By Deborah Goonan, Independent American Communities
Readers often contact me with a difficult problem. They hate HOAs. But, in their home search, they cannot seem to avoid association-governed housing.
And that’s not surprising when you look at the statistics for new home construction over the past decade.
Specifically, according to the U.S. Census Survey of Construction (SOC), the nationwide percentage share of new single family detached homes sold has remained steady, in the range of 71-73%, since 2013.
Regionally, a homeowners’ association exists for only about one-third of new detached homes sold in Northeast states, and a bit more than half of homes sold in the Midwest. But an HOA governs at least 80% of new homes in the South and 76% of new homes in Western states.
Population growth, employment opportunities, and new home construction go hand in hand. So if you live in any growing metropolitan area, nearly every home will require common ownership and mandatory membership in an HOA.
If you choose to live and work in certain parts of the country, and you cannot avoid HOAs, here are a few options.
Option 1: Rent instead of buy
This is an obvious option for some housing consumers. Don’t dismiss it too quickly. And don’t assume that buying a home is a better investment than renting.
Even if rents are high, you’ll probably pay several hundred dollars more per month if you own a home, especially a condo or townhouse.
The combination of a mortgage payment, property taxes, insurance, home maintenance, and HOA fees can stretch your household budget to the brink. And if — or when — your homeowners, condo, or co-op association raises its regular fees or imposes a special assessment, the additional cost can break your budget.
Rather than pinching every penny to afford homeownership, rent a few years longer, pay down debts, and save more money for a down payment, retirement, or both.
Try before you buy
What if you’ve already scrimped and saved enough money for a down payment, but you’re still uneasy about buying?
In that case, consider renting a home in your preferred community for a year before buying. It will give you the chance to check out the HOA and interact with the neighbors, to see if the community is a good fit for your budget, your lifestyle, and values.
If you find that the HOA spends money like it grows on trees, that the HOA board enforces rules with an iron fist, or that many of your neighbors are snooty or stand-offish, you’re free to move out at the end of your lease.
If you decide to buy, make sure you’ll still have the option of leasing your home in the future, in case you need to relocate for employment or personal reasons, and a slow market prevents you from selling the home.
Option 2: Look for homes in older neighborhoods
HOA trade group Community Associations Institute (CAI), estimates that, as of 2018, the U.S. has at least 346,000 association-governed communities. And in 2017, 26.6 million HOA-governed housing units, including single family homes, townhouses, condos, or co-ops.
By contrast, in 1970, there were only 10,000 HOA communities with 0.7 million housing units.
That means many single family homes built prior to 1970 or 1980 won’t be part of a mandatory homeowners association.
Consider mid-century and older homes in well-established neighborhoods, especially where new homeowners are buying and renovating properties for owner-occupants.
NOTE: Unless you’re buying as an investment, avoid neighborhoods with a high concentration of short-term rental properties.
Older single family homes tend to be in neighborhoods that are close to in-town conveniences, and they often sit on generously sized lots. Older townhomes or row homes usually don’t have HOAs either, but be sure to consider the pros and cons of attached townhouses before you buy.
You’ll probably need to renovate and modernize an older home, so plan for the additional costs. Caution: don’t overimprove the home for neighborhood.
Option 3: Check out “vintage” HOAs
Another little known fact: HOA governing documents written prior to the 1990s tend to be less onerous than the complex documents used by more modern community associations.
Most homes in vintage communities come a relatively short list of Covenants, Conditions, & Restrictions (CC&Rs). You won’t be able to raise livestock in your back yard or allow junk or trash to accumulate on your property. There may be some basic requirements for keeping your home spruced up, for example, keep the lawn mowed and avoid peeling paint. There will be rules against loud parties that linger late into the evening.
Most likely, these kinds of rules won’t crimp your style.
Newer HOAs tend to micromanage everything: choice of exterior paint colors and roofing materials, where you can park your vehicles, and even where and how you store your trash can.
Some other advantage of vintage HOAs
Pre-1970 HOAs are more likely to be voluntary-membership associations. That means you don’t have to join the association and pay annual dues, unless you want to. In contrast to mandatory HOAs, Voluntary membership associations don’t have the power to impose monetary fines, and they cannot file a lien on your home and foreclose to collect unpaid fees.
One note of caution: If the HOA exists to maintain a community pool, park, or lake, however, be on the lookout for a few rabid HOA members who want to force a mandatory HOA onto every homeowner in the in the neighborhood.
Vintage HOAs sometimes function as Voluntary membership Neighborhood Associations or Civic Associations. Instead of focusing on enforcing rules and restrictions, these associations organize neighborhood events, and often attend city or county meetings to address important member concerns, such as reducing crime or preventing public nuisances.
Compared to today’s modern mandatory membership HOA, it’s apples vs. oranges.
Option 4: Consider communities without amenities
If you want or need a newer home with modern conveniences, and you cannot avoid a mandatory membership HOA, at least try to limit your risks.
Fancy, amenity-rich planned communities and condominiums can be quite appealing to home buyers. But remember, if you buy in, you’ll be paying thousands of dollars each year to pay for swimming pools, spas, tot lots, sports facilities, and club houses.
And you will be obligated to pay for these “goodies” whether you use them or not.
To minimize HOA costs, opt for standard, no-frills bedroom communities with minimal common property to maintain. Visit public pools, state parks, and join private social clubs if and when the mood strikes you.
Also, if you’re looking at townhouses and condos, try to avoid balconies and decks, a common source of frustration, and a potential safety hazard for homeowners.
Option 5: Relocation
Finally, if you’re dead set against HOAs, your best option may be to relocate to a different county or state to find homes that aren’t HOA-governed.
Going back to the start of this post, notice that Northeastern and Midwestern states have a greater percentage of newer homes that aren’t in HOAville.
Even in your current state of residence, if you’e willing and able to move to a small town or a more rural area, it will be easier to avoid association-governed common interest communities.
Who knows? If enough American housing consumers vote with their feet by abandoning high-growth, HOA-saturated cities and states, developers and local governments might finally get the message that it’s time to abandon the 50-year HOA trend.
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