Our data science team reveals insights on the state of Homeowner’s Associations (HOAs) in America, with roughly 8,000 new HOAs forming each year.
Homeowners’ associations, also known as HOAs or community associations, are governing organizations over neighborhoods and communities. These can include single-family homes, townhouses, condominiums, and other groups of homes in planned “covenant” communities. Since the 1970s, American neighborhoods have been increasingly governed by these associations. There are very few newly constructed neighborhoods without them, as local development planning processes typically mandate an HOA when approving a new community. Each year, as many as 8,000 more associations are formed. Most HOAs are formed by real estate developers that then turn them over to an association board when construction nears completion on the new development. The board members are typically volunteers who live in the community and with one or more community managers.
Most HOAs govern single-family residences in planned communities, but there are also governing bodies over condominiums, retirement communities, co-op, and vacation timeshare communities. These are often referred to as common-interest communities or common-interest developments. A condominium owner owns his individual unit and shares joint ownership with other unit owners in the complex of common areas of the building. These shared facilities may include parking lots and garages, laundry rooms, community meeting spaces, dog parks, pools, and clubhouses. The owners of the individual units pay a monthly fee for the upkeep of the community’s shared facilities. These communities are also governed by a group of the individual unit owners or a property manager, referred to as the condominium association. This group acts as a landlord to collect dues and maintenance fees needed to maintain the complex. The rules and regulations for condominium residents are often very restrictive as the proximity of units to one another requires consistency.
In 2019, there are over 347,000 HOA covenanted communities in the United States, comprised of 26.6 million housing units, and approximately 70 million residents living in these units. In 2018, the estimated real estate value of homes in HOA communities was over $6 trillion.
Approximately 24% of the United States population resides in HOA-governed housing.
By U.S. region, homeowner associations govern at least 75% of homes in the South and Western portions, 33% of homes in the Northeast, and just over 50% of households in the Midwest. California and Florida account for the highest number of community associations.
And the HOA fees add up. Annual revenue ranged at approximately $95.6 billion, and this represents monthly fees collected from homeowners. Sometimes the fees can be extremely steep. In 2015, the typical monthly HOA fee was over $330.00, and in communities where the fee is a percentage of the property value, it’s even higher. In many communities, the HOA fees have risen at a rate that is not proportionate with the national housing prices. Between 2005 and 2015 HOA fees rose 32.4%. This does not correspond to the 15.1% increase in home prices during that time. Homeowners in the Southern and Western areas of the United States pay much higher premiums than elsewhere.
As homes and properties age, the cost of maintaining them goes up. In communities where HOA fees pay for portions of maintenance on older structures and homes, this is justifiable. However, in many regions, the increase in fees doesn’t always correlate with the age of the community.
Many Americans bristle at the level of control an HOA board exerts over their properties. Between 35% and 76% of residents indicate they feel their association rules protect their property values. HOAs can levy fines on residents whose properties are noncompliant, put a lien on their home, and take them to court for unpaid dues, using lawyers paid with HOA fees. Membership is not optional in most communities as just about all new residential construction occurs in government jurisdictions where an HOA is mandatory.
When possible, census data for new residential construction shows American buyers prefer not to live in an HOA. Homes in HOA communities sell for an average of 4% more than homes not regulated by an HOA, and some of these associations add on even more one-time fees to the cost of a home such as transfer fees. There is an extremely limited supply of new homes that the average American homebuyer can afford, and these are almost exclusively in HOA communities.
HOA communities tend to be more concentrated in areas where local government doesn’t provide as much oversight or services. It’s a winning situation for local government when they can avoid the responsibility for maintaining the streets and other infrastructure but still collect taxes from a new community. Cities and counties pass the costs of new infrastructure on to developers and home builders who then pass on most of their expenses to homeowners through HOA fees. In instances when an HOA cannot charge enough to establish infrastructure to support a brand new residential community, residents often have to deal issues such as inadequate roads and bottlenecked traffic until development by the city or town they live in finally spends the money to bring their communities in line with the rest of the city or county. By paying HOA fees in these new communities, residents have to foot the bill for items they are often also paying taxes for as well.
Property tax issues are a contentious matter. Even as taxes go up, city and county governments continue to have a lousy track record in making those funds work to maintain public spaces, parks, and other amenities. This is where a properly organized HOA can come in and ensure that the people utilizing these amenities are the ones paying for them. The intention behind a community association is a good one, but implementing jurisdiction over something as unique as a person’s home presents unique challenges.
The Community Associations Institute (CAI) is the largest paid-membership organization for association board members and members of community management staff. CAI publishes resources including jobs, guides, and newsletters for their members, and just like the HOAs themselves, charges a handsome fee for doing so. For example, in addition to the members’ fee, anyone curious about community association manager salaries must pay $99.00 for the 2017 salary survey. CAI’s non-profit research arm, the Foundation for Community Association Research provides best-practices reports, analysis on communities, research scholarships, and statistics about members of its parent organization. The homeowner satisfaction surveys continuously seek to debunk the negative associations most Americans have with HOAs.
The covenants and laws governing these communities are often divisive. While the Community Associations Institute publishes positive statistics about levels of satisfaction among HOA community residents, there are a lot of negative stories. On CAI’s own 2016 survey, only 32% of the residents surveyed indicated that the fact that a home was in an HOA community was a deciding factor in choosing to purchase or rent in that community. 63% of residents surveyed indicated their experience with their community association as positive, and 62% felt that their homeowners’ association protected and enhanced their property values.
One of the biggest reasons for the strict HOA laws is to protect property values, but this may not always be the case. In a recent study of sales of homes, the average return on investment is significantly lower in newer HOA neighborhoods. In the past, these kinds of laws resulted in discrimination based on race, religion, and other protected statuses. While most of these associations have been taken to court and forced to change their bylaws, the problems persist in some communities. HOA regulations can still result in residents needing accommodations such as a wheelchair ramp being unfairly targeted. Most homeowners do not have direct interactions with their HOA, but for many that do, the community association experience is not always a positive one.
One property developer/builder even went so far as to write into their covenants that homeowners were not allowed to use any “public medium” to disparage the building quality or practices of the builder. While KB Homes claims to have never enforced those rules, it is becoming common practice for developers and builders to include similar language in deed restrictions unobtrusively. When surveyed, Americans indicate that these kinds of practices are what underline their belief that the HOAs fail to represent their interests.
While HOAs can be a sore point for many property owners, there are definite benefits for the average property owner to having a home in an HOA community. Advantages of living in an HOA community may include services such as irrigation, certain utilities, common area maintenance, landscaping, waste collection, snow and tree branch removal. Most HOA communities have pools, parks, recreation centers, and clubhouses for the use of their residents. Some of these facilities are quite luxurious and greatly enhance the quality of life for residents. Many times the cost of these services would cost far more if paid by individuals because an HOA can usually negotiate group rates vs. individual rates.
It’s essential when deciding whether or not to move to an HOA community to read all the fine print. Before deciding to purchase a property, a potential buyer should insist on getting a copy of the HOA contract and laws. Examine what the benefits are against the cost of monthly fees. Some property owners who feel strongly enough about their neighborhoods can even join a housing association board and volunteer their time to help make a difference in their community.