The Trib had a great and timely article regarding some of the changes that condo associations are finding they have to make in order to "get with the times". That article is reprinted below.

One of the early issues tackled by the new Kedvale Gardens Condominium Association in 2004 was renters. The board decided that up to six units, or 15 percent, of the 41 units could be rented at any given time. The policy worked well until a couple of years ago.

"Then the economy blew up," said Kerry Smith, president of the association in Chicago's Old Irving Park neighborhood. "People were begging and pleading for us to let them rent. They couldn't afford to keep their units, and they couldn't sell either."

The board responded by granting four one-year hardship exemptions, raising the number of rentals to 10.

A few years ago, renters were largely unwelcome in community associations. Among the arguments: Owners take better care of the property, frequent move-ins tear up hallways, and rental restrictions protect property values. Some associations were so averse to renters that they amended their declarations to ban them.

But times have changed. Financially stressed owners increasingly are asking for exceptions to no-renter policies. Boards often are granting them, just as Kedvale did.

Joanna Dziok, who owns Integral Residential LLC in Chicago and who manages Kedvale, said most of her client associations have "reluctantly" allowed more renters in recent years.

"Boards felt they needed to do something," Dziok said. "They were getting pressured from both sides, from owners who need to rent and from others who said, 'I didn't sign up to live in a rental building.'"

"We decided it was in our best interest to temporarily raise the cap," said Smith. "No one wants a vacant unit."

"This is a reversal of trends, driven solely by economic factors," said attorney David Allswang, of Holland & Knight in Chicago. "Today, when sales are (made) less often, to put it mildly, the option of renting is much more prevalent than the option of selling."

For some owners, the only other option is foreclosure, which will depress the value of everyone else's unit, he said.

Foreclosures also strain an association's budget. It can take six months to a year for lenders to sort out ownership and loan issues; meanwhile, assessments most likely go unpaid, said developer Garry Benson, chief executive of Garrison Partners in Chicago.

"Associations are sensitive about getting a transient reputation if they allow renters, but they often make exceptions because of the opportunity to recoup their overdue assessments," he said. "It's all about cash flow."

That sentiment is echoed by Gene Fisher, executive director of Diversey Harbor Lakeview Association, which represents 30 North Side associations.

"There is little question that the number of condo rentals has increased," he said. "It's a concern, but I have a sense that most buildings in this neighborhood have put their concerns about rentals on the back burner as long as assessments keep getting paid."

Boards are adapting their rental policies to economic conditions in various ways, ranging from rigid to permissive and from simple to elaborate.

Dziok said that some of her buildings lifted all restrictions for a year or two. Others raised prerecession rental caps, generally between 7 percent and 15 percent, to as high as 25 percent. Still others added a second cap for hardships on top of the regular cap. Percentages intentionally are set below Federal Housing Administration owner-occupancy requirements, currently 50 percent, so that buyers can seek government-backed mortgages.

Units that are rented to immediate family members usually don't count toward the rental pool, she added.

Hardship exemptions are tricky for boards to deal with, said association attorney Allan Goldberg, of Arnstein & Lehr in Chicago.

"Hardship is, pardon the pun, hard to define and can be quite subjectively applied, since the human dynamic can enter into a board's consideration," he said. "Each board has its own penchant for factors determining hardship."

Many boards take the view that the economy itself is not reason to determine a hardship, but they may be sympathetic to owners who have trouble selling their units or who are facing foreclosure, he added.

When considering hardship requests, boards must avoid appearances of favoritism or discrimination. Hard feelings can erupt and potentially lead to legal action when one request is denied and another is granted. The Illinois Condominium Property Act prohibits boards from creating two classes of membership.

Brian White, executive director of Lakeside Community Development Corp., urges associations to offer hardship exemptions, especially when doing so might keep owners from losing their homes.

Hardship exemptions can include reasonable conditions, perhaps requiring owners to undergo credit counseling or landlord training, or limiting the length of the rental to 12 months, he said.

