Smaller, more affordable housing doesn’t have to come with an HOA

By Deborah Goonan, Independent American Communities

Here are several housing alternatives that allow consumers to avoid an HOA.

More than a decade after the worst real estate market in recent history, housing prices have rebounded in many fast-growing markets in the U.S. The result is that, whether you’re looking to buy or rent your next home, housing has become much less affordable.

Most experts agree that the past several decades of housing policies at the federal, state, and local levels have created a housing affordability crisis.

They blame overly restrictive local governments zoning laws, which, for decades, have favored two types of residential development:

  • large and pricey single family subdivisions or
  • densely packed condominium and apartment communities.


Too few home builders

Mass production home builders have driven many small home builders out of business.

National and international developers and community management conglomerates have been allowed to dominate the new construction market, creating more than 330,000 association-governed, common interest communities, or roughly 20% of the U.S. housing market.


Shared ownership and rising HOA fees

The majority of association-governed communities — homeowners’, condominium, and cooperative associations — face rising costs of ownership due to one or more of the following factors:

• Years of under-funding their capital reserve accounts,

• Decades of deferred maintenance,

• Poor decision-making at the planning stage,

• Subpar construction,

• Rapidly increasing costs to insure the community’s assets, and

• A higher than average risk of litigation.

The past decade has also seen a surge in new construction of apartment buildings, mostly on a large scale, and funded by real estate investment corporations and trusts.

Very few new apartments have been built to serve the needs of households with limited incomes, because builders have instead catered to middle and upper income tenants.

All of this mass production and establishment of common interest communities was supposed to make housing more affordable. In fact, we are left with precisely the opposite effect — unaffordable housing in many U.S. urban areas.

What alternatives exist for millions of Americans seeking modestly priced housing?

There are several trends, each with its pros and cons.

The Tiny House

First, let’s consider the Tiny House trend, a fad that emerged in the past 5 years, but that has already lost its appeal in the real estate market, according to many sources, including a recent report on the Today Show.

Common sense tells us that, although living tiny might seem like an adventure at first, being crammed into less than 500 square feet gets old after a while.

While a tiny house, especially a portable one, might work for the occasional country get away or a nomadic lifestyle, it probably won’t work for most people looking to put down roots and live comfortably for the long term.

Besides, with the high cost per square foot, the added cost of land rental, and the hidden costs of living tiny (such as eating more take out), tiny homes are generally not the best housing value.

The biggest clue that tiny house living is out of vogue: HGTV has stopped running its marathons of Tiny House, Big Living shows.


There’s nothing simple about living in a tiny home.
By Daria Uhlig, Go Banking Rates, March 2, 2018

The ADU or “Granny flat”

The next step up from tiny house living is something known in the industry as accessory dwelling units or ADUs, sometimes referred to as “granny flats.”

These are small but permanent housing options such as backyard cottages or apartments built over a detached garage. Bigger and sturdier than tiny houses, ADUs provide housing options for young adult children, or aging parents that require in-home care while retaining independence.

A homeowner can rent the space in a small cottage for several years to build up equity or retirement savings. In the future, the same space can become a guest house for adult children and grandchildren. Or a single adult can move into the cottage and rent out the main house.

The concept of the granny flat is nothing new. Our grandparents and great-grandparents often added small dwellings to their property to accommodate extended family members.

That said, the value in an ADU depends largely on the quality of construction.


ADU challenges

The biggest challenge with this affordable and flexible housing option is that most municipalities have zoning laws that prohibit adding cottages or detached garages with apartments.

However, that’s changing, as more states and cities enact statutes and local ordinances to allow ADUs.

However, that creates second challenge — how to fit ADUs into existing communities with homes that are already crowded close together.


MIMI KIRK, City Lab, JAN 16, 2018

Detached condos and villas

Because of strict local zoning requirements, it can be next to impossible for empty nest couples or single retired adults to find the right sized home with modern amenities, and without a big yard to maintain.

The industry has pushed the apartment-style condominium and, more recently, the maintenance-provided townhouse, as tempting alternatives.

Of course, regular readers of this website know that affordable condo living is largely a myth. Add in the cost of regular monthly assessments and surprise special assessments, and suddenly, the benefit of a relatively low purchase price is entirely offset by the high cost of ownership.

And then there are the practical social and financial considerations that come with owning what is essentially an apartment, and sharing townhouse walls with one’s neighbors.

Now the real estate market has responded with a relatively new product — the detached condo.


Costlier maintenance

But buyer beware. While an owner of a detached condo or villa gains a bit more privacy and elbow room, part of the cost of exterior maintenance remains the sole responsibility of the homeowner, not the condo association.

And, as with other maintenance-provided multifamily association-governed communities, a homeowner has no direct control over the selection of landscape, snow removal, painting, or general construction contractors.

As with all types of shared ownership housing, you’re not guaranteed high quality work or fair and competitive pricing for the HOA’s home maintenance and improvement services.

Condo and townhouse owners often discover that HOA assessments can be more expensive than hiring similar service providers for their former single family home, especially if the home is located in a non-deed restricted neighborhood.


Life is short…buy the detached condo
John M. Baker, Prime Meridian Bank (Tallahassee Democrat) Published 12:09 a.m. ET March 6, 2018

Ranch home photo from

Instead of owning, Rent a small house

How about renting a small single family home?

