06.08.23
CIC Info Bytes are frequent, succinct updates that provide educational and engagement opportunities to help your community thrive! Subscribe to receive CIC Info Bytes updates by email. Join us on Reddit at r/HOA.
ISSUE # 67
CIC Info Bytes 06/08/23
CIC Info Bytes are frequent, succinct updates providing educational and engagement opportunities that help your community thrive! Please forward and share this newsletter with your peers, neighbors and colleagues so they can connect and join. Our goal is to curate content that provides a robust basis for contextual understanding to support practical takeaways for you and your association. Please consider following us on Twitter and Reddit.
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Are you under pressure? Condo Connection has a new page dedicated to conflict.
A dozen Board conflict related resources in one place! Here’s a poignant quote by Marion Peters Angelica in Keeping the Peace: Resolving Conflict in the Boardroom:
Boards draw their membership from people whose work experience is in other sectors—government and business. Many conflicts on boards and between boards and executives result from the introduction of practices and values that may be appropriate to the way other sectors do business, but which may be incompatible with nonprofits' legal and ethical obligations.
One of the most pervasive reasons for conflict in common interest communities (CICs) is that volunteers — with various backgrounds and livelihoods and other demands — are simply overwhelmed trying to run the business: your community — incorporated or not — is a business. Doing the best and/or the right thing for your community gives way to doing what's most expedient, whatever can be summarized in one page or decided in a 5 to 10 minute conversation (see frequent mistakes and lessons learned).
Who can resist our photogenic brand mark? If you didn’t follow already, why not? Come tweet with us!
How Long does Certainty Last in Your Community?
Compromise required to broker a debt ceiling deal in Washington DC reminds us that certainty lasts only until the next election (certain 'wins' from 2022 -- before the change House leadership -- were given up). How long does certainty last in your community association?
N.B. For purposes of this poll, certainty is defined as reliance that your community association will act:
within the limits of its authority
as required by statute and your governing documents
to proactively engage all necessary parties to avoid surprises
to promote owner and resident satisfaction
to appropriately maintain, repair and replace common property and infrastructure
to appropriately budget and collect assessments necessary to fund operations and reserves
Great Failing of the Industry
While debating the merits of a records policy requiring that the association maintain copies of almost all its own records and stating that no community association in my robust experience has managed to establish reasonable continuity through management changes – especially related to records – and then getting attacked by a volunteer colleague with a rant including “that is false”, our community association attorney came to my defense by expressing one of the great failings of the industry: records never transfer from one management experience to the next in a way that ensures continuity of access and appropriate retention. NEVER. Hundreds of client examples. Zero successes. This attorney said that the Washington State legislature has tried to correct this failure, but they can’t seem to make it happen. WHY NOT?
Operationalizing continuity requires more than laws.
LEARN MORE on our Records Page
Self-Managed?
Being "self-managed" does not mean that homeowner volunteers take on all the work that professionals should be doing. Self-management implies that homeowner leaders have decided to eschew retaining a “management” company to coordinate some of the heavy lifting to get all the necessary professionals involved. Self-managed associations have all the same needs for bookkeeping, legal and other professional services, but volunteers coordinate those services directly (which is somewhat oddly the experience of many associations that pay a management company).
Cost Amnesia?
Folks who are in single-family homes and who are responsible for the roofs and the siding and all of the home understand relatively quickly what it costs to maintain, repair and replace elements of their home and lots.
Cost amnesia seems to set in when a group of homeowners need to make decisions as a team and/or there's a bigger roof sitting atop a multifamily residential building. Why does common sense go out the window? Why do proper planning and due diligence go out the window? Why is it so hard to accept the expenses associated with operating a common interest community?
Structural Deficiencies
If the “system” were working as designed, emergency structural evacuations would be a thing of the past. The system, as it were, is broken and homeowners are in the drivers’ seat. Let Rochester Towers be a hard lesson your association can proactively avoid!
Details regarding how long residents of the Rochester Towers Condominium will be homeless remain scarce.
“The structural engineering firm is continuing to assess the entire building to ensure any other potential issues are identified,” Jenna Bowman, Rochester’s strategic communications and engagement director, stated in an email sent Tuesday. “Once that work is complete, there will be a better understanding of potential timelines.”
Residents of the building at 207 Fifth Ave. SW report receiving emails stating the city has officially pulled the 15-story building’s certificate of occupancy, which could result in a month-long wait for a return to their units, but Bowman said the certificate was not formally pulled.
Timeline remain uncertain for Rochester Towers Condominium residents — Randy Petersen | The Post Bulletin | June 06, 2023
Rochester Towers Condominium building evacuated due to structural concerns — Rebecca Mitchell | The Post Bulletin | June 02, 2023
Dave Ramsey says “your HOA fee is asinine.” We say this unfortunate segment is the perfect example of sensational "wisdom" absent understanding WHY assessments are levied in certain amounts.
The market value of your condominium unit, townhome or single family detached home has no direct proportional relationship to the amount of assessments that must be levied to maintain the components shared in common.
Look at homeownership rates in the chart below. The numbers are striking in their precision. The statistical value of each year of human life, accounting for racial differences in life expectancy: $13,619. Wealth missing due to lower rates of Black home ownership: $148,099. Average devaluation of Black-owned businesses: $77,000. Each year of disproportionate incarceration factored by race, combining lost wages and freedom: $159,792.
