Sometimes managers entering the community association field have a hard time understanding some of the stressful dynamics of the business. They hear that profit margins are tight. They may wonder if their bosses are making excuses to justify low wages. As I’ve stated before in the T-Rex Blog, management fees ARE artificially low. A look into the past can help explain why.
Fortunately for me, my ex-boss and current mentor was there at the beginning of the early condominium boom, starting his career as a community association manager straight out of college in 1973. When he walked me through the history of the industry, things started to fall into place.
The United States had its challenges in the ’70s. Real estate agents wanted to sell and developers wanted to develop, but inflation and interest rates were high. As the end of the decade loomed, mortgage rates reached into the double-digits. The concept of converting apartments into condominium associations became appealing. Enter the first condo boom.
Off The Rails…And We Didn’t Even Know It
This is where some of the persistent challenges that dog us today had their beginnings. There were several factors:
- Condominiums were sold as “carefree living.” Someone else will take care of the grounds, the roofs, and the hallways…no worries!
- The transition from apartment house to condominium association shifted responsibility for interior living spaces from on-site staff to the unit owner. Leasing activity and rent collection were no longer factors. As a result, the site staffing typical of apartment complexes was either decreased or deleted altogether.
- The same notion about decreased workload combined with the developer’s desire to keep condominium fees as low as possible led to a baseline of low management fees.
- Early condominium documents sometimes treated professional management as an afterthought. Like magic, multi-million dollar pieces of real estate that previously required professional management could now be administrated by volunteer boards with little or no management or real estate experience.
Hindsight being 20/20, in many ways we were set up for failure.
How Could They Have Known?
An Urban Land Institute lawyer and framer of early community association governing documents stood before us, a crowd of association managers and lawyers, at a CAI National Conference in the late nineties. I still remember his words. “As I stand before professional managers and attorneys serving community associations and working with the documents we wrote in those early years, I have one thing to say…we’re sorry!” He explained that they were writing from scratch. Lawyers need precedent. They had to go all the way back to 14th-century English horse trail law to find something they could use to define common elements and their administration.
Indeed…who knew that community associations would become so complicated? Who knew the world would become such a litigious place? Who knew how legislated and regulated associations would become? Who knew the promise of technology would result in an immediate gratification mindset? Who knew volunteers would want to do less over time? Who knew societal norms would decrease personal accountability and increase distrust of anyone in authority? And finally, who would have imagined the current trend where courts would hold community associations responsible for members and residents’ civil rights, even though their governing documents provided no basis of authority to do anything substantial about it?
“I have great respect for the past. If you don’t know where you’ve come from, you don’t know where you’re going. I have respect for the past, but I’m a person of the moment. I’m here, and I do my best to be completely centered at the place I’m at, then I go forward to the next place.”
– Maya Angelou
Industry Trends
Community association management continues to mature. I think of it as an adolescent – certainly more sophisticated than it was in its infancy, but not yet fully grown. Business does what it does – big fish eat little fish. As a result, national, regional, and even local companies acquire other companies to gain market share and leverage volume. At the very same time, technology makes it easier than ever before to start a management company with little overhead. Whether company costs are minimized by volume or low overhead, the result is the same – a push to be “competitive” in the marketplace. An unintended consequence is that a professional service became commoditized. The industry accidentally devalued itself. As Tom Peters would say, it’s a race to the bottom.
It All Adds Up
So what have we learned? Management companies operate in a space with an increasingly demanding client base. They compete in a commoditized industry. And they employ a workforce that may be poorly trained, under-supported and generally demotivated to one degree or another.
Is all hope lost? Sadly, for too many in the industry, yes. In my travels and deep dive discussions around the country, I’ve felt their stress and heard their resignation. I get it. They’ve had the same concerns and expressed the same frustrations for the last twenty years or more.
Light at The End of The Tunnel?
If the way it’s always been done doesn’t work, there’s a reason. Get to the root and you can find a solution. It requires thinking differently. That makes unconsciousness a poor option. It’s time to stop banging our heads against the wall.
There are no easy answers. However, there are a few practical strategies and perspectives that have turned things around for some. These will be the subject in upcoming blogs.
