 Aloha and welcome to another edition of Kondo Insider, Hawaii's show about association living. I've said many times about 400,000 people, a third of our population, live in an association in Hawaii. And this show is designed for board members and owners to understand the opportunities and obligations of living in an association. Now today's show will be a little interesting because we have a guest from the mainland on the show via Skype. I've never done that before. And so this will be a little bit of a challenge for us. But we're going to have with us today Don Baumann, who's senior vice president with CAI regarding government and public affairs. And a good friend of mine has been to Hawaii and done seminars here because we're going to be talking about federal issues. We often talk about our legislature and the things we're doing in the state legislature. I thought it might be really insightful for everybody to learn more of what's going on on the federal front. So let me welcome my good friend Don Baumann to Kondo Insider. Welcome Don. Thank you. Hello Richard. It's great to be with you. Thanks for inviting me to join you. Well, I've got to ask, where are you? What's the weather like? Well, it's never as good as it is in Hawaii. But we're lucky. We are having 70 degree weather here in the Washington, D.C. area when it's supposed to be in the 40s and 50s. So we are having a warm spell. Maybe it was in anticipation of this opportunity to Skype with you tonight. I'm not sure. But we're having great weather. Thanks for asking. Yeah, well, we wish you were here with us because you're always enjoyable to be with. But, you know, a lot of times locally here is the misunderstanding of CAI or Community Associations Institute. Can you generally talk about how big you are and what you do and the perception that maybe it only represents management, companies or lawyers and kind of what your base is. Can you just briefly tell everybody a little bit more about CAI? Sure. I'd be happy to. So Community Associations Institute is an organization, a non-profit organization. We've been around for just more than 40 years. We have 34,000 members around the country, around the U.S. and around the world. We have 60 chapters around the country and a couple of them outside of the U.S. as well, Canada, South Africa and the United Arab Emirates. And those locations are growing as well with more coming on internationally. And the organization is an educational and advocacy organization for people who govern associations, so the board members, and people who manage associations. I would say about a third of our members are made up of volunteers, board members of associations, about a third is made up of, well, let me actually correct that, about 40% board members of associations, 40% managers and management companies, and about 20% are the business partners that serve those groups. So education and advocacy are primary services that can offer to members? Well, since it's true that a lot of the legislation, state legislation, it must be a challenging job to keep with all the differences. I'm sure all the states aren't one size fits all. I mean, I gotta believe it's gotta be very challenging to keep up with the differences in the various states. Well, it's interesting. So there are 50 states in session this year. So all of the states right now are in legislative session. And we're monitoring about 1500 bills throughout the country that have an impact on community associations, condominiums and homeowners associations. Now, the good thing is, there is a Uniform Act that was created by the Uniform Law Commission. It's a bipartisan group of attorneys out of Chicago. It's a national organization. They're based in Chicago. And they create Uniform Acts for everything, for building codes for all kinds of matters, different kinds of matters, mediation matters, family and domestic matters, a variety of matters. And there is a Uniform Common Interest Ownership Act. It is a state-based act that is a really well thought out piece of legislation that affects all the different areas of the governance and management and operation and development. So that's probably the best resource for legislative bodies to look to when they're looking at making legislation to impact community associations. I know that I have regularly used your research and your data that you collected from all over the states, because we, like any other state, have legislation every year on a whole variety of issues. I've found that your resources and the work you do in government affairs and public affairs has been very valuable to us and also educating our legislators of what's being done around the rest of the country. Although we and Hawaii always think we're different than everybody else, I would tell you the issues often are quite the same, but how they're handled. So I thank you for all your effort in that area. What I'd like to focus on today is we often on this show talk about local legislative issues. And I want to just mention I was down at the legislature today and our producer here, Zuri, asked me to say this. So I will accommodate her. Otherwise she'll cut me off and you'll never see me again on the show. But anyway, when we were at a bill, one of the big issues is education of board members and homeowners. Because we, like most states, get all these complaints by some group that says that a living in association is unfair. But the bill was to require mandatory education for board members. And of course they're volunteers. Well, in this particular bill, mandating education, they deleted that but did state that they wanted a real state commission to be required to put on their website. The condo insider shows as a resource to local owners and board members here because they felt that the one-on-one, the people we brought on this show, really gave our board members and owners real information about living in a condo. So thanks to Think Tech Hawaii and our staff here, we're very proud of that accomplishment. That being said, I know that there's probably a half a dozen issues on the federal side that