These calculations by California’s Task Force to Study and Develop Reparation Proposals for African Americans, buried in the nearly 500-page draft of a report that will go to the state legislature in late June, belie the complexity and raw emotion underlying the first state-level effort to provide compensation for the legacy of slavery and discrimination in the US. By even considering reparations for harms that have compounded for centuries, California is transforming what has been a largely theoretical concept into a detailed model that may be adopted elsewhere as others also attempt to reckon with the costs of historical injustices. And at a potential cost of up to $800 billion, this would be to date the largest — and one of the most complex — reparations efforts in history.
By one reckoning, the state’s payments could reach $1.2 million per person. But who is compensated, and by whom, is far from resolved…
California Puts a Price on Slavery’s Legacy and Draws a Blueprint for Reparations — Karen Breslau | Bloomberg | June 06, 2023
View past coverage: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, and 11.
Energy
Regressive heat pump subsidies? The figure below shows how the percent of U.S. households with a heat pump varies by annual household income. Nationwide, 15% of U.S. households have a heat pump as their primary heating equipment, and this is essentially the same for all levels of household income, ranging from the bottom of the income distribution (less than $30,000 annually) to the top ($150,000+).
Are Heat Pump Subsidies Regressive?
— Lucas Davis | The Energy Institute Blog | June 05, 2023
2023 Updates: Residential Energy Consumption Survey (RECS) from the EIA
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Californians’ ability to pay – not just energy use – will soon dictate their utility bill.
Depending on the proposal the state ultimately adopts, Californians making more than $180,000 a year could end up paying an average of $500 more on their annual electricity bills, while the lowest-income residents would save around $300 per year.
Supporters argue that the plan will help the state electrify by lowering costs for residents that might not otherwise afford it. Critics, including many California residents, say that it will eat into progress on energy efficiency and that it is unfair to those who are conserving energy.
That’s where the new law, which passed last summer as part of a larger energy bill, comes in. First proposed by researchers at the University of California at Berkeley and the nonprofit Next 10, the plan would split utility costs into two buckets: Fixed charges, which everyone has to pay just to be connected to the grid, and variable charges, which depend on how much electricity you use. Proponents say that the creation of fixed charges would cover things like wildfire preparedness and grid updates — and would also lower electricity costs based on usage. In theory, that would make it easier to convince Californians to electrify.
But, in a twist from how many other utilities do it, the fixed charge would be based on how much money the electricity user makes.
If you live in California, your power bill will soon depend on your income
— Shannon Osaka | The Washington Post | June 01, 2023
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…Tinia’s solution consists of two key components: data-collecting hardware that is mounted on every solar panel, and an IoT, AI and blockchain-based platform that takes data from the solar panel and makes transactions possible.
With this proprietary hardware-software, AI, and blockchain platform, Tinia gives all actors connected to the electrical grid the possibility to securely and transparently transact their surplus energy as well as maximize the efficiency of solar energy production. “We aim to become the operating system for distributed energy resources. From residential to solar farms, we help solar energy producers make money out of their unused energy with more efficient systems that speed up the transition to green energy and a sustainable future worldwide,” says Pichiu…
A Breakthrough Model For Solar: Meet The Startup Democratizing The Energy Revolution — Marianne Lehnis | Forbes | June 02, 2023
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BIG NUMBERS FOR FLOATING SOLAR at the Canoe Brook reservoir:
16,510 solar panels covering 17 acres
8.9-megawatt (MW) generating capacity could power up to 1,400 homes, but will provide approximately 95% of the power needs for New Jersey American Water’s Canoe Brook Water Treatment Plant.
The largest floating solar farm in North America is officially online — Michelle Lewis | Elektrek | June 07, 2023
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Up front costs, shade, latitude, clouds, panel size and solar irradiance all play a role in the energy produced by solar panels and their long-term LCOE (levelized cost of energy).
How Much Energy Does a Solar Panel Produce? — Chi Odogwu | CNET | May 25, 2023
Solar Is Cheapest Energy Source Says IEA — Irina Slav | OilPrice.com | May 28, 2023
How Low (& How Green) Can Solar Cells Go? The Magic Word Is Kerfless — Tina Casey | CleanTechnica | June 02, 2023
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A big lesson the leaders and pioneers in this technology (like the Northwest Energy Efficiency Alliance, Bonneville Power Administration, Ecotope, and Small Planet Supply) have learned is that successful installations of commercial heat pump water heaters need to happen as a system. This means putting all the parts together off-site and shipping a central heat pump water heater to a building in a fully packaged container rather than having lots of parts show up onsite and having them put together. To see what a central heat pump water heater system looks like, check out a virtual tour of a factory building packaged central heat pump water heaters.
— Joe Wachunas | CleanTechnica | May 27, 2023
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Giant heat pumps are ruthlessly efficient in their role with district heating.
The 'exploding' demand for giant heat pumps — Chris Baraniuk | BBC News | May 29, 2023
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A barrage of measures in the Texas legislature had threatened wind and solar projects, but according to renewables-project developers, the worst of those weren’t enacted.
Proposals that fizzled included one that would have made renewables foot part of the bill for new natural-gas plants. Another would have mandated that wind farms be set back the distance of 10 football fields from property lines.
Renewable Energy Avoids Nightmare Scenario in Texas — Phred Dvorak and Jennifer Hiller | WSJ | June 04, 2023
Texas, a Clean-Energy Pioneer, Turns Against Renewables — Jennifer Hiller, Phred Dvorak and Katherine Blunt | WSJ | May 26, 2023
The Cost of Net Zero
Court challenges delay states’ ultra-progressive energy moves. See May 11th issue.
