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CommunityNext 2020 and Beyond - External Influences

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External Influences ​​

20209.PNGToday, an estimated 67 million Americans— about 20.7 percent of the population—live in 333,600 homeowners associations, condominiums and cooperatives. In the coming decades, these figures are expected to grow, giving associations and their leaders increasing influence and attention. 

At the same time, community association volunteer board members, professional managers and community business partners will face a number of challenges and factors—largely beyond their control and expertise—that will affect commoninterest communities. The External Influences Panel discussed some of these influences and what can be done to mitigate the negative and accentuate the positive. 

202011.PNGThe panel predicts that changes in demographics and attitudes, economic factors, perception and reputation, influential stakeholders and organizations, local trends and more will combine to affect how associations are operated and governed in the next 15 years. These elements largely are interrelated. For associations to continue to thrive as the preferred places to call home, CAI and association leaders may need to adapt and prepare their communities for the evolution of community association living.

»PREPARE FOR MULTIPLE GENERATIONS AND INCREASING DIVERSITY
From millennials and Generations Y and X to baby boomers and the matures, common-interest communities increasingly will serve multiple generations. Associations will need to revise their communications strategies, operations, assessment collections, reserves for deferred maintenance, governance and meeting schedules to accommodate the broadened audience. 

202010.PNGIn general, residents will be more interested in walkability, amenities and activities beyond golf and tennis, and telecommuting. They’re placing a higher value on open space too. There’s likely to be more interest in association-provided maintenance services, such as landscaping, snow removal and other projects traditionally administered by homeowners. Separately, each generation will present different challenges to board members, managers and association business partners. Baby boomers, for example, will be coming to grips with the savings lost during the Great Recession. With the decline in pensions, and 401k and retirement plans hit hard during the recent recession, there will be a greater wealth disparity within retirees. 

202012.PNGActive boomers will seek more diverse amenities and events that go beyond the typical golf, gates and tennis ethos of today’s retirement communities. Some associations will find themselves evolving into pseudo-assisted living facilities, even though they’re not prepared for the additional burdens of aging residents. Some older residents may require round-the-clock, live-in caregivers—contracted healthcare providers and family members. This may create conflicts with occupancy requirements, parking restrictions and the like. 

Group homes, for example, typically run afoul of governing documents in community associations. Association CC&Rs may contain restrictions that preclude providing additional services to certain members such as the elderly, but aging residents will expect their communities to make it possible for them to remain in their homes. Future associations may need to depend more on outside services to meet the needs of older residents while looking at physical modifications to the property to accommodate diminished physical capacity. ​

Meanwhile, millennials and those in the iGeneration, who are saddled with student loan debt, facing a difficult job market and possibly unable to qualify for a mortgage, won’t be as eager to buy a home as previous generations. They will be renting for longer periods of time and will be more likely to move back home and live with their parents after college. In addition, they’re also expected to delay marriage and children and have more interest in living in cities. For that reason, the development of condominiums is expected to boom. As for ethnic and cultural diversity, associations will become less homogenous. Associations also may be counted on to provide multilingual governing documents, rules, newsletters and websites. Alternatively, translators may need to be on hand for association meetings. To bridge the language gap, it also may be beneficial for communities to embed photos and illustrations in governing documents and publications.

»STAY ON TOP OF ECONOMIC AND ENVIRONMENTAL ISSUES
Delinquencies and foreclosures caused by economic and environmental factors during the Great Recession have battered association operating and reserve funds. Today, most community associations have recovered financially, and that trend is expected to continue. However, association leaders will need to continue to pay close attention to their accounts and pursue delinquent owners when necessary. In some states, association liens can take precedence over mortgages, but courts may intervene and strip away those priority liens. Meanwhile, the business world increasingly is moving toward virtual offices and home-based employees, and—in the age when small businesses can sprout up overnight with an idea and a website—more residents will be working from home. In addition to economic factors, association leaders will need to receive even more education than they do today on environmental and energy issues. Homeowners are expected to be more interested in water conservation, xeriscaping, artificial turf, solar panels, electric cars and charging stations. Board members and managers in the South, Southwest and West, in particular, will need to get up to speed on things like xeriscaping and recycled water and may need to keep a constant eye on residents’ water consumption. Municipal water providers and local and state governments may count on association leaders to help them monitor water use and abuse among residents and to lead the way through water-wise common area landscaping and amenities. These environmental issues, and possibly a new set in 15 years, could clash with association rules and regulations; they also could impact where and how development occurs. The availability of water is likely to have a significant influence over where development occurs.