we don't often talk about here. So let's talk about some of the priorities on the national level and the federal legislation. And let's begin with what you guys call housing finance reform. Tell us about what that issue is and kind of what's going on there. Great. Thank you. So housing finance reform has been an issue that we've been looking at for years and an issue the federal government has been looking at for years. And what it means is how do people who live or want to buy in a condominium or homeowner's association, how do they get along? And the whole housing finance system, you know, really there were some significant changes made to that system after the housing bubble in 2006 to 2008. So a lot of changes made to Fannie Mae, Freddie Mac and some of the federal regulations and some of the oversight of banks and what banks are required to do when they loan to people who are trying to get a mortgage in a condominium or homeowner association. So this is a huge issue for a lot of different stakeholders, like the mortgage bankers, like the American bankers, like the realtors and the home builders. And for us, we only make up about 23% of the housing stock around the country. So for us, it's an important issue. But what we focus on what's very important is what are the requirements for the obstacles for lenders to make a loan for people who want to move into a condominium and a homeowner association. And believe it or not, Fannie Mae and Freddie Mac and FHA, they all have their own regulations that are specific to how a lender can make a loan in those in a condominium or homeowner association, what their requirements are. So we are watching housing finance really closely with the narrow focus of making sure that just because we live in a condominium or homeowner association, you don't get treated any differently than anyone else trying to get a loan. I will say the one thing that's different in that we hope you're treated differently in that when a lender evaluates in a prospective buyer's ability to repay their loan, we hope that they include the homeowner association or condo association assessment in that evaluation, that monthly evaluation of identifying whether that individual buyer has the ability to repay that loan. And that's actually a federal law right now, which I think is helpful so that we don't see the defaults that we saw back in 2006-2008. So that housing finance reform and we're just watching it. Congress is super slow in dealing with housing finance right now. They tried for the last few years and nothing has changed, nothing has passed. But there are some significant proposals we expect to see this year that will be in conversation for the next couple of years that will have an impact, I believe, on Fannie Mae and Freddie Mac's future. Well, I know in general terms, and I think we're on the same point, to get federally guaranteed loans, the Fannie Mae, Freddie Mac type loans, you have to have an association that's qualified. And there's this condo questionnaire qualification form. It used to have all sorts of requirements with owner occupancy, reserve funding. And so I assume that's what you're talking about. And there has been reform to improve that for associations, allowing them to qualify and open the market to more buyers as far as the questionnaires. Is that correct? That's correct, yes. And thank you for digging deeper into that. Because that's exactly what it's about. So the federal government, Fannie Mae, Freddie Mac and FHA, they look at an association through a condo questionnaire or HOA questionnaire, exactly that. And they identify what they believe is an important way to assess the financial stability of that condominium or homeowner's association. And what our job is and what we pay close attention to is whether they're assessing the proper thing. So they're coming up with an arbitrary rule about, let's just say, reserves, for example. If they were to say every association needs to have 75% reserves funded at all times, well, that's arbitrary, right? We want to make sure that what they're putting out there has some solid, quantifiable, evident-based requirements that's really practical. I remember going to a seminar in, I want to say it was Florida with the Association of Professional Reserve Analyst, which is another organization on reserve studies. And this is back around 2008, 2009 when this housing crisis happened. And we actually had representatives there from Fannie Mae, Freddie Mac, and I want to say the IRS talking about reserves. And because it was so new to them, they didn't have a clue really what this was all about. And they were talking about legislation and requirements that were just totally unrealistic. So I can see your job has a heavy educational role for these government agencies. So they really understand what the issues are. So we have effective legislation, not reactive legislation, which has no basis to help anybody, you know. You're exactly right. You're exactly right. So other than, we know the Housing Finance Reform is important to it. Certainly for every association, buyer and seller and owner, there's another big discussion about what I'm going to call, which should be very dear to the people here in Hawaii, it's called disaster relief fairness. And it has specifically to do with FEMA, and as you know, FEMA comes in and helps. But in a lot of ways they can help associations because of the way the current law was drafted. Can you share with us a little bit more about that? Sure. So you laid it out perfectly. It's the Federal Emergency Management Agency. And what it has to do with is the current statute and regulation specifically says that community associations are not, well, it doesn't specifically say that. Let me rephrase that. FEMA interprets their regulation to say, community associations don't qualify for FEMA funding in the wake of a presently declared disaster for any assistance. And typically, I'll use the example of debris removal because that's probably the most typical requirement that an association has, is when there's a hurricane or a fire or anything like