Washington Delays Requirements for Heat Pumps in New Buildings — Angely Marcado | Gizmodo | May 21, 2023
In an emergency meeting Wednesday, the Washington State Building Code Council delayed implementation of code changes until late October….
In the California case – California Restaurant Association v. City of Berkeley – the 9th Circuit Court of Appeals concluded the federal Energy Policy and Conservation Act “expressly preempts state and local regulations concerning the energy use of many natural gas appliances, including those used in household and restaurant kitchens.”
WA council delays new building codes that would require heat pumps – Jerry Cornfield | Washington State Standard | May 25, 2023
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The following article offers some practical insights about costs and considerations related to heat pump installations.
Oregonians’ experiences with heat pump installations — OregonLive| May 28, 2023
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Ducted, mini-split, cold climate…you name it, this glossary has got the goods!
Heat pump glossary — OregonLive| May 28, 2023
Environment
DID YOU KNOW that up to 30% of urban water supply is used to flush human waste?
Earth has pushed past seven out of eight scientifically established safety limits and into “the danger zone,” not just for an overheating planet that’s losing its natural areas, but for the well-being of people living on it, according to a new study.
The study looks not just at guardrails for the planetary ecosystem but for the first time it includes measures of “justice,” which is mostly about preventing harm for countries, ethnicities and genders.
The study by the international scientist group Earth Commission published in Wednesday’s journal Nature looks at climate, air pollution, phosphorus and nitrogen contamination of water from fertilizer overuse, groundwater supplies, fresh surface water, the unbuilt natural environment and the overall natural and human-built environment. Only air pollution wasn’t quite at the danger point globally.
Earth is 'really quite sick now' and in danger zone in nearly all ecological ways, study says — Seth Borenstein | AP News | May 31, 2023
A just world on a safe planet: First study quantifying Earth system boundaries — Future Earth | Phys.org | May 31, 2023
Earth Commission: A just world on a safe planet: First study quantifying Earth System Boundaries
AP News Climate & Environment Page
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“As long as they keep talking about global climate change, they are not gonna go anywhere. ‘Cause no one gives a s--- about that,” Schwarzenegger told CBS’ “Sunday Morning” correspondent Tracy Smith in a profile that aired Sunday.
“So my thing is, let’s go and rephrase this and communicate differently about it and really tell people — we’re talking about pollution. Pollution creates climate change, and pollution kills,” Schwarzenegger said.
Arnold Schwarzenegger: 'No one gives a s--- about' climate change… — Catherine Clifford Borenstein | CNBC News | May 31, 2023
A Persistent and Puzzling Problem: Plastic
The current recycling system is broken and probably won’t be fixed anytime soon because new plastic is cheaper than recycled plastic.
VIDEO: Trashed: The Secret Life of Plastic Recycling — ABC News | May 24, 2023
Small town, big landfill: New York’s largest garbage dump could grow larger
— Jared Kofsky, Tonya Simpson, Cho Park, and Cindy Galli | ABC News | May 31, 2023
We put dozens of trackers in plastic bags for recycling. Many were trashed. — Matt Gutman, Evan Simon, Cho Park, Tonya Simpson, Jared Kofsky, Jon Schlosberg, Tommy Brooksbank, Seiji Yamashita, and Soo Rin Kim | ABC News | May 23, 2023
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The list of plastic substitutes seems to be growing longer by the day as companies come up with novel products such as cling wrap made from potato waste, seaweed-based food wrappers and cassava starch bags.
Work is underway to create the first global treaty to reduce plastic pollution. But experts say achieving that goal will probably involve, in part, developing better substitutes — a challenge that has appeared to vex many environmentalists and sustainability researchers.
That’s because it hasn’t been easy to replace plastic, a ubiquitous material that’s inexpensive, robust and versatile.
“Plastics need to get fixed,” said Michael Shaver, director of the Sustainable Materials Innovation Hub at the University of Manchester. “But doing that by simply switching to another material without considering the consequences of that is where that’s dangerous.”
Why glass, paper and other options aren’t the simple alternative to plastic that they seem to be — Allyson Chiu | WaPo | June 07, 2023
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The recognizable chasing arrows icon could be doing more harm than good—so the EPA wants to toss it.
Last month, the US Environmental Protection Agency (EPA) submitted a comment about the Green Guides. According to the agency, the use of the resin identification code (RIC) with the recycling symbol—the familiar three chasing arrows—constitutes a misrepresentation of claims. Even though the RIC is meant to identify a product’s unique plastic resin type, consumers generally understand it to represent a universal recycling symbol. A 2019 report from the Consumer Brands Association found that 68 percent of Americans assume any product with the resin code and recycling symbol is recyclable.
The RIC system was not intended for consumers in the first place, but rather, for those who work in materials recovery and recycling facilities.
Why the recycling symbol is part of a 'misinformation campaign' — Carla Delgado | Popular Science | May 29, 2023
Reduce. Reuse. Confuse. — Consumer Brands Association | 2019
Fossil-Fuel Interests Try to Weaken Global Plastics Treaty — Sara Schonhardt | E&E News | June 1, 2023
Nearly two-thirds of 430,000,000 tons of plastic produced becomes garbage after being used. Only 9% is recycled.
