The dynamics of privatopia

THE DYNAMICS OF
PRIVATOPIA
Private residential governance in the USA
Evan McKenzie
Satish Kumar (21n78e@gmail.com)
Architect ,Urban Planner ,Researcher

Introduction( 1950-2005)
 This is part of the book “Private Cities” global and
local perspectives, it presents an overview of private
residential governance in the US.
 It explains what the institution consists of, what forms
it takes and how widespread it is; how privately
governed communities are brought into existence and
how they are regulated.
 Privately governed residential communities are now
the dominant factor in new housing construction in
the US.
 What were formerly municipal public services and
infrastructure are increasingly privatised and placed
under the administration of homeowner and

Introduction
 Many municipalities are now even requiring
developers to create associations in all new
residential construction.
 In order to relieve government of the burden of
providing services and building infrastructure,
while still securing to government the ability to collect
a full share of property taxes from the new owners.
 Privatised services gives rise to the potential for
abuse of power and leads to a high level of
conflict.
 On the other hand, it is argued that transferring these
functions to the private sphere increases efficiency
by subjecting them to market discipline.

Introduction
 It also increased liberties through freedom of contract
and consumer sovereignty
 No consensus has emerged over how to manage the
growth or regulate the activities of this new form of
local government.
 It appears that many other nations are now heading
down the same road and will soon have large numbers
of private communities.

The scale and scope of private residential
government
 Several different names for privately governed
residential communities appear in the American
literature,
 CIDs, short for common interest developments;
community associations, which is the usual
nomenclature used by industry professionals
 HOAs,short for homeowners’ associations;
 CICs, or common-interest communities;
 RPGs, or residential private governments;
 and in the press and vernacular they are often
lumped into the vague category of gated
communities, even though many do not have gates,

Data on the scale and rate of growth of common-
interest housing
 In the US there are three distinct legal types of
common-interest housing:
1. Condominiums,
2. Housing cooperatives,
3. Planned developments of single family homes
run by homeowners’ associations.
 These forms of housing have spread with astonishing
rapidity over the US in the last four or five decades
and, taken together, these approximately 250,000
developments constitute as of 2003 about 15 per cent
of the American residential housing stock, as

Data on the scale and rate of growth of common
interest housing
 Of the three types, developments with single family
homes and an HOA are by far the most prevalent in
new construction, reflecting the overwhelming
preference of Americans for detached homes over
apartment-like high-density buildings.
The rise of common interest
housing since 1970. Source:
Community Associations Institute and
United States Census, 1970–2000

Elements of Common-interest housing
 The main elements are common ownership of real
property, private land-use controls, private
government, master planning and, with increasing
prevalence, the use of various security features.
 Planning and, with increasing prevalence, the use of
various security features.
 What distinguishes common-interest housing most
clearly from other housing types is a bifurcated
ownership scheme in which all owners have two
interests, one an individual interest and the other a
common interest.

Common ownership of real property-
Condominium
 In a condominium the individual interest is nothing
more than the airspace contained within the owner’s
unit, along with the inner finished surface of the walls,
ceiling and floor.
 The common interest is the entire remainder of the
building or buildings.
 This notional individual ownership interest is in fact
more like an occupancy right.
 The condominium association does not own any
property, but instead manages the building as the
representative of all the owners.

Common ownership of real property- Housing
cooperatives
 Housing cooperatives, which are a small fraction of
the American market, divide the interest in a slightly
different way,
 The entire building is owned by the cooperative
association, which is typically a nonprofit
corporation.
 The owners do not own units, but instead own
shares in the corporation.
 Co-ops are found mainly in highrise buildings in
New York City, with a number in Chicago and a few
other older cities.

Common ownership of real property
 Developers, prefer condominiums over cooperatives
because the condominium approach individualises
ownership of distinct real property interests, and this
facilitates separate financing, insurance and sale.
 Cooperatives, by contrast, involve buying and selling
shares in a corporation that owns the building, and this
complicates the legal arrangements for obtaining
financing and insurance.

 Planned developments of detached single family
homes generally include amenities such as private
streets, parking lots, and gates and walls; recreation
facilities such as swimming pools, lakes, and golf
courses; and private infrastructure such as internet
systems, water and sewer services, and even private
police.
 These facilities must be owned in common by the
residents, with their use managed by some
permanent organised body, and their maintenance
and repair funded.

 The largest and fastest growing share of common-
interest housing is in the planned developments of
single family homes, as shown in figure in American
context.
 In the 1960s and 1970s this phenomenon amounted
to the spread of new forms of ownership such as
condominiums and cooperatives.
Growth of common-interest
housing by type, 1970–98. Source:
Community Associations Institute

Private landuse control
 The means by which these interests are created and
the physical properties managed and regulated are
contract-based tools for private land-use regulation,
generically knows as governing documents. Typically
there are three main documents for any development.
1. The first is the articles of incorporation of the
condominium, homeowners’ or cooperative
association. This will set out the powers and
duties of the organisation.
2. The second document, and by the far the most
important, is the set of covenants,conditions and
restrictions, usually referred to by the acronym
CC&Rs. These can be quite voluminous, running

Private landuse control
1. In addition, there will typically be a third document
called the bylaws that will contain details about
elections and many other procedural matters.
2. There may also be elaborate sets of architectural
restrictions and guidelines, pool or golf course rules,
parking regulations and whatever other codifications
are deemed necessary to prescribe the limits on
conduct within the development.