"During that time, the unit owner should be making steps to resolve whatever barrier led to the hardship request," he said.

Some associations have determined how often units may be rented, set up waiting lists and protocols for moving up and down the waiting list, and made rules for sublets, said Goldberg.

Dziok separates hardships into two categories: medical and financial. Medical hardships, such as when an owner must temporarily move in with an ailing parent, are easier to prove. Financial hardships are a little tougher.

"To not get into a legal pickle, my boards have left open to interpretation what is needed to prove the hardship," she said. "They'll take whatever documentation the owner wants to provide, but they won't require specific bank or tax records. If the owner provides nothing, that doesn't work in their favor."

Allswang's preference is for boards to create a relaxed rental policy for all owners rather than hardship exceptions for a few.

"Administratively, it's easier," he said. "With a hardship provision, you need to deal with owners case by case, which can get very personal and very emotional. People aren't so keen on providing all the information why they have a hardship."

He offered an example of a relaxed policy: "You might say, 'The window is now open for two years for all owners, and after that, we'll re-evaluate. The market might be different then.'"

Before implementing a new rental policy, boards must check their governing documents to see if they have the authority to make changes. A declaration that prohibits all leasing must be amended by a supermajority of owners. A declaration that prohibits leasing but contains a hardship provision gives the board more leeway to allow exceptions. Rules and regulations that address leasing can be changed by a board vote.

Back at Kedvale, a couple of the hardship rentals recently sold. The board is hoping for speedy resolution for the other two cases, so they can get back to their original six rentals.

"The economy has been a real issue for us," said Smith. "We had to give people a chance to recover."

The Chicago Tribune is reporting today that the annual increase in Cook County property-tax bills appears to have slowed from a gallop to a crawl.

The latest round of bills will hit mailboxes as early as Friday, and officials say the rise in the total tax burden collectively faced by homeowners and business in Chicago will be less than four-tenths of 1 percent. The comparable hike in the Cook suburbs comes out to a little more than 2.5 percent.

But those who thought their bills would drop as dramatically as their home's value didn't fully appreciate the convoluted nature of the county's property-tax system.

Last year, Cook County Assessor James Houlihan initiated a special recalibration of assessments to reflect the freefall in housing values in much of the county. Even so, the impact of those lower assessments on the soon-to-arrive round of tax bills was offset by other forces.

Tax breaks imposed during the height of the real estate boom are gradually being reduced. And the state raised the so-called multiplier, the factor added in to compensate for Cook's penchant for valuing property at lower rates than the other 101 counties in Illinois.

Houlihan's tinkering had the effect of reducing assessed values across the county by about 11 percent, county tax officials said. However, that was wiped out by the impact of the multiplier.

Sales- and income-tax revenues decline during a recession because people typically buy less and earn less. Property taxes are largely immune to such a downturn because governments set the total they want to rake in and then expect taxpayers to pay it even if their home values or incomes are on the decline.

That's why actual tax bills don't necessarily track with the ups and downs of assessments.

Still, the trend this fall is one of easing after years of relentless hikes faced by many taxpayers, sometimes in the double digits.

In general, this year should bring "very nominal increases" in tax bills, said Bill Vaselopulos, director of the tax extension department for Cook County Clerk David Orr.

Any discussion of property-tax bills has to be leavened with a big cautionary note. The process of calculating individual tax burdens is so complicated and layered with exceptions that vary from block to block and door to door that many taxpayers may actually experience reductions in their bills from last year while many others still could be smacked by sticker shock.

Technically, the new tax bills were supposed to have been mailed by Aug. 1. While they typically go out late, they have never been this late. Payments will be due Dec. 13 — just 12 days before Christmas and seven weeks before the next property-tax bill installments are to be mailed out. That next round of bills won't come due until April 1, however — an apparent attempt to give taxpayers a little breathing room.