VIDEO: The UN wants to drastically reduce plastic pollution by 2040. Here’s how — William Brangham | PBS | May 27, 2023
Turning Off the Tap — United Nations | 2023
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RECYCLING NOT A CURE: “Hazardous chemicals can accumulate in recycled material and then migrate into foodstuffs, leading to chronic human exposure,” the study’s authors wrote, noting bottles made from polyethylene terephthalate (PET) plastic as a common example.
The study comes amid a debate over how to reduce the amount of plastic waste filling up the globe. The petrochemical industry, some governments and many environmental groups have pushed for improvements to the recyclability of plastic.
Though some types of the material can be recycled, most cannot, and the study highlights how improving recyclability of the material comes with risks: it identified 853 chemicals used in PET recycled plastic and many of those have been discovered during the last two years…
The data indicates chemicals are added or created during the recycling process. While 461 kinds of volatile organic compounds (VOCs) were detected in virgin plastic, some 573 were found in recycled material. Geueke said it was difficult to say why that occurred, but it could stem from the addition of chemicals during the recycling process, the addition of chemicals from the contaminated recycling stream, reactions among chemicals, or from plastic taking up additional chemicals when used the first time.
Recycled and reused food contact plastics are ‘vectors’ for toxins – study — Tom Perkins | The Guardian | May 27, 2023
Plastic containers still distributed across the US are a potential health disaster: PFAS — Tom Perkins | The Guardian | June 01, 2023
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BRING AN UMBRELLA?: This pioneering work by French scientists found that most plastic particles falling across Paris's 2,500-square-kilometer (965-square-mile) catchment area were nylon and polyester, probably from clothing. Other bits were cast off by tires, which shed them especially when vehicles brake.
Over an entire year, up to 10 tons of microplastic fibers settle over the Paris area, they estimated. The density of "plastic fall" can increase by an order of magnitude during heavy rain. Measurements taken by other teams have replicated these findings in half a dozen cities around the world…
1st Plastics Pollution Weather Forecast Predicts 88 Pounds of Microplastic Over Paris — Marlowe Hood | Science Alert | May 26, 2023
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Despite a single-use bag ban in 2017, Nairobi and its waste collectors are still inundated with plastic. Can a new law pin responsibility on the manufacturers?
A sustainable waste management law, which will come into force in July, will require companies to reduce the pollution and environmental impacts of the products they introduce into the Kenyan market – either individually or through collective schemes. Previously, businesses were not obliged to take part in waste collection and recycling schemes such as Petco, an initiative created in 2018 after authorities threatened to ban the production and sale of plastic bottles. Only a few companies signed on, and its membership has remained dismal.
“We have over 1,000 companies that are producing bottled drinking water in the country, yet our membership … is [only] about 13 or 14 companies,” the Petco CEO, Joyce Gachungi, told the Guardian.
After a plastic bag ban, Kenya takes another shot at its pollution problem — Caroline Kimeu | The Guardian | May 30, 2023
Housing Affordability & Homelessness
If past efforts are any indication, we cannot spend our way out of the housing affordability and homelessness crisis gripping cities across the United States…
California spent a record $17 billion combating homelessness in the past four fiscal years. For the state budget year starting in July, Gov. Gavin Newsom has proposed another $3.7 billion.
Voters in Los Angeles and San Francisco, which have some of the largest homeless populations in California, were unhappy enough about it to approve taxes costing them billions of dollars to fund anti-homelessness programs and housing in recent years. So far, cost overruns and delays have left little to show for the money.
California Spent $17 Billion on Homelessness. It’s Not Working. — Christine Mai-Duc and Jim Carlton | WSJ | 06/02/23
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The King County Regional Homelessness Authority (KCRHA) has backed down from its $12 billion plan to work on maximizing its $250 million annual budget. KCRHA votes to move forward with proposed 5-year plan to help combat homeless crisis — Jeremy Harris | KOMO | 06/01/23
Five months after elected officials balked at the King County Regional Homelessness Authority’s five-year plan first draft, they approved a scaled-back version in a meeting last week. Now finalized, the plan will serve as guideposts for the authority’s operations. The plan creates guideposts for the authority's operations, lays out new ideas for funding and creates a vision for more regional buy-in, but avoids dollar figures.
“Our plan is grounded in our current reality and how we can be responsible stewards of the homeless response system,” said Helen Howell, interim CEO of the Regional Homelessness Authority, who presented the details of the plan to the agency’s governing committee on Thursday.
The reworked plan focuses less on the $12 billion and tens of thousands of shelter and housing units the authority says are needed to fully address the county’s homelessness crisis and emphasizes areas the homelessness system can be more efficient.
King County Regional Homelessness Authority adopts 5-year plan — Greg Kim | The Seattle Times | 06/07/23
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Accessory dwelling units (ADUs) allow younger Americans to afford housing in their parents’ backyard…maybe. See our coverage of ADUs: 1, 2, 3, and 4.
— Jeff Kruth, Murali Paranandi and The Conversation | Fortune | June 06, 2023
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An organization in San Francisco has turned a six-car garage into three 550- to 600-square-foot units, each with a bedroom, bathroom, and small kitchen... The affordable housing units cost $600,000 and are seen as a victory in the city's housing crisis.
"Now, more than ever, it is imperative that San Francisco's affordable housing development community utilizes its properties to their fullest and best potential to provide as many affordable housing units as possible," said Sam Moss, the executive director of Mission Housing, in a statement.
