Privatopia: Homeowner Associations and the Rise of Residential Private Government.

• Author: Tuohy, John H.

Reviewed by John H. Tuohy, finance director, Fauquier County, Virginia, Schools and Government and member of GFOA's Committee on Cash Management.

Privatopia is a work which should stimulate, if not alarm, finance officers, planners, and governing bodies. The key to appreciating this book is to focus on that wonderful oxymoron "private government" contained in the subtitle. Private governments are common-interest developments (CID), which are defined as those forms of development involving common ownership of private property coupled with individual use or ownership of a particular residential unit. The four types of CIDs are condominiums, planned developments, stock cooperatives, and community apartments.

McKenzie traces the roots of common-interest development back to the early English common law concept of restrictive covenants that run with the land and the utopian urban thinking of Ebenezer Howard in the latter years of the 19th century. While Howard envisioned perfect, balanced urban environments encompassing all social classes and commercial as well as residential areas, the concept as transported to the United States became the creation of restricted developments intended to preserve property values and keep out those who would depress values (i.e., minorities and the less affluent).

Such developments were relatively rare prior to World War II. The initial post-war burst of construction and home ownership did not in itself lead to a significant increase in planned developments; however, it did set the stage. As developable land was used up around America's cities, developers needed to be able to build in greater density. The CID provided the mechanism which made such density palatable to local governments. Concentrating the open space normally associated with single-family dwellings into common areas and by building and maintaining roads, drainage, and recreational facilities as part of the homeowners' association package, CIDs can be built to greater densities without placing localities under greater fiscal stress than traditional developments.

The developers of these communities enlisted the aid of the federal government and its agencies in fostering this concept. HUD (Department of Housing and Urban Development), FNMA (the Federal National Mortgage Agency) and the rest of the alphabet soup of agencies devoted to home ownership fell in with the real estate industry to encourage CIDs.

It is by no means clear under the law as to...