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The future of secured communities in South Africa

Adapt or die

By Francois Schoeman, CEO Pecanwood Estate

, |

The future of secured communities in South Africa

Adapt or die

By Francois Schoeman, CEO Pecanwood Estate

, |

6 min read

Predicting the future is far from an exact science, but the one thing we can be sure of is that secured communities must adapt to keep up with changes ‘beyond the wall’.

Residential estates and the broader community

In trying to decipher the future of secured communities, there is much to consider. Regulators will soon require HOAs to address matters that were previously the responsibility of government, and to find business models to address them adequately. This might seem targeted and burdensome, but HOAs – when they take over the running of a community – inherit a slew of assets, but also significant risks and responsibilities. So the time has come for some serious introspection, and for HOAs to look at ways to guard the communities they govern.

The days when an HOA’s management and board could sit back as mere custodians of the status quo are fast coming to an end. It’s time to go beyond managing operations and assets inside the walls of these developments. As an industry, we constantly need to research and evaluate the future, as best we can – we must take heed of the signs on the horizon, and read the ‘writing on the wall’.

Between 1990 and 2010, many developers built aesthetically pleasing estates specifically to hand over to an HOA, and then move on to new territory – a strategy that has had some dramatic consequences. With many of these developments now standing as a castle on a hill among the surrounding community, the true cost of separation is starting to become obvious. The driving force of this type of development, and the cost of aesthetic commonage, is rapidly becoming dwarfed by the cost of security, governance and compliance with external pressures.

It is clear that separation by means of a fence or a wall alone cannot adequately address the issues. As property values ‘beyond the wall’ decline, they affect the property values, aesthetic values and lifestyle values of the luxury estates in their midst. This is leading to proposed legislation that will attempt to level the playing fields once more.

And that’s the big question. Is this the only way to ensure a property holds its value, has security of utilities, safety and good quality amenities? It probably still is, for now.

Local government and HOAs

The relationship between local government and HOAs is not a new topic. Many have tried to separate them in the past, more from a convenience point of view. ‘Experts’ have tried to prevent legislative interference in their perfect models, but let’s stop lying to ourselves and our stakeholders. Change is not coming – it’s here! Those who wish to dig in their heels or stick their heads in the sand will be hurt most. We would like to argue that we merely administer common funds for common services, and have little effect on anything outside the gates. And – we insist – they dare not intervene inside our hallowed walls. With this attitude, it is easy to predict growing tension between most HOAs and local government. Already there is conflict about rates, taxes, traffic, security vs SAPS, and the list goes on …

We have to change some paradigms and ways of managing developments. We need to protect ourselves, both from governance inadequacies inside the gates, and also on a macro level. This onus cannot be placed on the smaller developments; it must be championed by the old dogs – the communities that have seen it all play out before, and have somehow survived and even prospered. Careful investigation of these cases can serve as a reference for how the new model could evolve. This is of value not only to home owners and HOAs, but also to developers. The very nature of property in South Africa has been captured by a model that still holds risk if we do not address the growing property tensions outside our gates.

The big picture

The fact that it is possible to participate in the management of the local area surrounding a development is not new; it is already implemented by mega developers. The problem starts when the developer exits, and the HOA becomes an island. This island often elects leaders that are popular but not skilled in governance, business or sustainability. Furthermore, many fall prey to the illusion of elitism, and believe in keeping the gates closed for status, rather than recognising the uprising starting ‘outside the castle’. All through history, castles have been stormed. No matter their form, or the legitimacy of the attack, it will come. In the same way that the best way to protect your house from the one that is on fire next door is to go and help, we need to look beyond the wall.

But the future does not have to be gloomy. Secured communities should be actively contributing to the surrounding communities, thereby ensuring that they are perceived as something beneficial to the surrounding area. The fact that an estate can be considered as a contributor to the whole will make the development coexist with other developments, private or not. This can mitigate the expectation of an HOA (with its limited resources) to be all things to all people. Most estates have been accurately identified by their municipalities as ‘cash cows’ for higher rates, even though they often receive reduced services. How sustainable is this in the long run? Will this be the last attempt to tap into the financial, intellectual, property and asset vault? My guess would be no.

After all these questions are raised, one cannot avoid the obvious: we must participate. We must build relationships; we need to engage.

Why collaborate?

The complexity and diversity of land ownership and occupation, especially within our cities, is obvious. Collaboration can break down these walls to make the most of mutually beneficial assets and shared purposes. This has the following advantages:

  • It allows partners to take a more strategic approach to a larger range of assets, rather than be limited by acting on a site-by-site basis.
  • It reduces risk and shared costs, giving access to additional funds in some cases – either because several local authorities are working together and bringing in money, or because one specific institution can then access additional funds by having the benefit of reduced risk.
  • It offers more human resources – benefiting from one organisation’s specific skills or knowledge to deliver the projects.
  • It allows new opportunities for partnership – not only between existing partners, but successful partnerships can spur ambitions for future, additional cross-boundary working models.

What are the major challenges of collaboration?

The importance of, and opportunities for, collaboration are clear – in particular the need to support local authority budgets – but it can be very difficult. It is a process fraught with challenges.

  • Understanding the full range of opportunities available within a place – who owns what and where – and sharing that knowledge with potential partners in order to take that opportunity is difficult. In some places, parts of the public sector may be unwilling to disclose all assets publicly if they think that they may then lose control of how they will be used.
  • Deep knowledge of the local economy, and how it is likely to develop in the mid to long term is difficult but important. Partnership takes time and incurs risk, and it is difficult to factor this in successfully if it is not clear how a project will fit into the future economy of the city.
  • Different organisational cultures, e.g. public and private sectors stepping out of their core functions, expose themselves to greater risk of failure.
  • Different organisations will often have very different timescales for when they can take decisions and expect to see results, as well as how they measure the success of those results.
  • Capacity and funds are limited, and individuals may be busy with existing work. Collaboration to make the most of assets requires additional dedicated resources to overcome inertia and realise benefits.
  • Inflexibility can hinder projects, especially as they are likely to be buffeted by events foreseen and unforeseen. Without a strong institutional relationship backed up by strong personal connections between partners, collaborations can be overly rigid and brittle, unable to bend with the wind of external shocks and internal developments.

Bottom line

As more cities look to make even greater use of their assets in partnership with their neighbours, government agencies or the private sector, there are clear lessons from the past that are leading the way to new holistic thinking. Gone are the private castles; here comes a modern model with room for all, to the mutual benefit of all.

If we can explore this ethos further, we may be able to demonstrate to the communities outside of our walls that – if we approach collaboration holistically – we can all win. A better life for all.

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