A San Francisco builder converted a former garage into 3 tiny homes — Lauren Steussy | Business Insider | 06/03/23
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- Insurance costs – especially in California and Florida – are driving increased costs of home ownership.
…California’s insurance dilemma is actually the result of two colliding crises, and one feeds the other. The long-standing NIMBY resistance to denser housing has historically pushed new development into the flammable fringes of cities known as the “wildland-urban interface.” Now, as fire chews through more homes, the state is falling far short of its housing-production goals. In 2020, a particularly destructive fire year, the number of homes that burned was equivalent to one-seventh of the homes built during the same 12-month period. There is a small shift happening: Over the past few years, sprawling developments proposed to boost the state’s housing stock have been rightfully challenged in epic legal battles that intend to stop new housing from being built in areas facing increased fire risk. By one estimate, 25,000 proposed units of housing are being held up in litigation. That housing still needs to be built — just somewhere less likely to become the subject of an insurance claim.
What happens in California is often a harbinger for the rest of the U.S. There’s even a name for this: the “California effect,” whereby policy decisions made here ripple across the country. Insuring the uninsurable in the face of increasingly pervasive climate risk will be a challenge everywhere and not just for wildfires. Incentivizing denser development in cities would deliver a whole bunch of other benefits as well, from reducing carbon emissions to improving air quality — the very climate metrics the state claims to lead on. If California wanted to remain the trailblazer here, its officials would subsidize affordable housing in safer places, instead of supporting an increasingly unaffordable cycle of destruction and rebuilding, as its residents stare down what may be the most devastating fire season in years…
California Is Becoming Uninsurable — Alissa Walker | Curbed | 05/30/23
State Farm Halts Home-Insurance Sales in California — Leslie Scism | WSJ | 05/26/23
ABC7 reported how State Farm Insurance stopped selling new homeowner policies in California last Saturday -- now a second major carrier, Allstate Insurance, confirmed today it ended new home policies in the state last year. On top of that, sources tell ABC7 a third carrier, Farmers Insurance, is limiting policies for new customers. The exodus comes as wildfire season looms ahead.
Allstate halting home insurance policies in California due to wildfire risk — Michael Finney | ABC News 7 | 06/03/23
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IT. Finally. Happened. Lack of water = less housing in Arizona.
Arizona has determined that there is not enough groundwater for all of the housing construction that has already been approved in the Phoenix area, and will stop developers from building some new subdivisions, a sign of looming trouble in the West and other places where overuse, drought and climate change are straining water supplies.
The decision by state officials very likely means the beginning of the end to the explosive development that has made the Phoenix area the fastest growing metropolitan region in the country.
The state said it would not revoke building permits that have already been issued and is instead counting on new water conservation measures and alternative sources to produce the water necessary for housing developments that have already been approved….
The decision means cities and developers must look for alternative sources of water to support future development — for example, by trying to buy access to river water from farmers or Native American tribes, many of whom are facing their own shortages. That rush to buy water is likely to rattle the real estate market in Arizona, making homes more expensive and threatening the relatively low housing costs that had made the region a magnet for people from across the country.
Arizona Limits Construction Around Phoenix as Its Water Supply Dwindles — Christopher Flavelle and Jack Healy | NYT | 05/26/23
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The Federal Housing Administration proposed a plan on Wednesday for mortgage borrowers who are behind on payments to get back on track by temporarily reducing their monthly bills. As part of it, borrowers would avoid giving up their super-low mortgage rates.
The FHA would essentially pay part of the homeowner’s monthly bill, using its insurance fund, then structure the repayment as a second loan due after the first is paid off, officials said. It would be available to people who otherwise wouldn’t benefit from a traditional modification that involves giving up their low rate for a higher one.
Rising Interest Rates Make It Harder to Help Distressed Homeowners. Regulators Are Trying to Fix That. — Ben Eisen | WSJ | 05/31/23
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Homeowners around the country are facing large bills and even foreclosure threats from investors who own their second mortgages. The loans were often made more than a decade ago. High home prices have given the investors a new incentive to try to collect.
Many homeowners say they were unaware that their second mortgages still existed. Lenders often “charged off” these loans years ago, deeming them unlikely to be repaid after borrowers fell behind. Many homeowners stopped receiving monthly statements, giving them the impression that the mortgages had gone away.
They hadn’t. The lenders sold the second mortgages to other investors, sometimes for just pennies on the dollar. Now, some borrowers could lose their homes even though they have been consistently paying the bills they receive each month for their primary mortgages. Federal regulators have taken notice.
Zombie Mortgages Could Force Some Homeowners Into Foreclosure — Nicole Friedmand and Ben Eisen | WSJ | 06/04/23
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Seattle-area mortgage payments cost nearly double the rent — Heidi Groover | The Seattle Times | 05/26/23
Housing Market
More on doom loops: I asked Tomasz Piskorski, a property market expert at Columbia Business School, why we should care if some downtown mogul—or better yet, the shareholders in a publicly traded Canadian office company—takes a haircut on their trophy building. For that matter, why should we care if they have to hand over the keys to the bank?
He gave me three reasons: First, because city property taxes will decline with the value of their office districts, prompting the so-called “doom loop”—the downward double-helix of revenue-strapped public services and diminished urban activity, each worsening the other. Second, contagion from abandoned office buildings will spread to retail (no daytime shoppers), restaurants (no daytime diners), and street life (no happy hour!), draining the vitality of urban neighborhoods.