A few real estate developers have recognized an unfilled market niche, creating detached rental homes suitable for busy working adults and retirees looking to downsize.

This option offers all of the tempting benefits of the detached condo, but without the financial risks of common ownership.

Rents are a bit on the high side, but most consumers will find the rent less costly than a condo or townhouse mortgage, plus taxes, insurance, and those unpredictable condo HOA assessments.

And, if you’re at or near retirement, you don’t have to tie up tens or hundreds of thousands of dollars to purchase a home, with the risk of losing a substantial portion of that equity in the future.


Competition between rental home investors

Of course, as a renter, you still won’t have direct control over maintenance and management of the rental home community.

But, with rents well above median rates for standard apartment homes, owners of a single family home rental community may be more motivated to maintain high standards.

If management is poor, tenants simply won’t renew their leases. Word of mouth could deter new tenants from moving in.


Less bureaucratic than condos

In contrast to renting a condo, traditional rental housing is owned and managed by a single entity, eliminating the maintenance request bureaucracy that is often created by numerous landlords and managers in a condominium association.

Renting also provides an opportunity to try out a downsized lifestyle, with the option of relocating if it doesn’t meet your expectations.

If you don’t like it, or you decide to purchase a home later, just end your lease, pack up, and move out.


Lakeside community grows, one small house at a time
Kate Collins, Correspondent Published 1:48 p.m. ET Dec. 18, 2017 | Updated 1:59 p.m. ET Dec. 18, 2017

The Cohousing option

I know some readers hate the idea of renting, and have their hearts set on home ownership. They don’t want or cannot afford a big detached house. And they like the idea of living in a small community where they can make friends with their neighbors.

Cohousing could be a good option, and it’s an interesting alternative to typical HOA or condo living.

Even though most cohousing communities are legally organized as homeowners,’ condominium, or cooperative associations, they have a decidedly different form of self-governance.

Living by consensus

Instead of the typical hierarchical power structure of association-governed communities, where a board of directors wields considerable power and control over rule-making and financial operations, cohousing governs itself by consensus.

The community model counts on each and every member to participate in all decision making. There’s total transparency, because, by necessity, the community is owner or resident focused and largely self-managed.

When professional help is hired, whether for accounting or maintenance services, it’s a group decision.

Of course, to make the cohousing concept work, communities tend to be small — perhaps 30-50 residents — and members typically share common values. For example, an eco-village community might share a small organic farm or an interest in solar and wind energy.

Anyone considering moving into the community is well-vetted by current residents, and often has the opportunity to visit and stay in the community to get acquainted before making a commitment.

Cohousing challenges

A dose of reality: the cohousing lifestyle is not without conflict and controversy. As with any group endeavor, there are some people who will participate more than others, and a few slackers. There will be disagreements over rules and aesthetics, even in the most tolerant of communities.

The process of attaining consensus is hard work, and emotionally draining for some people. It requires a willingness to compromise and even sacrifice personal preferences for the good of the group.

However, for those inspired by and committed to the concept of “intentional living,” building a true sense of community can be rewarding.




Two family homes ( free image)

Growing trend toward “missing middle housing”

And finally, the National Association of Home Builders (NAHB) and Urban Land Institute (ULI) are beginning to bring back housing options of from the past.

Michael Medick, an architect and urban planner, advocates for bringing back the duplex, triplex, and townhouse as alternatives to high-rise apartments and condominiums.

NAHB and ULI have recognized that, by and large, the public has a distaste for high density housing. Building duplex and triplex neighborhoods is proposed as a sort of middle ground that offers needed housing without creating a huge burden on local school districts, utility service providers, and traffic management.

Medick blames “outdated zoning laws” as a barrier to the “missing middle” of housing alternatives.

That’s because, as previously noted, local governments tend to favor either large single family homes or densely clustered multifamily housing.

Medick is onto something with regard to moderating housing density. Bravo!

However, here’s the reality check: duplexes, triplexes, and townhouses of yesteryear did not require common ownership, did not come with dozens of even hundreds of pages of restrictive covenants (CC&Rs or Declarations), and did not mandate payments to some sort of residential property owners association (HOA)!


The Missing Middle
By Michael Medick Source: NAHB Best in American Living, Fall 2017, see page 25

No need for HOAs

All of Medick’s “missing middle” housing options can exist as independently-owned single or multiplex housing units, integrating homeowners and tenants seamlessly into neighborhoods.

I know this from personal experience, as someone who grew up in a generation where it was common to rent a second floor apartment or half of a “twin”home from the owner who lived in the other half of the dwelling.

I grew up knowing great-grandparents who lived on one side of a double home, their daughter and son-in-law, who owned the property, residing next door.

My grandmother owned a townhouse after my grandfather’s death, but there was never the need for an HOA. To this day, there is still no HOA in her old neighborhood, where homes sell quickly, for nearly three times the price she paid in the 1980s.

Urban planners, developers, local and state governments must work together to strip away the unwanted layers of residential development — common ownership, restrictive covenants, and HOAs. Only then will housing consumers benefit from a diversity of more affordable housing options, as well as friendlier, more economically stable communities.♦

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