Info Bytes 02.02.23

Great Leaders Always Ask “WHY?”

• Some owners are more involved than others. Some are more vocal than others. Homeowner meeting attendance – or lack thereof – is not a true reflection of who cares or how much. Sentiments like these are akin to saying that all City residents who fail to attend City Council meetings don’t care about the future of their City. Nothing could be further from the truth. How many council meetings did YOU attend last year?

  As someone who contributes a relatively significant amount of volunteer time to various causes, the concept that homeowners who don't get involved and/or proactively speak up lose their right to complain after the fact is valid, but so too is the fact that great governance has to come from within. Everyone wants leaders who:

  • don’t assume that someone else will take care of it
  • apply the necessary time and resources to educate themselves
  • elevate the needs of their community above their own interests
  • proactively do the right thing, at the right time, for the right reasons
  • act within the limits of their authority without being compelled to comply
• This month, we’re highlighting one of our first blog articles: Always Ask “Why?”

Architectural Discretion

• Reddit proves once again that free online forums can yield great insights. Here, u/singluon provided a detailed update to the Reddit audience about challenges faced when their HOA pushed back about roof color .

• TLDR: HOAs in Florida have limited discretion. Too many homeowners, management companies and even attorneys do not perform due diligence to render fully informed opinions. Here’s a poignant excerpt from Young v. Tortoise Island Homeowners.

  • In the absence of an existing pattern or scheme of type of architecture which puts a prospective purchaser on notice that only one kind of style is allowed, either in the recorded restrictions or de facto from the unified building scheme built on the subdivision, such a board does not have the power or discretion to impose only one style over another based purely on "aesthetic concepts".

  FL Statute §720.3035(1) - Architectural control; owner improvements; rights & privileges

  Will The Association’s Denial Of An Architectural Request Withstand Challenge?

  Architectural Review Committees DO NOT Have Unlimited Authority

Sinking Feeling

• Homeowners in this HOA learned an expensive lesson from this sinkhole. It is critical to understand what property homeowners are responsible for insuring.

  Future Unclear for Residents Affected by ‘Absolutely Devastating’ Sinkhole in State College — Halie Kines | Centre Daily Times | 01/22/23

“The housing market is the most interest-rate sensitive part of any economy, so it’s a very good lead of where the rest of the economy could be in quarters to come,” said Schroders fund manager James Ringer. Bloomberg 5 Things to Start Your Day | 02/01/23

The CO$T Of Solving Homelessness

• Sadly, the cost of solving the homelessness crisis in King County is not new information.

  • McKinsey & Company calculated the cost of homelessness starting back in 2017. We wrote about in Q1 2022.

• The King County Regional Homelessness Authority (KCRHA) presented its 5 year plan for public comment estimating it will cost ~$12,000,000,000 ($12 BILLION) to eradicate homelessness in King County. The plan was called an "overreach" by King County Councilmember Reagan Dunn. What’s the reality?

  • No agency (including the KCHRA) has fully earned the public’s trust of:
    1. fiscal stewardship of massive cash infusions
    2. uninterrupted operations: Homeless Authority Struggles to Find Severe Weather Shelter Providers After Key Contractor Bows Out
  • The public doesn’t want to pay the upfront cost to solve homelessness, so we continue to subsidize over $1 Billion annually to lost business and tourism, additional public response (police, fire, outreach, etc.) and frequent hospitalization for people who lack permanent shelter and access to basic services.

  Billions, not millions, needed to address King County homelessness crisis — Jeremy Harris | KOMO News | 01/26/23

  Homeless services could face cuts in WA's 2023 legislative session — Josh Cohen | Crosscut | 01/31/23

  Learn about Homelessness in King County, WA

Rude Awakening

• A recent survey found about 28 million buyers want to buy a home for about $100,000 less than the US median home price.

