HOA Detective™ | February 3, 2026: Nobel Prize-winning professor and author, Paul Krugman, has long poked at a simple contradiction in “free market” rhetoric: markets do not exist without rules. A market is not a force of nature; it is an institutional arena. Someone decides what can be owned, what counts as fraud, what happens when debts can’t be paid, and who gets to enforce all of the above. Change those rules, and you do not “distort” a neutral market – you build a different market entirely.
This matters for common-interest developments (CIDs) because privatized housing is routinely sold as a preferred choice by those seeking to buy versus rent a home. Efficiency is often promoted as a cornerstone argument justifying the premise that the “self-governing,” privatized residential development is better than the “old-fashioned” neighborhood where your grandparents lived, where administrative functions, and maintenance of the common areas were performed by city and in some cases county governments. By choosing a more “efficient” market-driven substitute for public government, a home buyer is rewarded by a more efficient governmental construct – or so the theory goes.
In practice, the CID model often looks like “governance by contract.” The Board of Directors performs asa private legislature, private police powers (fines, towing, rule enforcement), and a private tax authority (assessments) backed by the ultimate state instrument – the lien – are extended to the BOD. The CID model doesn’t replace government; it subcontracted it.
The compact thesis statement is simple: the political fight is not “market vs. government.” The fight is over which rules, who writes them, who enforces them, and who captures the profits those rules create. That is not a slogan. It is institutional economics with the gloves off.2
The Free-Market myth is a baseline trick: the term “Free market” is rarely a literal description. It is a baseline claim. It treats one preferred rule-set as natural and labels other rule-sets as meddling. Property rights and contract enforcement are waved through as “just how things work,” while labor standards, consumer protections, or anti-monopoly rules are framed as illegitimate intrusions.
But the baseline is itself political. Douglass North’s new institutional economics makes the point in a cooler register: institutions – formal rules, informal norms, and their enforcement – shape transaction costs, incentives, and the feasibility of exchange. Markets aren’t “freed”; they are governed into being.2
Once you accept that, the conversation changes. We stop asking whether government should “interfere” with the market and start asking: which interests wrote the rules of the game, and what kinds of power do those rules stabilize? That is where neoliberalism does its real work: not in removing governance, but in redesigning governance so that market participation (especially corporate participation) becomes the default delivery mechanism for public life.
When rules go missing, “freedom” becomes predation: A literal “free market” – one without enforceable property or contract rules – does not reliably produce dignified competition. It tends to collapse into predation and monopoly-by-force. If you want the historical intuition, the frontier is instructive: where formal institutions were weak or corrupt, governance didn’t disappear; it often migrated to private coercion, informal tribunals, and local capture.
This is the part free-market mythology politely skips. “Deregulation” can mean shifting regulation from public law to private power — the contract stack, the one-sided dispute clause, the gatekeeper network, the threat of retaliation, the ability to starve information. The gun is not always literal; the leverage is.
The Manco/Vendor Ecosystem: The closed loop of entrenched managementcompanies and primary vendors leads to a form of “engineered rents.” The term “engineered ”comes from the fact that these costs are not a matter of choice for the homeowner/HOA member. The term “entrenched” stems from the fact that primary HOS vendors are often installed under multi-year contracts that can and do continue for years if not decades. This HOA management company (Manco) and vendor ecosystem is the exact construct that Linc Cummings was concerned about decades ago, as CAI first began the process of advancing the agenda of privatized residential developments. Community-association governance professionalized. In that ecosystem, the “market” is not a neutral clearinghouse. It is a constructed revenue field with toll booths.
The core structural fact is captivity. Once an association exists, it must buy management services, legal services, insurance products, maintenance contracts, compliance tools, reserve studies, and endless “consulting.” These are not discretionary consumer purchases; they are mandated by the governance architecture. The rules create the market, and the market rewards those positioned closest to rule-writing and rule-interpretation.
And the homeowner’s ability to discipline bad outcomes is weak. Exit is expensive and slow. Voice is time-consuming, procedural, and frequently filtered through the very institutions (boards, managers, counsel) that benefit from complexity. So the “customer” in many transactions isn’t the resident who pays; it’s the gatekeeper who signs.
That’s how “professionalization” can quietly become rent extraction: preferred-vendor lists, bundled scopes, recurring add-on fees, opaque procurement, and a steady transfer of control from residents to an interlocking services class. You do not need a conspiracy to get monopoly-like behavior – you only need a stable set of incentives and asymmetric information.
The polemical part (because it deserves one): If “free market” were an honest phrase, it would be called what it often is: selective rulemaking that treats corporate convenience as neutrality. And privatized housing schemes are not “self-governance” so much as government-by-appendix – civic life turned into compliance management, with enforcement monetized as a revenue strategy.
Where this leaves the thesis: If markets require rules, then the CID question is not whether housing governance should involve markets. It already does. The question is whether we will keep outsourcing core civic functions to private entities that can monetize enforcement while limiting transparency and democratic correction.
The analytic checklist writes itself: Which rules define the HOA’s powers? Who drafted those rules and under what incentives? Who enforces them and with what transparency? What revenue streams are produced by enforcement? And who, precisely, profits from the architecture – managers, attorneys, insurers, developers, vendors – even when the lived experience for residents is stagnation, conflict, and rising costs?
In other words: follow the rules, and you will find the rents. That is not a metaphor. It is the operating system.
Notes
1. Ha-Joon Chang, 23 Things They Don’t Tell You About Capitalism (New York: Bloomsbury Press, 2010), chap. 1 (“There Is No Such Thing as a Free Market”). See also excerpt PDF distributed by Rethink Economics (accessed January 29, 2026).
2. Douglass C. North, “The New Institutional Economics,” Journal of Institutional and Theoretical Economics 142, no. 1 (1986): 230–237 (as indexed on JSTOR; accessed January 29, 2026).
3. Naomi Oreskes and Erik M. Conway, “The True Cost of the ‘Free’ Market,” Time, February 28, 2023 (accessed January 29, 2026).
4. Inequality Media Civic Action (Robert Reich), “Myth 2: ‘The Free Market’,” video explainer, June 7, 2024 (accessed January 29, 2026).
5. ProTec, “The Maintenance Manager: Linc Cummings,” interview/blog post (accessed January 29, 2026). See also ProTec’s recorded interview edition on YouTube/Spotify.
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