The tardiness became a political football in the just-completed campaign season, with charges flying that key Democratic leaders were deliberately slowing down the process to avoid sending out big tax bills before Election Day. Assessor-elect Joe Berrios denied those claims as he sought to deflect blame to outgoing Assessor Houlihan for mistakes that led to delays.

One thing is clear: The assessment process used to calculate the new bills engendered a record number of appeals from county taxpayers that had to be resolved before bills could be sent out. The Board of Review, the three-member elected body that decides assessment appeals, weighed 430,000 of them related to the new tax bills. The previous record was 280,000.

The disparity between the city and suburban overall increases breaks down this way, according to Orr's office: Taxes requested by the city, county, Chicago schools and most other government bodies in Chicago have remained essentially the same as the ones for last year's tax bills. Meanwhile, some suburban taxing bodies have imposed modest increases in their requests, while a handful gained permission through referendums for bigger hikes.

Other tax data released by Orr's office Monday showed:

•Property-tax payers in Chicago are being asked to fork over a combined $3.913 billion to the city, county, schools, Park District and other taxing bodies — just a hair more than last year's total of $3.899 billion. In the suburbs, the total last year was $7.201 billion, and this year it is $7.387 billion.

The lowest combined tax rate in the county this year is in north suburban Northfield, where property values are high. Taxpayers there are being charged a total of $4.461 for every $100 in the taxable value of their property.

•The second-lowest rate is in Chicago at $4.627 for every $100 in taxable value.

•The highest rate is in Ford Heights, the economically challenged south suburb, where taxpayers are charged $20.595 for every $100 in taxable value.

The Chicago Tribune had an interesting article today suggesting that the consumers who are paying on their underwater mortgages is having an adverse effect on the economy. I've reprinted the article below:

For almost two years, home foreclosures have swept the nation, spreading misery among once-buoyant families, spattering lenders with red ink and undermining efforts to restart the economy.

But a bigger problem may turn out to be the millions of Americans who are still faithfully paying their mortgages, but on houses worth far less than before the bubble burst. It's not that these homeowners will stop making their payments. It's just the opposite — that they will keep doing it.

How could that be a source of future trouble? Because, with home prices stagnant in much of the country, payments on mortgages that are underwater could absorb billions of dollars that might be used for other forms of consumer spending — a drag on family finances, the housing market and the overall economy.

And the drag could persist for years. 

Of the estimated 15 million homeowners underwater, about 7.8 million owed at least 25% more than their properties were worth in the first quarter of this year, according to Moody's Analytics' calculations of Equifax credit records and government data.

More than 4 million borrowers, including 672,000 in California, 424,000 in Florida and 121,000 in Illinois — three of the biggest real estate markets — were underwater more than 50%. Their average negative equity: a whopping $107,000.

Many of these homeowners are paying much higher interest rates than the latest national average of 4.25%. They still have jobs and can afford to make the payments.

But they can't refinance because they owe too much. That home equity line of credit isn't going to happen. Even ordinary loans may be impossible to get. And selling the home at a huge loss is out of the question.

Nor can most underwater borrowers take advantage of the Treasury Department's loan-modification program, which generally requires a job loss or another kind of hardship.

In other words, they're stuck.

Heather Hines and her husband reflect this new reality. They owe $415,000 on a Santa Rosa, Calif., town house they bought in 2004 for $430,000. When the county appraised the three-bedroom home a few weeks ago, it was worth $246,000 — even less than a year earlier.

The couple had planned to move to a larger home after their two grade-school children became teenagers, but now that looks impossible. Their house needs a new roof, but they've put off replacing it for more than a year.

"It's hard to think of making that investment when you're hundreds of thousands underwater," said Hines, 37, a city planner who like her husband is employed and has an advanced university degree. "It just feels hopeless. What are we supposed to do? It feels like we're never going to see any equity in our home."