Third: Widespread defaults on loans backed by commercial real estate could prompt a crisis at shaky regional banks, prompting tighter credit, bank runs, and ultimately, a financial meltdown…
Downtown real estate and commercial buildings are struggling. Why [not] lower the rent? — Henry Grabar | Slate | May 26, 2023
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US apartment landlords who benefited from rapid rent growth during the pandemic are suddenly in the red.
Higher interest rates and surging expenses are erasing their profits, even as rents are still climbing in many places. Debt payments already exceed income from multifamily buildings financed with more than $47 billion of securitized loans, according to data from Trepp.
Making matters worse, property taxes are escalating swiftly and the destructive path of climate change is sending insurance costs skyward. And building values are falling, complicating owners’ efforts to sell or refinance their way out of trouble.
“The problem is, nobody expected expenses to rise as much as they did,” said Jay Parsons, chief economist for RealPage, a rental-data tracker. “In particular, investors with floating-rate loans resetting at significantly higher rates could be challenged to cover debt payments.”
For now, the fallout has been limited. That’s because investors often purchase rate caps that protect them from the worst effects of soaring interest costs. But those policies are likely to begin burning off at a rapid rate later this year, leaving a growing number of owners vulnerable.
Apartment Landlords Bleeding Cash Imperil $47 Billion of Loans
— Patrick Clark and Prashant Gopal | Bloomberg | 05/25/23
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ABSTRACT: We show remote work led to large drops in lease revenues, occupancy, lease renewal rates, and market rents in the commercial office sector. We revalue New York City office buildings taking into account both the cash flow and discount rate implications of these shocks, and find a 44% decline in long run value. For the U.S., we find a $506.3 billion value destruction. Higher quality buildings were buffered against these trends due to a flight to quality, while lower quality office is at risk of becoming a stranded asset. These valuation changes have repercussions for local public finances and financial stability.
Work From Home and the Office Real Estate Apocalypse — Arpit Gupta, Vrinda Mittal, Stijn Van Nieuwerburgh | Slate | May 15, 2023
$500 billion ‘Office apocalypse’: Researchers find remote work’s effect worse than expected — Alena Botros | Slate | May 25, 2023
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Perhaps there’s hope for more return to office and more healthy downtowns? — Natasha Solo-Lyons | Bloomberg Evening Briefing | 06/05/23
Built Environment
Gaia is Asia’s largest mass timber building covering 468,000sqft:
‘Like entering a forest’: Inside Asia’s largest timber building — OScar Holland | CNN | 06/08/23
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Drive your car into your condominium unit? YES! The comments are a laugh!
Bugatti unveils design for first residential skyscraper — Tom Ravenscroft | Dezeen | 05/25/23
Condo Connection's financial coverage is indexed to our Dollar$ and $ense page dedicated to all things CIC finance.
Debt
The world is SWIMMING in $305 trillion in debt. How does US debt rank compared with the rest of the world? — Hannah Duggal | Al Jazeera | 05/31/23
US interest rates could push higher in the short-run, and taxes rise in the long run, says former Treasury Secretary Lawrence Summers, who sees risks from inflation and government debt. In a speech Tuesday at the Peterson Institute, he said the US seemed stuck with underlying inflation around double that of the Fed’s target, meaning the central bank may have to raise rates further. “My guess is that Fed funds are going to have to get to a point 50 basis points or more ahead of where they are,” he said, adding the US would be “likely to require substantial increases in revenue.” — Liza Tetley | Bloomberg 5 Things to Start Your Day | 05/31/23
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With America’s debt limit drama and its potential for triggering a catastrophic default in the rearview mirror, we return to your regular scheduled programming—the global battle against inflation.
When (and how) will central banks declare some measure of victory over price surges and stop (or even reverse) more than a year of tightening? The Federal Reserve says it’s notched some progress and that the US economy is cooling down. But the job market hasn’t cracked, with payrolls still surging. At the same time, however, a household survey showed a rise in joblessness. That mixed bag, one would think, might cement the Fed’s perceived inclination to pause interest-rate hikes this month—were it not for a third, critical piece of data. The number of unfilled jobs in the US unexpectedly jumped to more than 10 million. In Europe meanwhile, underlying inflation dipped by more than expected and global food costs fell to their lowest in two years, raising hopes that prices on market shelves are coming under control. Elsewhere, some observers say the screws might not be tight enough just yet. Mexico’s central bank said it anticipated a prolonged stretch of restrictive monetary policy to get inflation there back to target. Back in the US, the Fed’s coming decision could be seen in terms of the lesser of two evils. “Better to risk a deep economic recession,” Bill Dudley writes in Bloomberg Opinion, “than out-of-control inflation.”
— Victoria Cavaliere and Ian Fisher | Bloomberg Weekend Reading | 06/03/23
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A deluge is likely to suck a significant amount of liquidity out of financial markets. That could add pressure to a financial system that’s still showing signs of strain after several banks collapsed with the Federal Reserve raising interest rates and shrinking its balance sheet.
A $1 Trillion T-Bill Deluge Is Painful Risk of a Debt-Limit Deal
With the Treasury competing with banks for cash, lenders may see their own short-term funding rates rise, forcing them to boost the borrowing costs they impose on businesses and households.
Bank of America Corp. analysts have estimated that would have the same economic impact as a quarter-point interest rate hike, a squeeze which would come as traders are already predicting the Fed could lift its benchmark another 25 basis-point rate rise by July.
