Johnson, Armstrong Debate HOAs, Gambling

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Johnson, Armstrong Debate HOAs, Gambling

HOAs are Mandated -- Joe Johnson, September 29, 2003

In his recent article, "Legislation vs. Contracts for Property Rules," Ari Armstrong sticks by his earlier arguments in favor of unrestricted HOAs. For some reason Ari -- falsely -- separates HOAs as a contract, but the state legislature as a government. Make no mistake, both are governments, with one difference, with the state legislature, a citizen has a course of redress (the court system), with a HOA, no such thing. The fine is assessed against your property before you are ever proven guilty of whatever the Board of Directors has arbitrary found you, or your property, guilty of.

Armstrong's main point to back the "contract" idea of his argument, is that the homeowner signed an agreement to abide by the rules when he moved to the neighborhood. This might (and that's still a big "might") hold water IF the rules were set and never changed. At which point, a homeowner knows the rules, and makes a decision whether to live there or not. However, as a HOA is a government, they do not simply enforce rules, they make and/or amend rules monthly. It is simply impossible to be prepared for a rule (see worse than a law - due to no course of redress) that has not yet been written!

For example, there is nothing to stop a board of directors at a HOA from passing a rule that no red cars are to be parked in driveways as red clashes with the color scheme of the development. All other colored cars are allowed. Now, as the owner of a red car, you are required to dispose of your car, or find off-property parking. If you fail to adhere within 30 days, a $75 fine will be assessed against your property -- monthly, until you comply.

By Armstrong's argument, you should get rid of your red car, because you signed a contract. You can't sue the HOA, because you signed a contract agreeing to the rules present and future. In short, get rid of your red car, or pay $75 per month.

Now, suppose Hitler, Jr. gets on the board, and passes a rule that Jews are no longer allowed to live in the development. By Armstrong's argument, all Jews must move, or pay $75 per month. Sound far fetched? Maybe, but there is nothing to stop such in Armstrong's world. How about a real-world example from my HOA:

Melody Homes warranties their homes and property for one year. In order to be compliant with the warranty, the homeowner must do certain things. One of these things is to treat the exterior fence with a weather seal. The advised seal is Thompson's water seal -- or an equivalent. Such seals were permitted in the HOA bylaws one year ago. Nearly all of the homeowners sealed their fence with one of the two seals. This spring, new homeowners where in the process of sealing their fences when the board decided the color for fences would be "weathered grey." Immediately after passing this resolution, the board began fining any homeowner that sealed their fence with anything but "weathered grey." In an effort to keep you in the loop, no homeowner to date has a "weathered grey" fence. At the last HOA meeting, the room was filled with angry residents, all of whom were told, "too bad, too sad," replace your fence, or pay $75 per month. This is okay by Ari.

Or this: When my house was purchased, the bylaws stated that "all properties must be 100% landscaped within one year. The definition of 100% landscaped is to mean no open soil except immediately surrounding plants." This meant that landscape fabric was okay, just as long as there were plants in the bed, and all soil was covered.

Two months ago, the rules were changed, and now all landscape fabric MUST also be "covered with rock or some other ground covering first approved by the board." To cover my beds with an "approved" ground cover will cost approximately $1,500 - $2,000. I am unemployed, and just avoided having my gas turned off last month (don't know if I'll be able to pay the electric before it's shut off this month). I cannot afford to buy 5 tons of landscape stone. Ari would have me simply face my fate and either move or pay $75 per month - which I cannot afford. Now here's the rub, as the development is less than 20% developed, there are only two residents on the board of five. Which means we can't change the board, we must simply adhere. I pay $70 per month in dues, but have no say on the board. Can someone explain to me just how King George was worse than this?

Simply put, like it or not, your rights are more secure with the state or county government than they are with a HOA, because a HOA IS a government EXCEPT, they are all powerful, whereas, you can at least fight the state in court. As for Armstrong's argument that people keep buying homes with HOAs, perhaps he is not familiar with the fact that it is state law that all new developments must have HOAs at least until they are 80% complete. Thus if you want to own a new home, you have no choice but to live in a gulag. But Ari defends that because you sign a contract first.

Reply -- Ari Armstrong, October 1, 2003

Nothing Joe Johnson writes defeats my previous analysis or the quoted analysis of "Mr. Libertarian," Murray Rothbard.

It is indeed news to me that state law requires HOAs. So Johnson's argument, then, runs as follows. "The state mandates HOAs, and existing HOAs are bad, therefore we should rely exclusively on the state for land management."

Despite Johnson's assertion to the contrary, I obviously oppose state interference in the market. If the state mandates HOAs, then entering into an HOA is not a contract -- it is state force.

A quick search through the statutes for "homeowners association" does indeed pull up a set of laws, such as 38-33.3-102, that interfere with HOAs. However, I have not been able to verify Johnson's claim that "it is state law that all new developments must have HOAs at least until they are 80% complete." This is an important area for future research.

If I made the mistake of assuming HOAs generally are truly contractual arrangements, rather than state-mandated property rules, Johnson makes the mistake of assuming HOAs are necessarily tainted.

Certainly a free market would give rise to HOAs. Certainly some people who chose to buy houses governed by HOAs would continue to complain about them -- surprise, surprise, we don't live in a perfect world. But equally certain is that the only alternative to letting people contract freely to create HOAs is to call upon the state to interfere with voluntary market transactions. The libertarian position is clear: free-market HOAs must be legally respected. Legislation interfering with property development and HOAs should be repealed.

Johnson erroneously argues that all types of governance are equivalent. That simply isn't the case. All types of contracts are forms of governance; they govern people's behavior. Libertarians aren't against the governance of the market -- they are for the rule of (common) law and the strict enforcement of property rights. Free-market HOAs are a form of governance that are an important alternative to statist property rules.