Theoretically, the Hineses could walk away — stop making the mortgage payments that consume a big part of their income. But defaulting would ruin their credit and have other negative consequences. So, she said, they'll keep paying and hoping for the best.

Unhappily for the rest of the country, that's not the end of the problem: The Hineses' financial bind will ripple throughout their community and the larger economy.

The real estate market depends on such homeowners being able to sell and move up; without them the trade-up market can't grow.

Meantime, the Hineses will keep delaying that new roof, depriving a local roofer of business. They're unlikely to redecorate or upgrade the kitchen either, as millions of families were doing before the recession — more potential losses for local businesses, not to mention the car dealers, clothing and consumer electronics stores and manufacturers of the products that the Hineses won't buy.

Weighed down by the huge debt on their house, they also will be a lot more cautious about how they use credit cards. Big family getaways in the summer? Forget it, Hines said.

Multiply such sentiments by millions across the country and that translates into lackluster private spending, which accounts for 70% of the American economy.

"Families have not yet boosted their spending above the levels preceding the severe cuts they made during the recession," William Dudley, president of the Federal Reserve Bank of New York, said in a speech last month.

"This frugality stands in stark contrast to the first year of recovery from previous deep recessions," Dudley said.

In prior downturns, the housing industry and consumer spending powered the economy back to strength. Home building not only created construction and finance jobs but also fueled manufacturing of glass and lumber, furniture and appliances, and a host of other goods and services. 

In normal times, the U.S. should be putting up about 1.7 million new houses annually, but this year it's running at about 600,000, economist David Crowe of the National Home Builders Assn. said. He thinks it will be three years before home building returns to its potential.

Rather than going out on their own or starting families, young Americans are doubling up with friends and relatives, saving more and paying down debts. Older Americans are staying in their jobs longer, hoping that the single biggest asset for most of them, their homes, will recover in value.

But nobody is expecting a return of rapid real estate appreciation any time soon. If home prices were to rise at an annual rate of 3%, not an unlikely scenario, it would take the Hineses about 11 years to get to a point where their mortgage balance was even with their property value.

Refinancing the Hineses' 6.5% interest loan could be a big help, saving them almost $600 a month. But lenders won't even consider them.

And unless borrowers fall behind on their mortgage payments or face a high risk of defaulting, there's little chance that lenders, even with federal incentives, would reduce their principal or lower their interest rates.

"They feel completely left out," said Fred Arnold, past president of the California Assn. of Mortgage Professionals, referring to many underwater borrowers.

"If you stop payments, you have a much better chance of getting a modification," Arnold said.

He contends that the federal government should set aside funds to help more borrowers refinance: "It would put immediate money into the economy." But that's not in the cards, especially with budget deficits weighing on Washington and the American public.

Eventually, economists suggested, a lack of options will push more underwater borrowers to walk away from their mortgages. But in the meantime, the stress on families, the housing market and the whole economy will continue.

Mike Saint-Just, 62, doesn't see a lot of room to maneuver. In 2007, he put down $125,000 on a $230,000 one-bedroom condominium near Palm Springs. County tax authorities say it is now worth $87,000.

After tapping  a home equity line of credit, Saint-Just owes $143,000 — about two-thirds more than the value of his home.

Saint-Just draws a federal pension, enough to stay current on his loan but not much more. When he asked his lender about getting a new loan with lower rates, he said he was told he was too far underwater.

The loan officer "did say I could go into foreclosure and hope, maybe, they might do something. And they might not, in which case my credit would be ruined and I'd be out the door of the unit," he said.

So Saint-Just keeps making his monthly payments and cutting back on nearly everything else.

"It means dropping grocery stores and going to Wal-Mart, the 99 Cents store for food and generic items," he said.

With the winter coming, he's preparing to dress warmly and wrap himself in a large afghan to save on heating. That may get Saint-Just through the cold weather, but it may leave the overall economy to shiver.