5 minute read
Special Assessments Are Here
TIME TO HAVE THOSE HARD CONVERSATIONS AND FIND SOLUTIONS FOR DEFERRED MAINTENANCE.
By Scott Swinton
Would the Roman Emperors have ruled differently if they had known that the Visigoths were scheduled to rush in from the east before the end of the first century? Probably. A retrospective look at history is patently unfair, but it is worth imagining how they might have tweaked their governing model and curtailed their world domination tour if the sacking of Rome had been somewhere in their imagination.
The same fairness must be applied to the multifamily reconstruction crisis playing out in so many HOAs across California. It seems like every condo and townhome community is being faced with unprecedented and unforeseen repair bills. Many homeowners are facing special assessments higher than what they would want to pay for a new car.
But, just as it is naïve to critique the Caesars for ruling poorly, it is also unfair to unduly critique the last generation of builders, board members, and owners for the current reconstruction woes experienced by so many California HOAs.
Why? At the inception of the CID explosion, there were poignant pressures and innovations that negatively affected the construction of the 1960s - 1980s multifamily structures:
• Sociological (Increased demand for affordable housing with the accompanying haste and graft)
• Political (Clean Air and Clean Water legislation that fundamentally changed what products and process could NO LONGER be utilized in housing developments)
• Industrial (Introduction of inexpensive tube-applied caulks and plywood siding)
Too often those pressures encouraged designers to improvise or value-engineer in their designs and nudged builders and city building departments toward lax methods and oversight. Not only that but rot and pest resistant oldgrowth lumber was harder to find, power tools were increasing production speed, and cheap caulk in a tube was becoming the alternative to craftsmanship and accuracy.
With that historical thumbnail in mind, remember that the HOA industry was infant in the 60s and 70s. Davis Sterling didn’t coalesce until the mid-80s. Reserve funding and building maintenance that should have begun immediately was naively assumed unimportant if necessary at all.
There were more exciting ways to spend money, or as often, dues were kept low and no money spent at all. Reserves for these “unnecessary” maintenance issues were of course postponed if not ignored. Monthly assessments and savings accounts were kept low for a generation, and all the while, a bigger issue was growing behind the thin paint and veneers.
Today, 15% inflation is being discussed in the news and condominiums are levying $30k, $60k, and $90k per door special assessments to catch up with decades of deferred maintenance.
Possibly, “deferred maintenance” is more derogatory than is fair. Much of what is being discovered wouldn’t have been prevented with any amount of maintenance. The rot and decay was inevitable.
Extensive repairs are needed in thousands of communities, and the path forward isn’t obvious or easy for many. The lucky ones saw the warning signs and launched repair projects in the last decade. Meanwhile, those who missed the COVID cut-off are faced with construction costs easily 25% higher than they would have been.
The lesson: delay is never going to be a wise strategy. Entropy and inflation are the allies of delay in their own group of mischief. Squarely facing and funding the “50-year-problem” that plagues so many communities today is the only way to get out in front.
The freight train of entropy and inflation has been rolling for 50 years and is accelerating. Now is the time to address the problems. Sitting around and casting blame may be cathartic, but funding a project simply won’t be easier next year. The project will be larger and the cost higher.
I see some boards catching on. They are making the hard decisions. It’s rough, but they are doing the hard work of keeping their property values up. I see the light coming on for others. The conversations are shifting away from why and moving toward how.
It’s naïve to think the problem will go away, but it’s also naïve to lose hope and assume the worst is unavoidable. The solution requires some hard conversations with the customer. It also requires a willingness as a vendor, manager, or management company to speak truth with confidence.
Often, the right step is to put your foot down and say, “No, I can’t assist you in settling for a path that will only twist the dial a little harder on the time bomb. I can’t abet loading this liability onto the unassuming next generation.”
The problem has been enroute for 50 years. It’s pulling into the station right now, and it’s up to the industry professionals of today to face the problem with resolve and creativity.
Help your boards understand the current conditions and the historical reasons for them. Call the experts to your defense and then insist on positive forward motion from your boards. It’s their time to make a difference in their community in a big way. History is watching.
Scott Swinton
Scott Swinton is the General Contractor and Certified Construction Manager at Unlimited Property Services, Inc.