  Homebuyers who are hoping for lower prices in 2023 are in for a ‘rude awakening’ … — Robert Davis | Business Insider | 01/24/23

  Bidding Wars Are Back… — Danny Schmidt | KOMO | 01/25/23

  In some areas of the US, first-time home buyers and small investors have the upper hand on supposedly sophisticated players that badly misjudged the property market. While big investors that leaned on algorithms — so-called iBuyers — are nursing losses, local flippers sold homes for 20% above their purchase price. They tended to buy distressed properties, though they also generally put more into renovations. The typical Phoenix homeowner is sitting on an additional $100,000 in home equity since the pandemic began, according to real estate data firm Black Knight Inc. Bloomberg 5 Things to Start Your Day | 01/30/23

  Sophisticated investors made a simple mistake: “They were paying far more than they needed to on the way up and getting far less than they should on the way down”

  “They rode a wave, and it’s crashing on them…It’s a corporation. I don’t feel bad for them.”

Perspective on The Price of Housing

• Op eds providing additional perspective on the cost of housing:

  • In 1970 the average worker had to work 3.9 hours per square foot for the average home. By 2019 that had fallen to 2.75 hours.

  • How to Understand Rising U.S. Home Prices — WSJ | 01/27/23

Armageddon for Real Estate Agents

• "To be specific about real estate agents, we've got federal regulators and a couple of lawsuits coming down the pipeline that at worst case could be an armageddon for real estate agents," he said. "You might see regulators uncouple the commission structure where the seller is now essentially paying for the buyers' and agents' commission."

  Housing market: Jason Oppenheim warns of an 'armageddon' in the real estate industry — Dylan Croll | Yahoo! Finance | 01/29/23

Critical Housing Analysis

• Critical Housing Analysis (CHA) is a peer-reviewed academic journal focusing on critical and innovative housing research. We’ve added a link to it from our Publications page.

• 2019 research from retired Yale professor Leon S. Robertson concluded that there is an inverse correlation between property value increases for single family homes with covenants (traditionally known as HOAs) vs. those without covenants.

• You might also enjoy what Deborah Goonan at IAC has to say about it.

The Colorado River is Disappearing

• FIGHTING WORDS: “It would be hard to tell the California farmers who rely on the Colorado River to stop growing crops, so that other folks continue to build subdivisions.”

  As the Colorado River Shrinks, Washington Prepares to Spread the Pain — Christopher Flavell | NYT | 01/27/23

  How Las Vegas declared war on thirsty grass and set an example for the desert Southwest — Molly Hennessy-Fiske & Ian James | Yahoo! News | 01/29/23

  New York investors snapping up Colorado River water rights… — Ben Tracy, Andy Bast, Chris Spinder | CBS News | 01/31/23

America, The Bland

• Advocates for multifamily housing say there are times when design has to take a back seat to necessity, and the current affordability crisis is one of those times.

  America, The Bland— Anna Kodé | NYT | 01/20/23

  Fake Grass, Wood Frames and One Journalist’s Search for Answers — Josh Ocampo | NYT

Office Oil to Residential Ritz

• From oil icon to residential behemoth. Proof there’s hope for residential conversions!

  Towering downtown skyscraper set for new high-rise apartment conversion — Steven Devadnam | Culturemap Houston | 01/30/23

On Tilt

• The Millennium Tower saga is wrapping up, but the tower is still on tilt.

  Computer model predicts the Millenium Tower "fix" may recover about half the tilt it caused — Jason Weisberger | boingboing | 01/20/23

Gas vs. Electric is Heating Up

• Don’t forget: if you want to ditch gas, the Inflation Reduction Act might help.

  Are Gas Stoves Dangerous to Your Health? Here’s What Science Says — Sumathi Reddy | WSJ | 01/25/23

  Should you replace your gas stove with an induction cooktop? Here’s what you need to know — Adele Peters | Fast Company | 01/24/23

• The City of Seattle Office of Sustainability and Environment is working through a draft Building Emissions Performance Standard (BEPS). Multi-family residential properties with 20,000+sqft are subject to new emissions targets (see slide 29). Translation = $$$$$

  Reference Washington State Statute RCW 19.27A (especially 19.27A.250)

• TAKE ACTION: VIEW Seattle Building Emissions Performance Standard (BEPS) CALL to ACTION

• YOUR building is already being benchmarked! <<< View your current performance.