Private Governement creation issues
 Private governments with significant
responsibilities and power, staffed by untrained
volunteer directors, and operating largely without
regulatory oversight.
 These organisations are exempt from constitutional
regulation because they are non-governmental, so
that bans on the exercise of what would otherwise be
free speech, such as displaying the flag or political
signs, are common.
 The success or failure of this entire experiment in
privatisation will depend on whether these
governments can be made to work

Private Governement
 Municipalities and state governments offer them little
or no support.
 These volunteer boards have no significant
institutional support other than the lawyers and
property managers they hire, and these professionals
are in turn subject to little governmental oversight.

Master Planning
 There is nothing new about developers planning
large residential neighbourhoods that are
specifically designed to meet the needs of an
anticipated target population, because it has been
done since the early nineteenth century.
 What is novel about the last few decades of
American planned developments is the
increasingly precise targeting of a plan and the
marketing strategy that supports it to very
particular groups of buyers.

Security Measures
 During the 1990s it became commonplace for
developers to include security features of living
behind walls and gates and protected by armed
guards.
 The striking thing was to see such features become
prevalent in middle-class housing
 These accoutrements fall into three categories: entry
controls, such as gates, traffic barriers, ‘no
admittance’ signs and guardhouses; hardened
perimeters, including walls, fences
 Other types of border such as lakes; and internal
surveillance,which might mean armed patrols but
could also be alarm systems or video cameras.

Security Measures
 It has been argued that this trend is driven by fears
of ethnic diversity at least as much as by fear of
crime, and that there may be little or no actual crime
reduction involved (Low 2003).

Creating private governments, American styl
 Land-use planning in the US is a largely privatised
process, but one in which municipalities have
considerable power at certain points.
1. One of these points is zoning, when municipalities
decide what kinds of development may be
permitted in which areas.
2. A second is the setting of specific construction
standards through adoption of building codes.
3. Third, is the process of deciding whether or not to
grant building permits for a developer’s plan, and
setting conditions that developers must satisfy in
order to obtain permission to build.

Creating private governments, American styl
 Last is the inspection process, when government
employees review the construction as it proceeds to
verify compliance with the plans and specifications.

What does American experience tell us?
 We cannot be assured that, if the number of CID units
almost doubled during the 1990s, it will nearly double
yet again in the first decade of the 21st century.This is
not a linear process with an inevitable conclusion,
 American experience is viewed as a model or perhaps
a sign of things to come for other nations.
 Established institutions can fail, and there is at
least one example of this in the real estate industry in
recent memory.
 Moreover, there are evident problems with the
functioning of HOA private governments, and if
they are not addressed these challenges could slow
or reverse the spread of this form of housing.

Specific challenges facing CID housing
 At the same time that developers are building record
numbers of CID units while municipalities look on
approvingly, events are occurring within these
developments that raise questions about how
smoothly this housing sector is operating.
 The question marks include a high level of internal
conflict, increasingly adversarial press coverage, a
trend towards surprisingly intrusive proposals for
governmental oversight, and evidence of inadequate
planning for major building repairs.

Condo wars
 There is considerable conflict between HOA directors
and their members that produces a great deal of
litigation over parking, pets, children, architectural
modifications, assessment levels, alleged violations by
directors of the procedures they are supposed to
follow, and myriad other details of community life. These
conflicts are inevitable.
 There will be a good deal of conflict and criticism in,
around and about community associations for the
foreseeable future no matter what anybody does.

Bad press & Follow the money
 Negative press coverage is a significant problem
because it can suppress consumer demand,
stimulate organised opposition to HOA governance, and
lead creative state legislators to think that the time may
be opportune to introduce bills aimed at preventing such
abuses in the future.
 Many billions of dollars are being spent by untrained
HOA directors who have major responsibilities and
hardly any oversight, and every dollar comes from
homeowners who are often financially strapped,
with high mortgage payments and growing property-
tax bills.

Privatopia: illiberal dystopia or paradise by
contract?
 There are some serious departures from the
libertarian model in the contemporary American
version of CIDs.
 Perhaps the most significant is the increasing trend
towards municipal mandates that force consumers
of new housing into CIDs.
 The problems that are clearly identifiable in American
CIDs cohere in a matrix of conflict and litigation,
bad press and reactive legislation that bode ill for
the future.
 Unless some way can be found to interrupt this
cycle, it is hard to see how the institution can avoid
being hampered by annual, piecemeal and over-

The dynamics of privatopia

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