Property is a relationship, not a thing. Solving the Tragedy of the Commons in the residential sector.

Ksenia Poplavskaya
July 2014
What is the point of a costly refurbishment of your own apartment when the building you are living in is falling apart?

One may ask, what is the point of a costly refurbishment of your own apartment when the building you are living in is falling apart? What is the point of planting flowers in the front yard when other neighbours turn any available space into parking lots and seemingly don’t mind the rubbish? How should you save energy when the neighbours don’t and the utility costs are calculated based on the use of all?

Those and many other similar situations are clear examples of social dilemmas, constituting many individuals’ everyday reality. A social dilemma, or a situation, in which individual interests are at odds with the group interests, is the centerpiece of the Tragedy of the Commons, first described by an American ecologist, Garrett Hardin. In his parable, Hardin describes the herders grazing their cows on the common pasture. Acting out of their rational self-interest, the herders, compelled to keep as many cattle as possible on the pasture, end up depleting the limited resource though it contradicts the group’s ultimate goal of preserving the commons as long as possible. In other words, strategies that are rational individually can produce irrational results collectively.

‘The Tragedy of the Commons constitutes perhaps the most powerful bias against sustainable development’[1]. Even though first coined in 1968, it has recently become a buzzword, particularly with the growing concerns about the exhaustion of common-pool resources (CPRs) causing decline of the earth’s ecosystems. Examples of reciprocity and altruism being subordinated in favor of self-interest have been cited in different areas, from traffic congestion, unregulated fishing and logging to the exponential growth of the human population and water pollution.

As in case of any other CPRs, whose boundaries as well as ownership cannot be clearly defined, individual homeowners tend to be guided by their personal priorities in the first place. ‘Difficulty of exclusion’ is the common trait in all CPRs, meaning that it’s hardly possible to limit individuals from profiting from the commons. The use of the common areas in residential buildings e.g. staircases, yards, security systems, central heating, maintenance services, elevators, can hardly be restricted in case of non-payers or misuse.

 

Is there a way to achieve common rationality for sustainable use?

Many theorists have been pondering ways of adequately addressing the CPR loss. For long it has been presumed that there is only one best way out of the situation, entailing either the use of coercive power or privatization of CPRs.

Hardin himself favored coercive power with its strict regulation as the best way to curb abusive practices, claiming that ‘freedom in the commons brings ruin to all’. Yet studies show that such regulations, if used alone, may completely undermine voluntary cooperation. Besides, as Peter G. Stillman in his The Tragedy of the Commons: A Reanalysis reasonably retorts, those who see ‘a strong central government or a strong ruler as a solution, implicitly assume that the ruler will be a wise and altruist while these same theorists presume that the users of common‐pool resources will be myopic, self‐interested hedonists.’[2]

On the other side of the spectrum, advocates of the shift towards the corporate regulation claim that the Tragedy stems from poorly defined property rights, adding that in case the commons are privatized, there is no longer a motivation to overuse them. However, apart from the fact that CPRs are tricky to quantify or to put a monetary value onto, sticky issues remain unsolved: Whose property would that be? What would be a fair way of distribution?  Again, privatization is also likely to erode people’s motivation to cooperate.

It seems that the solution to overcoming the Tragedy is neither a strict market arrangement nor a central-government arrangement. According to a US political economist, Elinor Ostrom, it is groups’ effective self-organization, collective governance and care for the resource that can do a better job at protect the resource. Another researcher, Patricia Marchak, reminds us that ‘property is a relationship, not a thing’, which determines socially enforceable claims over who may benefit from access to and use of resources, and who may be excluded. She argues that the solution lies beyond either privatization or state coercion in ‘a system that builds in public responsibilities and specifies management obligations that would incorporate the public domain’[3].

Getting back to the residential sector, what seems to be a viable practical arrangement to avoid a non-cooperative outcome in a social dilemma among co-owners is a homeowners’ association (HOA). Acting as rallying points for the neighbours to participate in the collective decision-making, they present that ‘magic corner’, an overlapping field between the pro-self and pro-social orientations. After all, the buyers are not just buying an apartment itself, but rather an apartment within the building and within a neighbourhood, which means that home doesn’t end at their doorstep.

Nevertheless, theory is often a far cry from reality. HOAs or similar bodies are intrinsic in Western Europe. To compare, their share doesn’t exceed 50% in most countries in Central and Eastern Europe, where their creation has also been relatively slow with proper legal framework still pending. And in Russia with around two thirds[4] of city dwellers living in apartment buildings  (compared to 43% EU-27 (EuroStats)), the number of HOAs goes over 20% only in big cities like St. Petersburg.  This low indicator in Russia shows that, two decades after housing privatizations, HOAs still is not a widespread phenomenon in the country.

 

How to bring everyone to cooperate?

A robust finding in social dilemmas is that cooperation increases when people are given a chance to talk to each other. One motivational reason is that communication reinforces a sense of group identity. Another research showed that a reduced group is more effective at raising cooperation compared to a bigger community, the latter likely to create an impression that action of a single individual does not have any effect. In reduced groups, individuals have proven to be much more aware of the shared responsibility for the common good.

In fact, one of the core drivers of human motivation is the sense of belonging, to a group or a cause, and a desire for interpersonal attachments within their respective communities. As Joshua Greene notes in his Moral Tribes, ‘nearly all of us are collectivists to some extent. The only pure individualists are hermits’[5]. In this way, a shared problem, for example, the one that a managing company is too slow or too expensive to solve, or a goal to accelerate repair works, receive subsidies or take out a loan can also unify and motivate homeowners and get them into the magic corner of a HOA. In her research on the subject, Carol Rabenhorst points out ‘because of increasing utility costs, energy-saving projects such as installation of smaller scale heat supply sources, improved insulation, energy meters, and thermostatic controls have held highest priority for condominium renovation. Projects of this magnitude are difficult to organize and implement without a HOA. In addition, they often cannot be accomplished with the owners’ available funds, even with a well-organized HOA, so access to bank loans or grant money from governments or donors is required.’[6]

The fact that HOAs are managed directly by the homeowners, makes it true that the users of the commons are also their governors, which allows them to tailor their situation to meet their particular circumstances. This ability to design their own arrangements provides the essential base for self-organized collective action and allows much more flexibility when negotiating with local authorities. When it comes to it, the whole association definitely has more weight than a single individual.

Fair enough, HOAs on their own are not the panacea for the Tragedy. People may not be willing to be actively involved in the association’s affairs. Co-owners may also come from different social backgrounds with varying financial resources, which could potentially lead to disputes. This is the reason why a proactive chairman, clear organizational structure and the ability to compromise are the major factors ensuring HOA’s success.

 


[1] Clark, M.S. (1991): ‘Altruism and prosocial behavior: Review of personality and social psychology’

[2] Stillman, Peter G. (1975): ‘The Tragedy of the Commons: A Reanalysis’.

[3] Marchak, M. Patricia (1995): ‘What Happens When Common Property becomes Uncommon?’

[4] http://image-factor.ru/news/research-news/?ELEMENT_ID=1333

[5] Greene, Joshua (2013): Moral Tribes: Emotion, Reason, and the Gap Between Us and Them

[6] Rabenhorst, Carol (2012): Homewoners’ Associations in Central and Eastern Europe: Opportunities and Challenges in the Real Estate Market Two Decades After Housing Privatization.

 

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