Amidst negative public opinion, pace of new construction of HOAs, condos slowing down

By Deborah Goonan, Independent American Communities

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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

http://www.orlandosentinel.com/opinion/os-hoa-fight-over-grass-beth-kassab-20160908-column.html

 

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

http://www.journalscene.com/20160909/160909816/opinion-shaper-it-would-be-nice-to-live-without-an-hoa

 

 

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

http://www.census.gov/construction/nrc/pdf/quarterly_starts_completions.pdf

 

Multifamily construction

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

https://www.census.gov/construction/chars/pdf/mfu_unitsperbldg.pdf

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

https://www.census.gov/construction/chars/pdf/mfu_agerestricted.pdf

 

 

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:

Northeast

2014 – 46%, 2015 – 40%, RSE 9%

Midwest

2014 – 55%, 2015 – 59%, RSE 7%

South

2014- – 80%, 2015 – 81%, RSE 3%

West

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

https://www.census.gov/construction/chars/pdf/association.pdf

 

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 

https://www.census.gov/construction/chars/pdf/bedrooms.pdf

 

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

https://www.census.gov/construction/chars/pdf/agerestricted.pdf

 

Conclusions:

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.

 

Sources:

Historical US Population 

http://www.census.gov/popest/data/national/totals/pre-1980/tables/popclockest.txt

American Fact Finder (2010-2015)

http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk

 

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4 Replies to “Amidst negative public opinion, pace of new construction of HOAs, condos slowing down”

  1. God I love it, thank you for putting this together. Housing Market Statistics do not lie, which means HOAs are on the down fall. Homebuyers just do not want to buy into HOAs anymore. You would think with these stats the counties and cities would get a clue, along with each State that these concepts of homeowners association are on the down fall, while looking for any home/property that is not within a HOA is on the rise (supply/demand). This also proves that the rental market is definitely on the rise (which could state if you don’t like your rental you can always move out without the hassles of selling in an HOA) trying to live happier outside of an HOA to old wording Don’t get owned by your HOA (Company Store). Instead of talking with the HOA or its management company actually talk with homeowners who actually live in that HOA community. People want options now, no more controlling every aspect of our lives living within these so called HOA sacrament communities. What lay behind those closed gates/doors could end up being matrimony from hell. Still more needs to be done, and without these homeowners stories that need more attention to the public, how would anyone really have ever known? No, times are changing, and people are speaking up, so when do the lawmakers open their ears along with the local government to give us a choice in housing, no more HOA housing developments, you can build homes without an HOA?

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  2. Compre mi casa en el 2004 vivo en ponciana la association no ase nada por la area se la pasan tomando fotos mandando cartas alos vecinos ,por bobadas pero lo mas important
    Lo tenemos que acer nosotros ,ellos no llaman por dano de luz,calles robos, basuras llantas de carro botas as en la calle mucho mas, pagamos para tener jente aciendo nada controlando la Comunidad, los queremos fuera que cierren esta oficina benimos de new York y new jersey ayudenos gracias

    ENGLISH TRANSLATION: Bought my house in 2004. I live in Poinciana. The association does not do anything for the area. They spend taking pictures sending letters to the neighbors for silly things, but most of the important stuff we have to do ourselves. They do not call for street light out, theft, tires, garbage on the street and much more. We paid to have people doing nothing but control the Community. We want this office to close. We come from New York and New Jersey. Help us, thanks

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  3. Article on slowing pace of HOA construction is compelling reading. The split in geographical “presumptions” got my attention. Reminds me of this grade-school story: Four men- each standing next to an elephant, with their eyes closed, while completely unaware of the other three men nearby- attempt to explain why their “view” of the great creature is the most important. Fast forward, turns out that each person is describing a small part of the whole without any understanding of the value contributed by the other body parts, or contributing viewers.

    So, the geo-split on HOA attitudes appears to be largely influenced by 1) availability of non-HOA options, and 2) personal experiences with HOAs. Now that I have read this piece, I can look forward to my children and grandchildren having lifestyle choices available to them that perhaps they did not fully appreciate in years past. Given that my own HOA experience has taken place in the Southwestern US, I am grateful to know that other non-HOA options remain viable in my home state. If local and regional new home options were over-weighted toward HOA-only, my concerns- about special interests exerting way too much influence over local quality of life issues- would surely explode, amid real life examples of overreaching boards and money-grubbing management companies that place their business interests first, and the interests of their homeowner clients in someone else’s back pocket.

    Is there such a thing as an ethical, moral, profitable animal in the HOA management jungle? If so, can someone point out that critter to me? I sure would like to know what food they eat, where they live, and what their neighbors say about them! During my current 8 years as an HOA owner and resident, I simply have not observed such a friendly beast in the entire animal kingdom. JS

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    1. Thanks for the elephant analogy. It’s very true that people tend to view HOAs through their own tunnel vision. They tend not to notice the fundamental flaws in economic, political, and social structure until they are personally adversely affected. Even then, a property owner may only see one facet of the problems inherent in Association-Governed Housing Communities.

      Two important points. First, under current law, it’s incredibly difficult and expensive to unwind HOA entanglements in existing common interest communities, creating a country with over 330,000 potential albatrosses that will have to be dealt with by the next generation.

      Second, as it stands right now, a home buyer or homeowner who wants to escape and/or avoid the HOA governance scheme is forced to either move far away from states and regions that are saturated with nothing else but mandatory Association-Governed common interest communities, or give up the idea of ownership in favor of renting an apartment. And even renting, the tenant-by-choice or necessity might be wise to avoid condominiums and homeowners associations, where the extra layer of Association management bureaucracy dilutes tenant protections under state law.

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