The result is that while yields on short-term Treasuries may drop on the relief of an agreement, the fall would be limited as investors try to assess what comes next.
Debt-Ceiling Relief May Be Short as Focus Turns to T-Bill Deluge — Benjamin Purvis | Yahoo! Finance | 05/28/23
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Federal Reserve officials signaled they are increasingly likely to hold interest rates steady at their June meeting before preparing to raise them again later this summer.
“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” Fed governor Philip Jefferson said in a speech Wednesday in Washington. “Indeed, skipping a rate hike at a coming meeting would allow the committee to see more data before making decisions about the extent of additional policy firming.”
Jefferson’s comments were notable because President Biden nominated him in May to serve as the Fed’s vice chair, a position that typically aids the Fed chair in shaping the policy agenda ahead of the central bank’s rate-setting Federal Open Market Committee meeting.
Fed Prepares to Skip June Rate Rise but Hike Later — Nick Timiraos | WSJ | 05/31/23
Being able to earn 5%-plus with a government guarantee is an advantage investors haven’t had since before the 2008-09 financial crisis.
When the risk-free rate is this high, you should think twice about taking risk…
The Investment Options for Your Cash Look a Lot Better These Days — Jason Zweig | WSJ | 05/26/23
As of June 8, 2023
The recent runs on Silicon Valley Bank and other regional lenders have drawn new attention to an old and seemingly intractable question: How far should governments go in guaranteeing the safety of bank deposits? Many are calling for a bold expansion of deposit insurance, arguing this would merely acknowledge where things now stand.
The rules can doubtless be improved, but extending government protection to all deposits, no matter how large, would be a grave mistake.
Insuring All Bank Deposits Won’t Make Finance Safer — Editors | Bloomberg | 05/30/23
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Tighter lending standards from regional banks are making it harder for U.S. hotel developers to secure funding, slowing construction of new hotels at a time Americans' appetite for travel is ripe.
Hotel developers, private equity firms, and general contractors told Reuters the financial stress on regional banks -- the largest lenders to hotels and other commercial real estate markets -- has forced developers to postpone projects or find other creative ways to raise capital.
Since March, 59 of the 98 total U.S. hotel projects that broke ground or were in the pre-construction phase this year have been paused, according to previously unreported data shared with Reuters by Build Central Inc., a subscription-based research and analytics firm used by some large hotel brands to gauge market opportunities by location.
US hotel developers run out of cash as construction lending dries up — Bianca Flowers and Priyamvada C | Reuters | 06/05/23
Jargon OUT | Plain Language IN
New research reinforces something many of us already knew:
Plain language is best. See Federal Plain Language Guidelines
Lawyers (and everyone else) COPY from one contract to the next.
Writing in a convoluted manner is a matter of convenience and tradition.
…In a separate experiment, the team asked another group of 100 lawyers to judge documents made with and without legalese on a variety of criteria. This time, the lawyers rated the simpler documents as being higher quality than those with jargon, while still being as legally enforceable. They also agreed that they and their clients would be more likely to sign the simpler version, and that they would more often hire someone who wrote that version over the more stuffy one.
The team had many working hypotheses for why jargon is so common in the legal field. One possible explanation, for example, was that lawyers use jargon because they’re so skilled at reading and using it that they don’t even notice how much harder it is for others to do the same. But that reasoning doesn’t make sense, given the findings. The only hypothesis that might still hold water is that lawyers tend to copy and paste legal jargon from one contract to the next, perhaps because they expect that language to remain enforceable.
“Contrary to previous speculation, these results suggest that lawyers who write in a convoluted manner do so as a matter of convenience and tradition as opposed to an outright preference and that simplifying legal documents would be beneficial for lawyers and nonlawyers alike,” they wrote.
Lawyers Hate Legal Jargon, Too — Mark Sherman | Gizmodo | 05/25/23
Different States, Different Covenant Amendment Requirements
Arizona Covenant Amendments Must be Foreseeable
MacLeod v. Mogollon Airpark Inc. is a great reminder about blue-penciling and Kalway v. Calabria Ranch HOA decided by the Arizona Supreme Court in May 2022.
Under Kalway, even if an amendment to CC&Rs was properly adopted under A.R.S. § 33-1817(A)(1) and the CC&Rs’ amendment procedure, it was none the less invalid without the consent of all owners if it was not reasonable and foreseeable considering the original CC&Rs. Kalway v. Calabria Ranch HOA, LLC, 252 Ariz. 532, 537, ¶ 10 (2022). That is, the original CC&Rs must give sufficient notice of the possibility of the amendment.
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Washington State Covenant Amendments Must be Foreseeable
In 2014, the Washington State Supreme Court decided Wilkinson v. Chihuahua Communities Association holding the following for HOAs governed by RCW 64.38:
In Washington, the authority of a simple majority of homeowners to adopt new covenants or amend existing ones in order to place new restrictions on the use of private property is limited.
When the governing covenants authorize a majority of homeowners to create new restrictions unrelated to existing ones, majority rule prevails “provided that such power is exercised in a reasonable manner consistent with the general plan of the development.” Shafer v. Bd. of Trs. of Sandy Hook Yacht Club Estates, Inc., 76 Wn.App. 267, 273–74, 883 P.2d 1387 (1994).