that, tornado that creates an obstruction of access to that community association. Yeah. I want you to hold that thought because we're going to take a one minute break and I want to hold that thought and have some more questions about it. But we'll be right back on the air in one minute. Aloha. I'm Kawe Lucas, host of Hawaii Is My Mainland, here on Think Tech Hawaii every Friday at 3 p.m. We address issues and importance for those of us who live here on the most isolated land mass on the planet. Please come join me Fridays at 3 p.m. Mahalo. Hello, I'm Michael North, inviting you to join us on the art of thinking smart every second Thursday at 12 noon here at the beautiful Think Tech studios in downtown Honolulu. I'm guest hosting for David Chang of Wealthbridge. Now we're talking to Hawaii's most intelligent accomplished leaders about what makes them successful in their professional lives. By absorbing their practical wisdom, all of us can think ahead, think deeper and become more successful ourselves. We look forward to seeing you on the art of thinking smart. Well, we're back to Kondo Insider. We're very privileged to have Don Baumann, Senior VP of Government and Public Affairs of CAI nationally out of Washington, D.C. You know, actually in the Falls Church, Virginia. Talking to us about federal legislation, we've briefly talked about the Housing Finance Reform where associations to qualify for government back loans have these questionnaires and they're out there fighting for us to make sure that financing for associations doesn't dry up. And we were discussing disaster relief, where the current FEMA regulations basically for homeowner association wouldn't be able to provide funds for disaster cleanup of all the trees falling down. And of course you people all in these associations pay taxes and are probably feel you deserve the same level of benefits. Is that a good way to sum it up? And where does it stand in the legislative front right now? That's right. So that's the argument we make to legislators to let them know that community associations and neighborhoods that are not deep restricted community associations, HOAs, they should be treated the same. So what happens right now is FEMA will pay for degree removal in a neighborhood that doesn't have a homeowners association, but not for a homeowners association. It's their misunderstanding that funds are collected by homeowners associations for disaster recovery. And that's clearly a misunderstanding. Now we have the support of a number of members of Congress on this particular topic. Several legislators have introduced bills previously. They just haven't moved forward as quickly as we'd like. I think that's been more politics than the issue. This year we have a bipartisan bill that we expect to be introduced in the next couple of weeks representative out of South Carolina. We just endured a terrible hurricane earlier this year. And representative Navar from New Jersey who is still reeling from Superstorm Sandy from a number of years ago. So we expect that bill to be introduced, which we'll just specifically clarify. Community associations are eligible for FEMA funding in the wake of a presidentially declared disaster. Well, it seems only fair. We pay taxes number one. Number two, when you have a disaster, I was in Hurricane Ike in 1992 and I can tell you degree removal was a huge problem. The associations deserve the same type of help as everybody else gets who's suffering in that disaster. So I would just suggest to our audience tell your legislators to support the bill for equal disaster recovery and relief. And I think it's always important that people tell their legislators what's going on because if they don't hear from us, they don't react. And that's very important. Another thing that came up, which is a little bit misunderstood, I think it's been resolved to some level, is in homeowner associations you have these ham operator antennas. And the original belief was that having need would help during an emergency, a disaster, a relief. But of course, you know, it's like the guy I want to have an antenna, so I'm going to erect a hundred foot tower on my property. And so there's a whole lot of discussion and legislation opportunities on this. Bring us up to date where that stands and what the issues were. Sure. So this is definitely a special interest piece of legislation. So the Amateur Radio Relay League, they're the ham radio lobby, they have been pursuing legislation for years to try to bypass local municipal organizations. Municipal ordinances and homeowner associations, covenants. So they don't have to deal with those covenants at all. They can just, without asking anybody and without any rules and restrictions, they can place a ham radio tower or antenna they're choosing at their time. And that's the way that we started it a couple of years ago. And unfortunately, the gentleman who's really pushing this bill, representative Walden out of Oregon, he's a ham radio operator. And he is now chair of the committee of oversight in the House of Representatives that hears this bill. So the bill has already passed the committee without question and has already passed the House. It is going to be moving on to the Senate. The way the bill reads now that we were able to negotiate, similar to a television antenna, the community association can have reasonable restrictions and rules. The antenna cannot be placed on common property and the individual who wants to place the antenna must have prior approval. One of the qualifications is the association rules may not preclude the installation of a ham radio tower or antenna on its base or differently. So if the rules are too complex that the ham radio operator just can't install anything, it's not going to hold up. But otherwise, I think what we're going to see happening is, I guess, is something is going to pass in the next couple of years, whereby associations will not be able to program the installation of a ham radio antenna or tower. Now, I want to express that ham radio antennas can be wires. They don't have to be a huge antenna that we see