Private Neighborhood Creativity

Quorum is the monthly magazine of the Washington chapter of the Community Association Institute. The magazine often has useful articles on the management issues confronting homeowners associations, condominiums and cooperatives – the three forms of private community association – in the Washington area.

The September 2009 issue includes an article by Randal O’Toole of the Thoreau Institute in Oregon usefully reminding us of “The Consequences of Urban Planning: How ‘Smart Growth’ Sprouts Bad Outcomes” (not yet available online).  Another interesting article describes how private neighborhood “Creativity Solves Persistent Painting Problems” in a homeowners association (HOA) of townhouses in McLean, Virginia. When neighborhood property owners have private control over their own environment, they are able to innovate pragmatic solutions to neighborhood problems that would be more difficult, or unavailable altogether, under zoning and other public forms of neighborhood collective controls.

In 1985, the McLean HOA board of directors passed a rule requiring that each townhouse be painted every three years with pre-approved colors (this seems a short time to me, but the association presumably had its reasons).  This led to a variety of practical problems, including owners who failed to meet the deadline, owner selection of lower quality paints to cut costs, and poor color coordination when each owner individually exercised their choice (if within the range of allowed colors).

In order to address these problems, the McLean HOA in 1999 adopted the following approach: in the year when a townhouse owner is scheduled to repaint, the HOA issues a paint voucher good for use at a particular local store. The voucher – covered by the HOA through its dues assessments — is only good for a top-quality national brand of paint and has an expiration date, creating a strong incentive for the owner to act within the HOA’s schedule. The owner does the painting or hires someone to do it. Assuming they use the voucher, all owners now use the same paint color, eliminating the former problem of clashing colors. Additional benefits are a lower contractor rate for paint that the HOA has been able to negotiate with the store and the increase — reflecting the new higher paint quality — in the painting interval from three to four years.

Under public sector control of a neighborhood environment, rigid zoning and other rules would be administered by officials outside the neighborhood itself. Once set in place, it would be difficult to make any changes in public rules based on subsequent neighborhood learning experiences. The neighborhood property owners themselves do not hold the responsibility for collectively managing their own surroundings, and thus have less incentive to search for practical solutions to their common problems. If they do come up with a good idea, they face the hurdle of having to sell it to the outside public administrators who hold the final authority.

The Sky Bryce Association in the Shenandoah Valley similarly faced a practical problem and was similarly able to innovate a creative solution. According to its founding documents (its “neighborhood constitution”), changing the rules of the association required not only a certain favorable percentage of owner votes but a certain absolute total number of votes. Even in the case of non-controversial changes to the association rules, the association had tried but failed to obtain the required total number of votes.

The Sky Bryce HOA, like the McLean HOA with its painting problem, came up with a clever solution. It turned the HOA voting into a lottery as well. The first selected “vote/ticket” offered a prize of $300, second place was worth $200, and third place $100. By appealing to their gambling instincts, owner voting in the HOA increased and the rules change was easily approved. In the public sector, even assuming public administrators had shown the same creativity, it would probably have been impossible to use a similar lottery procedure — it is not considered acceptable (legally at least, whatever the old political machines used to do) to “pay” people to vote.

A private neighborhood gives owners the opportunity to manage their own surrounding environment. Neighborhood environmental management in the public sector is by outsiders and is likely to be less creative and flexible. Although HOAs and other forms of private community association now predominate in brand new developments of any size throughout the United States, there remains the problem of introducing private creativity into the many old neighborhoods that lack a private collective management regime at present.