6 minute read
Bringing Relief to Distressed Communities
from Quorum – May 2020
Rand is President of Fishbein Associates, Inc., a public policy consulting firm specializing in national security issues. He formerly served as a Professional Staff Member of both the U.S. Senate Defense Appropriations and Foreign Operations Appropriations subcommittees. Dr. Fishbein served on the Montgomery County Commission on Common Ownership Communities (CCOC) for six years, three of them as Chairman. He is a founding member of the Distressed Communities’ Task Force and a former Vice President of the Maryland Homeowners’ Association (MHA).
Few challenges are more vexing for state and county policymakers than the plight of economically distressed communities and their struggle to achieve longterm financial sustainability. It is a problem that touches not only America’s inner cities where poverty, crime and urban blight have been fixtures of the social landscape for generations, but increasingly suburbia, the cradle of the nation’s middle class.
Advertisement
No jurisdiction is immune; not even Montgomery County, Maryland, identified by the U.S. Census Bureau as one of the seven wealthiest counties in the U.S. Here, in the shadow of the nation’s capital, many communities find themselves unable to catch the wave of increasing home values even as wages for both blue and white-collar workers of all stripes continue to rise, and unemployment sinks to historic lows.
Enter the Task Force on Distressed Communities (TFDC), the brainchild of a group of Commissioners from the Montgomery County Commission on Common Ownership Communities (CCOC). Launched in 2018, the new initiative seeks to reimagine how financially failing neighborhoods might be returned to a path of sustainability through the use of innovative, and welltimed, tools and policies. Key to the effort is understanding the social and economic indicators that can trigger a spiral into bankruptcy.
For this the citizen-volunteers directing the Task Force have assembled an interdisciplinary team of experts in property management, public policy, law, finance, community governance, affordable housing, public-private partnerships, civic activism and land use. Providing technical support to this team are representatives from the Montgomery Housing Partnership, the University of Maryland’s National Center for Smart Growth (NCSG) and CountyStat, the performance management and data analytics unit of the Office of the County Executive.
The Task Force has set its sights on tackling three primary challenges: 1) developing metrics for identifying at-risk communities before they falter, 2) devising sustainable policy solutions that focus on self-reliance in lieu of taxpayer bailouts and perennial public subsidies, and 3) undertaking public policy reforms that help citizens build home equity, buoying, rather than suppressing, community-wide property values.
Of particular concern to the Task Force is the plight of low to middle-income common ownership communities (condominiums, homeowners’ associations and cooperatives), whose boards of directors depend almost exclusively on annual assessments to fund everything from daily operations and maintenance to major capital projects. An unexpected drop in revenue or emergency expense can force significant adjustments to the quality of life of residents.
Consequences can range from the closure of amenities (a pool, tot lot, or seasonal landscaping), to a delay in the crucial repair of roads, elevators, HVAC systems, roofs and balconies. Postpone upkeep to common areas long enough and the health and safety of residents can be seriously impacted. Resale values can plummet and with them the principal source of retirement income and security for most Americans. For these families, the loss of their largest and most important nest egg can be devastating.
Montgomery County is home to nearly 1,100 common ownership communities representing upwards of 140,000 housing units or approximately 45 percent of all residences. Elected officials project this number only will grow as ever-denser land use patterns, shifting demographics and increased reliance on public transportation see more citizens gravitate toward condominiums and condominium rental units.
Yet, astonishingly, the County does not collect data on the financial health of individual common ownership communities. This can pose a host of problems when trying to track indicators of distress before they manifest themselves as a crisis. A dearth of metrics can lead to wasteful spending, a natural consequence of County agencies unable to accurately and quickly target public resources to those most in need. The Task Force is working with CountyStats to improve common ownership data collection and analysis.
Anecdotal information gathered by the Task Force suggests that as many as 20-plus percent of condominiums and 10-plus percent of HOAs in the County are suffering serious fiscal challenges. One knowledgeable observer has estimated that upwards of 20 percent of the County’s master-metered communities are insolvent. Without an action plan, backed by real-time data, the County could find itself woefully unprepared when the next economic recession hits.
For many communities, the tipping point comes when a small number of unit-owners in default on their annual assessments morphs into a cascade, forcing association boards to either curtail services or hike fees beyond the ability of many residences to pay. The situation is compounded in older master-metered buildings where residents with low utility usage are forced to subsidize high utility users since all fees are shared equally. Moreover, it often is the case that in comIf an association’s management is ill-equipped to deal with this situation in its early stages, the race to impoverishment hastens, eventually dragging down adjacent neighborhoods. Declining property values invariably lead to lower tax revenue, forcing local jurisdictions to cut back their services, downsize their workforce and impose user fees to stave off budget deficits and lower bond ratings.
And this is exactly what has happened to communities across Montgomery County that today are experiencing delinquency rates on assessments of between twenty and forty percent. The reasons for these failures are as complex as they are varied. But what they all have in common is the inability of association boards to get ahead of the developing crisis. Most lack the understanding, education, organization, skill sets, temperament and/or resources to effectively address a bankruptcy crisis. It is here where the Task Force hopes to make a difference. In the coming months, the Task Force will be taking the following actions:
• Conducting a “stress test” on upwards of twenty County common ownership communities to determine the causes and likelihood of failure. The results will be compared to the metrics from a control group of communities. • Developing a comprehensive survey to aid in the identification of struggling communities. • Establishing “Tiger Teams,” comprised of subjected matter experts, to drill down on specific contributory factors leading to community distress. From this effort recommendations will be developed covering banking, insurance and judicial reform, regulatory relief, training, public-private partnerships, best practices in property management and good governance education. • Delivering legislative and policy recommendations to the County Executive, the County Council and the County’s delegation to the Maryland General Assembly for their consideration and enactment. The Task Force has the full backing of County Executive, Marc Elrich, and the County’s Department of Housing and Community Affairs (DHCA).
The old adage of: “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime,” is the philosophy that animates the Task Force. If this new effort is to prove successful, it will require the good faith, energy and involvement of all community stakeholders. The members of the Task Force are optimistic that this goal can be achieved.