from miles away. It can be wires and the association can require that technology be used so that it is not a significant eyesore on the community. But it can't be so restrictive that it costs prohibitive for the ham radio operator. Well, it seems like on a general basis the problems you have, nationally, might even be a little worse than locally, that you get well-intended legislators who want to do things to help, but they don't really understand all the issues. And if we don't have our industry organization teaching them and educating and working in a positive way for a resolution, it sounds like you guys have done a really good job of cleaning that up to make sure that associations can preserve their aesthetic interests at the same time letting people who have, for example, an interest in ham radios also be able to do their thing. So it sounds like you guys have done a good job when we're moving in the right direction in that area. Well, and I'll say thank you. I appreciate that. But I'll say, you know, there were two senators who are responsible for making sure that associations were represented. And those two senators are Senator Bill Nelson from Florida and Senator Schatz right there in Hawaii. He was critical to our efforts in making sure we had conversation and then we came back to the House and Representative Eshu was very supportive in the House of Representatives as well to make sure associations were represented. So we may have to call on Senator Schatz again to help us out if we feel like things will change and we're not getting the rights that associations deserve. So Senator Schatz was critical to these efforts. Well, because we only have a few more minutes in the show, I want to deal with my favorite topic, and that always has to do with tax relief. And of course, my proposal was if you live in a condo, you don't have to pay taxes. That's not going to go anywhere. I know that. But I know you have some strong initiatives that try to help mitigate this with homeowner tax relief for associations. Can you describe that initiative and kind of where that's going and what we're trying to do? Yes. So thank you. And we, I agree with you. Listen, we are double tax. We're living in associations. We're paying association assessments for some municipal services. We're paying the local municipality taxes. We're paying federal taxes. And we're not getting the same benefits as everybody else because we're paying our association to handle half of those municipal services. So we're with you. The tax relief bill was introduced last year. It didn't go anywhere last year. I'm not sure how it will be, how it will move forward this year. So very briefly, the way the bill works is if you live in association and you have an income of less than $100,000 approximately a year, you can deduct up to $5,000 of your community association assessments from your tax, personal tax liability. Again, that bill has not been introduced this year. It may or may not. We expect to see tax reform pretty significantly this year. And that would be where there's an opportunity to pursue this treatment. So we're just kind of waiting to see how things will fall together when it comes to tax reform. Well, it sounds like these things have long lives before they begin to get enacted. You have a lot of work every year in the follow-up year and the follow-up year to get things to happen. I'm sure like in Hawaii, I think we had like 3,000 bills introduced in our local legislature, 157 affecting associations. It sounds like this is a long, slow process and you've got to keep pounding away at it. It's a lot more fun to work on state legislative issues than it is federal legislative issues because they go on and on, you're exactly right. And that's why they say it could take an act of Congress and they mean that like it could take almost moving building to make something happen. And that's how it works, which is unfortunate. You know, one of the things in general terms, I know we only have a couple of minutes left, in general terms that I'm going to call, and I read it all over the U.S., not just the why. There's this group of angry people out there who just seem to argue that self-governance is bad and associations don't know what they're doing. And there's all sorts of bills that try to interfere with the basic principles of self-governance. Do you see that nationally? And what do you think causes this anger? We've done surveys that reflect that people are generally satisfied. So kind of your last comments on why we have all these angry people out there. Well, here's why. Because we have 68 million people in this country living in community associations. That's a lot. It's a lot of people, you know? So people also, you and I know because we've been around for a while. We understand how associations work, right? We understand why you pay assessments. We understand how the board works. And now you have new people who are constantly moving into community associations. And it's really not well understood how that association works and what that is, that there are ruins and covenants and what those are really for. So I think we're seeing one thing. There are so many people living in community associations. We see about 80% of people living in community associations are happy. So that leaves 20%. 20% of 68 million is a lot of people, right? So those people are unhappy and they're calling their legislators and they're calling the media. But it's still a lot of people. It's only 20% but it's still a lot of people. And those people organize and get themselves involved and advocating for property rights. Well, to me, thank you for all you do on behalf of the association. I hope you'll come back to Hawaii with your husband so I can buy you a glass of wine. And you know, this business can drive you to drink sometimes. But anyway, we want to thank you for all you do for our industry. I hope this has been insightful for the people watching. And thank you all for watching Condo Insider. And we'll be back next week, Thursday at 3 o'clock with another exciting guest. Again, aloha to Don Bauman.