Johnson is simply mistaken that HOAs are not subject to the courts (barring state-imposed bans). Indeed, if I were him I would contact a lawyer. All contracts are subject to judicial advisement. At the same time, not all contracts are accepted as valid by the courts; a number of issues might cause a court to declare a contract (or part of it) invalid. Certainly the courts would invalidate the extreme sorts of injustices about which Johnson hypothesizes. Of course, it also pays to investigate one's contracts prior to signing them. On the market, people would come up with a wide range of HOA agreements to meet specific needs. For instance, a condo complex needs a unique set of rules.

Johnson's suggestion that HOAs are somehow more inherently capricious than are state (city, county, state, federal) governments is absurd. It is precisely the state that generally imposes arbitrary, unjust rules.

My position does not entail a defense of forced HOAs. Nor does it guarantee that even free-market HOA rules will always be fair, though internal and external judicial mechanisms serve to protect property owners. Nobody can deliver a perfect world. If the state currently interferes with the ability of citizens to freely contract with each other, that is an argument for getting rid of the state interferences, not for getting rid of contracts. There are two ways to govern property use: the common law and contracts, or the state. The former, while not perfect, is a vastly superior option than the latter.


An Argument for State-Sponsored Gambling -- Joe Johnson, September 29, 2003

Why would a libertarian ever support state sanctioned (see monopoly) gaming? Let me tell you why. Ever since I joined the Colorado Libertarian party, I have asked a question of it's members. To date I have yet to receive a good answer. Until a workable answer is forthcoming, I support state sponsored gaming (even if I do so while holding my nose).

That question is this: "If we first believe that there are legitimate functions of state government (courts, legislature, penal system, etc.), and second believe that forced taxation is a violation of basic human liberty, how do we pay for the first without the second?" As noted, I have yet to receive a good answer.

A few answers I have heard are "private jails, where inmates are forced to work to pay for the needs of the states." The problem with this is obvious to anyone who can either think, or follow world news. The end result is an incentive to condone slavery to pay for services. It's harder to parole a man when you need him to earn your budget. Or, "innocent until proven that you could work hard enough to help with balancing the budget." No, that would not work (not that I do not see room for much improvement in our current penal system, including having inmates pay restitution).

The other is to have the state sell us insurance. Try as I may, however, I cannot see a benefit of a state monopoly in the insurance racket. Lastly, and this is my all-time favorite, "raise fees and fines to pay for all legitimate functions." Yeah, a $10,000 fine for jaywalking to pay for a new court house! That'll work.

As I believe that the two aforementioned are true (forced taxation bad, small limited government good), I have struggled with my own demons to seek out a remedy to funding the state government. That remedy is state sponsored gaming. Before I get ahead of myself, let me mention that I not only understand the libertarian arguments against a state monopoly in gaming, but agree with those arguments. However, I have followed the lesser of two evils path, in that the money given to the state in these methods is at least voluntary. That said, I further understand that the current system prohibits gaming revenues from entering the general fund, meaning that gaming proceeds are not paying for the legitimate functions of government, but rather a special interest. To that I simply reply; that was once the case with most revenue sources. Remember when gas taxes were used for highway repairs? Once we get the revenue source in place, we can work to restructure it to pay only for legitimate functions. It is for the above reasons that I voted in favor of adding Colorado to "Power Ball."

I will however, thanks to Peter Saint-Andre's submission to the CO-Free, be voting against Amendment 33 (unless anyone can provide a more compelling reason to vote in favor). The main reasons for this is are that I do not want to see Amend 33 a part of the Colorado Constitution, and I didn't realize that such a large portion of the proceeds would be leaving the state.

See, one can learn from this libertarian rag (grin).

I'm still open to other ways to pay for our state government (albeit a MUCH smaller version of our current government) other than gaming OR direct taxes.

Reply -- Ari Armstrong, October 1, 2003

It's not at all clear to my why Johnson believes state-monopolized gambling is the "lesser of two evils." The state can run a gambling ring only by putting market gambling operations out of business. That is, if you attempt to compete with the state's gambling operation, men with guns will smash down your door and stop you.

This tax is "voluntary" in precisely the same way that state-mandated HOAs are "voluntary." Your option is to use the state service, or use no service at all. This isn't the voluntarism of the market.

It's possible to argue that a direct tax impacts more people than does a gambling monopoly, I suppose, but additional arguments would be needed to reach the desired conclusion.

Johnson's argument, "[o]nce we get the revenue source in place, we can work to restructure it to pay only for legitimate functions," strikes me as far-fetched. This strategy expands the size and scope of government, without bringing us any closer to repealing the taxes we don't like. If one concluded a gambling monopoly is superior to an income or property tax, one should support the former only when it substitutes for the latter.

It's worth noting that not all libertarians believe taxation for "essential" government services is inherently bad. Many people who want a minimal state argue taxation to fund such a state is necessary and just.

I completely agree with Johnson's analysis of the plan to force prisoners to fund government services. This is a silly idea that's beyond even the fringes of libertarian thought. A good argument can be made, as Johnson suggests, for requiring criminals to repay the full costs of their crime (whenever possible).

While I agree with Johnson that user fees are inadequate to support a minimal state, he doesn't capture what users fees are about. The idea is that people pay for the specific services they get from the government. For instance, if the fire truck comes, the user pays for that. If people use the court systems, they pay a fee to do so. This idea has nothing to do with overcharging jaywalkers or the like.

Of course, one alternative to trying to figure out how to fund a minimal state is to reject the state altogether; David Friedman's The Machinery of Freedom is one popular exposition of this approach.

Another alternative is to try to get the current government in better shape, without worrying as much about ideal end-states.

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