCallum's dream of a network of proprietary communities united into a polycentric federation that simply pushes aside traditional units of government, becoming, in effect, local government.

The critics of the RCA, however, are many and varied, and Evan McKenzie, a lawyer and associate professor of political science at Pennsylvania's Albright College, has earned a place in their vanguard with Privatopia: Homeowner Associations and the Rise of Residential Private Government. His case against these "privatopias" goes like this: RCAs are based on an "ideology of hostile privatism," where the supreme goal is the protection of property values, to which all of the nobler aspects of human life are subordinated. RCAs glorify a "culture that links ownership of private property with freedom, individuality, and autonomy, rather than with responsibility to the surrounding community." McKenzie even calls RCAs "socialism by contract"—although he concedes that it is a defective socialism since RCA bylaws don't require others to lift up the downtrodden who, due to economic reverses, can no longer cover their RCA assessments.

McKenzie attacks the RCA—which he calls a common interest development (CID)—for exhibiting a "communalistic, even cult-like isolationist nature." He is offended that in a poll of residents at the giant Leisure World RCA in Southern California, 92 percent of the respondents rated security "very important," and were happy to have the development patrolled by 300 private security officers.

He even sees the CID as a corporatization of the home. The individual in a CID, he says, is subservient to a corporation and its detached, expert managers who carry out their functions in a way that makes life easier for them, not the residents. The CID idea, he says, begins with a plan, then property, then rules to protect the property, then a physical city, and then people who live in the city and obey the rules, or else.

"In short," writes McKenzie, "a CID is a prefabricated framework for civil society in search of a population. The population may come and go, but the property and the rules will remain, and the population will remain in service to the rules." CIDs undermine the "real city," charges McKenzie. They are illiberal and anti-democratic, and they represent, to borrow Robert Reich's phrase, "the secession of the successful" from the disaster areas they left behind.

If CID living is as onerous as McKenzie claims, it's a wonder anybody actually lives in them. But McKenzie is at pains to demonstrate that CIDs are not the product of a voluntary Lockean contract among people who wish to escape the state of nature in return for common benefits. Instead, he says, the associations are a compulsory residential nightmare. His wrath is heightened by horror stories about tyrannical enforcement of CC&Rs: a woman taken to court because her dog weighed more than 30 pounds; a man who sued his senior-citizen community because it disallowed residence by his new 45-year-old wife; and a man sued by his RCA because he erected a fence to keep his young son from wandering over a 400-foot cliff. He describes how RCAs rely upon state government to bolster their enforcement and collection powers, while at the same time bidding government to remain outside the gates.

McKenzie builds much of his attack on the highly dubious proposition that the residents did not consent to this oppressive private government. According to him, they found themselves living in CIDs because they had no realistic options for living anywhere else. This will probably come as a surprise to CID residents, who thought they chose CID ownership of their own free will, and to non-residents who must wonder how they came to be spared.

At times, McKenzie grants that residents were not forced to join CIDs against their will. But that merely means they chose to join, in which case McKenzie views them as small-minded, selfish, illiberal, greedy dropouts from the great duty of life—namely, to make municipal government work and to struggle bravely toward economic justice for all instead of feathering their own nest.

Foldvary's shining RCA vision is a polycentric world of proprietary communities, wisely and efficiently operated with the consent of the residents by disinterested princes akin to Swiss hotel managers. McKenzie's horrible CID nightmare is an equally polycentric world of walled and guarded enclaves of the rich, petty, and socially irresponsible, where every generous impulse and mark of individuality is confined by a CC&R designed to advance the single-minded goal of property value protection and enhancement. Between these two poles lies Robert Jay Dilger's Neighborhood Politics.

Dilger, a political scientist at West Virginia University, is not seeking to grind an axe. His goal is to illuminate the origins, principles, development, and policy questions relating to the RCA movement. He blends exhaustive knowledge of his subject with an exemplary clarity of presentation. Without rhetorical flourishes or involved economic and legal analysis, he makes clear the various cases for and against RCAs. His conclusions are generally favorable to RCAs, and his recommendations include offering better information to prospective buyers to avoid ugly surprises later on, achieving better relations with local government, and providing representation for renters. He is supportive of the RCA as a channel for political activity, and as a forum for the practice of civic virtue.

RCAs obviously meet an important need for millions of people. In a society where government all too often proves unable to defend public order, assure personal security, prevent destruction of property values, spend tax dollars wisely, deliver high-quality services, and refrain from misguided social engineering, RCAs offer an attractive alternative. If one believes it is everyone's solemn duty to remain, suffer, and sometimes perish in the midst of over-governed but under-served urban disaster areas in the name of civic altruism and economic justice, then the RCA is a cowardly escape. On the other hand, if one believes in using one's resources to acquire the ownership of a decent home for one's family, or for one's retirement years, in safe and congenial surroundings, even at the price of some intrusive regulation of private choices, then the various forms of planned communities will remain an attractive option. Whether governments will allow themselves to be replaced by a RCA federation remains to be seen, but it's far from the worst idea to come down the pike.

Contributing Editor John McClaughry is president of the Ethan Allen Institute in Concord, Vermont.