However, when the general plan of development permits a majority to change the covenants but not create new ones, a simple majority cannot add new restrictive covenants that are inconsistent with the general plan of development or have no relation to existing covenants. See Ebel v. Fairwood Park II Homeowners' Ass'n, 136 Wn.App. 787, 793, 150 P.3d 1163 (2007); Meresse v. Stelma, 100 Wn.App. 857, 865–66, 999 P.2d 1267 (2000); Lakeland Prop. Owners Ass'n v. Larson, 121 Ill.App.3d 805, 459 N.E.2d 1164, 77 Ill.Dec. 68 (1984).
This rule protects the reasonable, settled expectation of landowners by giving them the power to block “ ‘new covenants which have no relation to existing ones' “ and deprive them of their property rights. Meresse, 100 Wn.App. at 866 (emphasis omitted) (quoting Lakeland, 459 N.E.2d at 1167, 1169). As the Court of Appeals observed, “ ‘[t]he law will not subject a minority of landowners to unlimited and unexpected restrictions on the use of their land.’ “ Id. (quoting Boyles v. Hausmann, 246 Neb. 181, 517 N.W.2d 610, 617 (1994)).
...Thus, for amendments by majority vote to be valid in Chiwawa, such amendments must be consistent with the general plan of development and related to an existing covenant. ...Because a durational restriction on rentals would be inconsistent with the 1988/1992 covenants, it cannot be adopted by a simple majority vote of Chiwawa homeowners. Therefore, the 2011 amendment barring short-term rentals was invalid. We affirm.
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Georgia Covenant Amendments Work Differently
The Georgia Court of Appeals decided Ochoa v. Coldwater Creek Homeowners Association, Inc. in 2021 finding that:
Normally, “no change in the covenants [restricting lands to certain uses affecting planned subdivisions] which imposes a greater restriction on the use or development of the land will be enforced unless agreed to in writing by the owner of the affected property at the time such change is made.” OCGA § 44-5-60 (d) (4).
If the subdivision is subject to the POA Act, however, then the covenants may be amended “by the agreement of lot owners of lots to which two-thirds of the votes in the association pertain or such larger majority as the instrument may specify[.]”
OCGA § 44-3-226 (a) (1); see also OCGA § 44-3-234 (“The limitations provided in . . . paragraphs (1), (2), and (4) of subsection (d) of Code Section 44-5-60 shall not apply to any covenants contained in any instrument created pursuant to or submitted to [the POA Act].”).
SCOTUS unanimously ruled in favor of Geraldine Tyler in Tyler v. Hennepin County, Minnesota 22-166. See Too Much Taking from our April 27th issue.
“The County had the power to sell Tyler’s home to recover the unpaid property taxes. But it could not use the toehold of the tax debt to confiscate more property than was due,” Chief Justice John Roberts wrote for the court.
Tyler, who now lives in an apartment building for older people, owed $2,300 in unpaid taxes, plus interest and penalties totalling $15,000, when the county took title to the one-bedroom apartment in 2015. The county said she did nothing to hold onto her one-time residence. The condominium sold the next year.
Minnesota is among roughly a dozen states and the District of Columbia that allow local jurisdictions to keep the excess money, according to the Pacific Legal Foundation, a not-for-profit public interest law firm focused on property rights that represented Tyler at the Supreme Court.
Supreme Court rules in favor of 94-year-old woman who got nothing when county took her condo — Mark Sherman | Associated Press | 05/25/23
Supreme Court Rules That States Are Not Entitled to Windfalls in Tax Disputes — Adam Liptak | NYT | 05/25/23
RECENT STATUTES:
California AB 1410: Effective 09/30/2022 — Prohibits restrictions:
on the use of social media platforms to discuss association matters, even if the communications or literary distributions reflect negatively on the association
on peaceful assembly (subject to reasonable hours and purposes related to CICs) and meeting with public officials, members and residents in common areas (without paying a fee or deposit) and canvassing and petitioning about these activities
disseminating information about CICs, elections, recalls, etc.
On leasing for durations of more than thirty (30) days
Texas: HB 886 amends property owners’ association (POA) TPC 209.0094 to require substantially more notice before filing a lien. Effective 09/01/23:
3 formal notices of delinquency
180 days’ wait from the 3rd notice of delinquency
Texas: SB 1668 amends condominium association TPC 82.003 and adds a net new section 82.1142 to establish the same requirements that are already in force for POAs. This bill was vetoed by the governor on June 18, 2023. Read the veto.
defines a “management company”
associations with at least 60 units and those with management company:
must make their dedicatory instruments available on a website or information portal
must file some additional information as part of TPC 82.116
caps resale certificate fees as 375 in TPC 82.157
adds new restrictions and prohibitions of restrictive covenants related to fencing and driveways in TPC 202.023
amends TPC 209.00505 to clarify architectural review committee qualifications, election and appointment authority by a POA
Texas: HB 614 adds net new section TPC 209.0061 related to POAs whose dedicatory instruments allow fines; requirements as of January 1, 2024:
an enforcement policy that includes
General categories of restrictive covenants associated with fines
A schedule of fines for each category
Information regarding hearings from TPC 209.007
the enforcement policy must be readily available to owners
the enforcement policy must be available on a publicly accessible website
Texas: HB 1193 adds net new section TPC 202.024 that applies to all restrictive covenants. This bill prohibits POAs from discriminating against tenants based on their method of payment such as housing vouchers from Section 8 and becomes effective September 1, 2023.
REMINDER! Washington State has four newly effective CIC-specific statutes. One of these became effective May 1st; the remainder will become effective July 23, 2023.
Please contact us if you’re aware of legislation to feature from YOUR state!
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