• Multi-family residential thresholds:

  • 2035: <=0.65kg CO2e/FT2
  • 2040: <=0.46kg CO2e/FT2
  • 2045: <=0.27kg CO2e/FT2
  • 2050: <=0 kg CO2e/FT2

• Call (206) 256-5158 and/or email Maketa Brazier and/or cleanbuildings@seattle.gov

• Seattle’s BEPS is intended to align with the WA Clean Buildings Energy Performance Standard developed by the WA Department of Commerce and applies to existing nonresidential & multifamily buildings greater than 20,000 square feet in size (excluding parking), roughly:

  • 1,650 nonresidential, 1,885 multifamily residential, and ~720 hospital and college campus buildings.
    • Governor Inslee signed SB5722 into law (effective June 9, 2022) which expanded the original standard to include multifamily residential properties >20,000sqft.
    • Multifamily residential properties >20,000sqft will be required to submit energy reports and energy management plans beginning in 2027, and to meet energy targets (TBD) after 2030.

Rates on the Rise

• The FOMC increased US overnight lending rates 25bps to a target of 4.5% - 4.75%
• The ECB (European Central Bank) increased its key interest rate by 50bps to 2.5%
• The BOE (Bank of England) bumped rates 50bps to a target of 4%

Coming in for Landing: Brace for Impact?

• The US economy is cooling just like the Federal Reserve wants, but growth hasn’t stalled—also as the Fed wants. While US gross domestic product for the last quarter exceeded estimates, the central bank’s preferred inflation measure slowed to its lowest pace in more than a year, and the number of temporary workers declined (an uptick can augur a recession). Together, these data points make it likely the Fed will, as expected, downshift the size of its interest rate hikes when it meets next week.

  But there’s danger lurking, some warn. If the Fed backs off monetary tightening too soon, inflation could again climb, this time on the back of a still-tight labor market. And inflation’s bite remains evident despite its decline: just look at soaring American credit card debt and automobile repossessions. In Europe, the outlook is worse. Inflation and Russia’s war on Ukraine have left the euro zone teetering near recession, with labor strikes from France to Germany to Italy another indicator that workers are in crisis.

• In the US, John Authers contends that even with all the good news, a hard or soft landing is hard to predict. “The data now look better for soft,” he writes in Bloomberg Opinion. But “the gut-check remains braced for hard.” Bloomberg Weekend Reading | 01/28/23

Legislation

• VIEW our new Legislation page focused on what’s happening in Washington State with the intent to highlight select, scintillating legislation from multiple states in the future. Washington State legislators are currently considering over 12 CIC-related bills.

Board Members Are Limited Public Figures

• While Arizona Supreme Court Rule 111(c) dictates that the Court of Appeals Division One decision in McCoy v. Johnson is not precedential, the appellate court affirmed the superior court’s dismissal of the case because the Board member plaintiffs were found to be “limited public figures.”

  • Neither the superior court nor appellate court rulings imply that every director on an elected private board is automatically a “limited public figure.”
  • Court findings re: “limited public figures” are based in part on the AZ legislature’s extension of certain First Amendment-type protections to CIC members.

Supreme Court Evaluates Scope of Attorney-Client Privilege

• TLDR: The Supreme Court dismissed In Re Grand Jury as improvidently granted.

  • “We’ve had the attorney-client privilege for a long time, and until 2014, nobody ever suggested that [a test of significance] is the right one…Everybody instead used the primary purpose test.”
  • “Everybody agrees you can’t just copy a lawyer on a communication, you can’t just have a lawyer sit in the corner of a meeting…and say the whole thing’s privileged.”
  • Justice Sonia Sotomayor said [the] proposed test would protect too many communications. “If 1 percent of the purpose of this communication was to render legal advice…the whole communication is suppressed.”

  Supreme Court Evaluates Scope of Attorney-Client Privilege – Adam Liptak | WSJ | 01/09/23

  View our Confidentiality page for this and more!

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