»ACCENTUATE THE POSTIVE ASPECTS OF ASSOCIATIONS CAI
chapters and association leaders still will be facing the negative perception of common-interest communities from the media in the next 15 years, and all stakeholders must do more to accentuate the positive aspects. The challenge is exacerbated by the budgetary crunch among traditional news outlets, which are expected to turn more frequently to wire services and away from original reporting. That will make sharing positive association stories a greater challenge than it is today. Association board members and managers need to be better trained and educated on working with news outlets; they need to learn how to frame things positively and proactively share their stories. Efforts to change the perception of associations will be critical in coming years. The negative reputation, especially in media coverage, influences legislators and regulators, who then work to create laws and standards to “fix” a problem that may not exist. In general, homebuyers don’t understand what an association does or why it exists in the first place. Efforts must be taken to explain the roles and responsibilities of associations. First-time community association homeowners sometimes confuse who’s in charge of development, transition and architectural review, or why associations have rules and regulations. However, as more people live in associations and ha​ve positive experiences, the overall perception of associations will improve.

»CONNECT AND COLLABORATE WITH STAKEHOLDERS AND ORGANIZATIONS
Association leaders also will need to work closely with influential stakeholders and organizations, such as developers, real estate agents and mortgage lenders. The NAHB, NAR and ABA exert an incredible amount of influence over development, sales and mortgage lending for homes in community associations. AARP, ​with its large, active membership and powerful voice, also impacts the success of associations. Engaging with these organizations is crucial to ensure commoninterest communities continue to be considered preferred places to call home.

Another key group to connect and collaborate with is developers and their attorneys, who are working to improve governing documents before they’re filed. Initial board members and managers need to pay close attention to their association’s documents—and the typical checklist—during the transition process. And managers engaged by the developer during the development process should be encouraged to use their knowledge of post-development association operational needs to steer the developer and its attorneys toward drafting and filing appropriate governing documents.

The business of developing community associations has become increasingly litigious. Tremendous benefits would be gained from providing enticing educational opportunities to developers to reinforce to both developers and associations that their interests are not mutually exclusive. Savvy developers already understand that the possibility of litigation is lessened when the development team pays attention to detail, supervises contractors and sub-contractors properly, fully discloses to prospective purchasers details of the project and makes a reasonable contribution to reserves during the period of developer control. The goal in this regard should be to help educate all developers regarding these issues and thus greatly improve the quality of new communities coming online.

Real estate agents must understand the nuances of community associations. By partnering with NAR and offering education to Realtors, who could then pass their knowledge on to homebuyers, there likely would be fewer owners who don’t understand the responsibilities and expectations of living in associations.

»UNDERSTAND KEY TRENDS
A number of patterns in development and generational desires will combine to impact associations too, but the extent of these influences largely depends on geographical location. For example, the Northeast Corridor and parts of Florida are running out of large tracts of land for development, which is leading to growth in townhome, condominium and small single-family home communities—and a gentrification of existing structures and property. That also may mean fewer amenities, lower assessments, a compact governance structure and a focus on contracting with service providers instead of hiring staff. As previously stated, managers and board members will need to be better versed in high-rise operations and governance with a special focus on maintenance, necessitating more outreach to urban high-rise managers.

The recent growth of rental properties and conversions of condominiums into apartments is another key trend. Once these renters gain enough equity and begin looking for ownership opportunities, there may be a rash of conversions from rentals into homeowners associations and condominiums—a cycle that seems to repeat every 10 to 15 years. Meanwhile, as baby boomers opt out of assisted living, they may turn to mother-in-law suites within their children’s homes. Similarly, millennials may be opting to move in to suites attached to their parents’ homes. Associations may need to assess whether they’d accept these new living situations and review and update their governing documents accordingly. Managers and board members will need to be knowledgeable in generational dynamics, communication styles and more. Senior housing communities also may want to consider strategic partnerships with healthcare facilities and hospitals, which will benefit their aging residents.

FINAL THOUGHTS
While association stakeholders will need to prepare for these coming challenges, seek education and advocate for communities, the primary mission of associations will remain unchanged. Volunteer board members, managers and business partners— even CAI and its chapters—will be focused on maintaining and improving property values and making communities preferred places to call home. That means collecting assessments, enforcing rules and restrictions, providing quality leadership and more—no matter what external forces influence associations. ​

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