By Deborah Goonan, Independent American Communities
It’s been a busy summer for reports of waste, abuse, and corruption in Association-Governed Housing. Here at IAC, there are hundreds of documented examples of outrageous rule enforcement, abuse of HOA power to fine and foreclose, corrupt collection companies, negligent developers, dying golf courses and resort communities, crumbling roads and manmade lakes that have turned into mud puddles, embezzlement, theft, and fraud.
And at the same time, FHA and its lenders have been fighting the HOA industry in court over loopholes in the law that have allowed some HOA foreclosures to wipe out the first mortgage, creating a tragedy for homeowners and a windfall for real estate investors. In essence the HOA industry has ticked off a primary source of its vast revenue – banks that make mortgage loans to home and condo buyers, and the federal agency that insures loans so they can be resold on the financial markets.
HUD continues to slog through Federal Fair Housing complaints. They are considering a new rule to hold HOA boards and managers accountable to Fair Housing standards. State level real estate boards and Attorneys General are being inundated with complaints from residents of homeowners, condominium, and cooperative associations. Several state Legislatures have gone through the motions of feigning concern and creating some meaningful regulation. But nothing much happened.
Following the Kansas City Star and Miami Herald coverage of HOA and condo association abuses, we’re starting to hear more chatter about HOA hell around the U.S.
Just this week, I read two interesting opinion columns on the subject.
The first column, by Beth Kassab of the Orlando Sentinel, blasts the FL state Legislature for its vague and ineffective law encouraging use of Florida Friendly Landscapes in HOAs, and its lack of willingness to give homeowners a more practical way to settle disputes with their Associations. Kassab also suggests the general public needs to rethink its worship of green lawns, when protection of Florida’s Aquifer, rivers, lakes and the Atlantic Ocean is so much more important.
Kassab seems to believe that HOAs can be beneficial if only they weren’t so darned unreasonable and heavy handed.
Lessons from HOA lawsuit over Florida-friendly grass
Beth Kassab, Orlando Sentinel Columnist
The second article, written by Michael Chiarito of The Summerville Journal Scene, is more critical of the concept of homeowners’ associations. In fact, he would have loved to avoid it, but in South Carolina’s low country, it’s almost impossible to buy a home outside of the overreach of an HOA. He’d like to see his current HOA go away.
Opinion Shaper: It would be nice to live without an HOA
By Michael Chiarito
But is any of this widespread public discontent and backlash having any effect on the real estate market at all?
To answer that question: let’s examine some statistics compiled by the U.S. Census Survey of Construction.
Condominiums represent a relatively small part of new housing construction
Increase in new construction of Privately Owned Housing (POH) units 2013-2015:
Single Family construction – up 16%
Multifamily construction – up 27%
Nearly 36% of new POH construction in 2015 was multifamily property (2 or more units)
Of multifamily units constructed in 2015, 94% were built for rent, and 84% contain at least 20 units per building. Less than 7% were built for sale as condominiums, cooperatives, or townhouse style condominiums.
Source: New Privately Owned Housing units started in the US by Purpose and Design
Decrease in new condominium construction
Note that new construction of Multifamily (MF) buildings for sale (condominiums) has dropped significantly since the recession, and has not recovered.
Here are some statistical highlights, noting number of new construction units:
1999 – 55,000
2006 – 127,000 PEAK
2011 through 2015 range – 11,000 -15,000
Current MF construction is down 71-80% from 1999, and down 87-91% from the peak construction period in 2006.
Source: Number of Multifamily Units completed for sale by number of units per building
RSE 11%. (Note: less than 1% of MF construction were townhouse style condominiums)
Age Restricted MF new construction is becoming rare, almost exclusively built for rent
Only 1% of MF Construction was age restricted in 2015, down from 12% of MF in 2012. That represents a 92% decrease in Age Restricted MF construction.
Furthermore, 95% of new MF construction in 2015 was built for rent, with only 5% built for sale. (RSE 5-11%)
Source: Number of Multifamily Housing completed by Age Restriction
Single Family Construction
Single Family (SF) Homes, New Construction for sale – percentage of homes in homeowners associations (HOAs) is leveling off
Percentage of new construction of SF homes in the U.S. for sale remains steady at 73% for 2015 (no change from 2014) with Relative Standard Error (RSE) of 3%.
Percentage of homes built for sale in HOAs in 2014 and 2015 by region are as follows:
2014 – 46%, 2015 – 40%, RSE 9%
2014 – 55%, 2015 – 59%, RSE 7%
2014- – 80%, 2015 – 81%, RSE 3%
2014 – 73%, 2015 – 71%, RSE 6%
Historically, since 2009 (the first year data for HOA new construction was collected for the US Census), HOA construction has increased 18%, with the bulk of that increase coming from new construction in the Southern and Western regions.
Source: Homeowners’ Association for new Single Family houses completed for sale
Note that new construction of Association Governed Housing varies by region of the country. That’s why homebuyers in the South and West are more likely to complain there are no alternatives on the market to avoid HOAs, while homebuyers in the Northeast and Midwest tend to think the home buyer can easily make an alternate choice.
In reality, the percentage of HOA housing for sale is based on local real estate markets.
Single Family construction trends since 1973
Number of new construction SF units:
1973 – 731,000
2006 – 1,293,000 PEAK
2011 – 291,000 LOW
2015 – 477,000
Construction of SF units is down 35% from 1973; down 63% from peak construction of 2006. New construction has increased by 64% from 2011 levels, but remains well below historical averages. RSE 4%.
Source: Number of Bedrooms in Single Family Houses Completed: Built For Sale
Age Restricted Single Family Construction is built mostly for sale
Age Restricted SF housing has consistently represented 3% of the new construction market from 2009 through 2015, and in 2015, 74% of SF homes in Age Restricted communities were built for sale. RSE=2%.
Source: Age Restriction of New Single Family Houses Completed
Overall construction levels are down significantly, despite a 52% increase in US population from approximately 212 million in 1973 to more than 321 million in 2015.
New construction of multifamily housing is overwhelmingly dominated by conventional apartments for rent, and percentage share of condominium and cooperative units built for sale remains at record low levels for the fourth year in a row.
While the share of new construction single family housing in HOAs has increased since the most recent recession, the most recent statistics indicate the pace of construction is slowing down. In 2015, HOA share of new construction remains steady at its 2014 level of 73% nationwide. Significant variations exist by region of the US. New construction in HOAs is more prevalent in Southern and Western regions, and less common in the Northeast and Midwestern regions.
Historical US Population
American Fact Finder (2010-2015)