Homeowners Associations as a Parallel for the Problems of Big Government

After living in Seattle for several years I was exposed to more liberal arguments than ever. Some of the people I respected most had extremely liberal views. While I remained far more fiscally conservative than most of my friends, I did become much more sympathetic towards fiscally liberal arguments. My views became more nuanced as I discussed politics with intelligent liberals.

I like to think I maintained more nuanced views upon moving back, but the thing that brought me back from fiscal liberalism most was buying a house and dealing with a high-priced HOA.

The HOA as a Mirror for Government

The idea of an HOA is simple and logical, as are many liberal positions. Everyone pays into a community fund. That fund is used primarily to maintain exterior appearances, either through enforcement (via fines and threats of fines) or HOA spending. Maintenance is not just cosmetic. Maintaining roofs, for example, is a necessary part of making a home last. Homeowners sometimes ignore replacing shingles to their own detriment. HOA funds are sometimes also used for community resources that would be wasteful for everyone to buy separately. The most common example is a pool. The idea is that everyone pays and everyone benefits by increased home values or a higher quality of life. The neighborhood should never fall apart when forcibly maintained.

It’s also worth noting that HOAs don’t charge based on what you use. It doesn’t matter whether you go to the pool five times a week or never: you pay the same amount to maintain the pool. Whether the HOA does no work on your property in a year or fully replaces your fence and roof, you still pay the same HOA dues.

If this sounds familiar, it’s because this is the same idea behind most government spending.

Why Unnecessary Government Fails

When people are investing a significant amount of money each month, it’s in their nature to want to get the most benefit possible. Homeowners don’t care nearly as much about the overall quality of the neighborhood as they do about their own home. So how does one extract extra benefit from a shared resource? HOA leaders, like our government leaders, are still human. They’re susceptible to the influence of their friends and the people who have the time and resources to spend on lobbying. HOA board members, with relatively little oversight, are also free to spend any free money on what they want.

In our time at the HOA the neighborhood was getting a bit older and required lots of updates. We saw one HOA board member demand their steps be fixed before they’d allow anyone else’s to be fixed. Their steps were not at all the worst in the neighborhood. The next project was to repair the fence of a socially-active friend who could help sway votes for re-election that year.

In general those with the most wealth and free time ran the place. Without work to attend to they had the time to build connections, lobby for positions, and influence the HOA board to do what they wanted. Working people, who were generally younger with fewer assets, had very little time for neighborhood politics.

People would do very little to take care of their own home. Because the HOA was supposed to cover the exterior, homeowners would spend almost nothing more. As a result there was never enough money to go around, so those who made the most noise or had the best connections would get their projects funded first.

If everyone had simply maintained their own property there would have been no need for politics, lobbying, and warring factions in the neighborhood. Some homes would have risen in value, others would have fallen. Owners would be able to choose where to invest their money. Failure to maintain or improve a property would be the homeowners problem when they went to sell. Everyone would have been rewarded relative to their investment.

Finally, the HOA failed at its primary role: maintaining home value. The high price of the HOA payment convinced people to move elsewhere. Property values were actually deflated because potential buyers saw the HOA dues in combination with the mortgage. The benefits were seen as secondary to the price.

How Government is the Same

The US government works in much the same way. Those corporations with the time and money to influence lawmakers are able to push through legislation to their benefit. It might be funding infrastructure they alone use. It might be in relaxing regulations that are costly for them to comply with. We, the average working people, are meanwhile left to fund whatever those with more resources decide.

OpenSecrets reports $3.12 billion in registered lobbying this last year. Companies would not be shelling out billions of dollars in lobbying money if it wasn’t worth it. Those with the highest net worth are reaping the benefit of a shared resource in ways we’re not even aware of. Further, like the HOA board, our congress people get to fund the things they like or use. We have an entire classification of spending for the politically elite: it’s called pork-barrel spending, and it cost Americans $5.1 billion last year. This is all at the federal level. It doesn’t include campaign financing, advertisement spending, super PACs, or state lobbying and earmarks. The money spent on peddling influence generally directs money away from true public goods towards special interests.

Everyone is trying to influence those in control of government spending just like the HOA board. The theory that more government spending will make us all better off is not working.

Roads: An Extensively Parallel Example

Road building and maintenance is an excellent example of social, health, and economic benefits we’re failing to capitalize on, all because we think it should be a public good that’s free to use for all.

We maintain public roads through taxes. Freight companies pay nearly the same amount as you do for driving a car the same distance. A truck might weigh 20 times what your car does, but the wear on the roads caused by heavy trucks is exponentially greater. Various studies have found one truck driving over the road puts between 2,900 and 9,600 cars-worth of wear on the road. Yet we all pay the same amount for a shared resource.

If vehicles paid based on their actual damage done to roads the shipping industry would change drastically. Shipping companies would likely favor smaller trucks, which would cause less damage, which in turn would mean a smaller bill for road maintenance. Shipping by rail, which is already more efficient, would probably expand. We might even see truck frame and wheelbase innovations that help spread heavy loads on the road, thereby reducing cost for the same shipment.

The price for some consumer goods would increase, but the amount the average American pays to fund road construction would more than make up for it. Local companies would suddenly have a greater advantage with local markets, as short-range shipping would be far cheaper. Companies that innovated and found ways to move goods more efficiently would be rewarded, while those lacking logistics creativity would suffer. We’d have a system that was, overall, much more efficient and much less wasteful.

When calculating road damage, large busses might also become a thing of the past in favor of light rails, subways, and smaller transport vehicles (like shuttles) with more frequent stops. Neighborhoods might become more walkable over time as people were charged for what they actually used on the roads. The benefits of a more walkable neighborhood are pretty huge.

Air pollution would decline drastically. Vehicles account for most air pollution in the United States. If you think pollution is a liberal hippy concern and global warming is a hoax, consider that people who live their lives in the most-polluted US cities in the world will die, on average, 5 years before people living in the least-polluted cities.

As an added benefit, large trucks cause a disproportionate amount of death on the road. Being hit by something so heavy drastically reduces your chance of survival in an accident. Large trucks were involved in about 11.4% of fatalities for the last year of reported data (2014) despite being about 4% of the vehicles on the road.

We won’t realize any of these benefits, however, until we stop funding inefficiency in the name of the greater good.

Limitations of the Analogy

The HOA analogy works well for things like oil and corn subsidies and infrastructure funding. In fact it holds up well to almost any fiscally-liberal proposal — as long as we’re talking about people who can afford homes. It’s unwise to adopt a blanket ideology of “everything should always be private” without considering the impact on already-disadvantaged groups.

For example, fully privatizing education would force people to pay for the standard of education they want and likely lead to greater competition and better education. It would also leave low-income families with low-quality education (more than is already the case), thereby ensuring their children have low-income families.

I don’t yet have a perfect answer for reaping the benefits of privatization without creating a class system. The point is this, though: public funding doesn’t work that well. The broader the scope of public funding, the more inefficiencies are likely to arise with special-interest groups influencing where money is spent.