New research busts myth that HOAs protect property values

By Deborah Goonan, Independent American Communities

Earlier this month I told you about research showing a link between prejudice in homeowners associations and weak local government. Now a new study by a retired Yale University researcher concludes that, contrary to industry claims and popular assumptions, HOAs don’t protect property values after all.

Leon S. Robertson, PhD, is a sociologist/epidemiologist. His previous areas of research include medical care delivery, causes and prevention of injuries, and the effects of climate change as it relates to motor vehicle use. Now Robertson uses his expertise in data analysis to study the correlation between the presence of homeowners’ association governance and its effect on property values.

Merriam-Webster’s dictionary defines correlation as follows:

1: the state or relation of being correlated

specifically : a relation existing between phenomena or things or between mathematical or statistical variables which tend to vary, be associated, or occur together in a way not expected on the basis of chance alone

 

Robertson conducted a thorough analysis of home sale prices in three U.S. counties that were the subject of previous research on property values in relation to HOAs. His research sample included publicly available data from 900 home sales in 2017 and 2018, in Duval County Florida, Pima County Arizona, and St. Louis County Missouri.

Of the 900 home analyzed, 55% were HOA-governed, and 45% were not. Robertson’s analysis used mathematical calculations to account for other factors that affect home prices, such as number of bedrooms and bathrooms, size of the home and lot, as well as the timing of the sale. Dollar figures were adjusted for inflation.

 

Results – HOA myth busted!

Unlike previous research, which analyzed home sale prices of HOA vs. non-HOA homes, this study examined the percent change in a home’s value over time. It then compared appreciation rates of properties in HOA and non-HOA communities.

Comparing a home’s most recent sale price to its previous sale price, Robertson determined the Annual Percentage Return (APR) for each home in the random sample of three Counties selected.

The data reveal something unexpected by many in the HOA industry. According to the data, homes that are not governed by HOA covenants, restrictions and rules increased in value, on average, at a significantly higher rate than homes located in HOA-governed communities.

Put another way, properties in HOA-governed communities have a lower return on investment than homes outside the boundaries of HOAs.

And, as Robertson aptly points out, his data analysis does not factor in the payment of  HOA assessments and fees over the course of property ownership. That, he says, would further reduce annual percentage return on investment for homes in HOA-governed communities.

In other words, Robertson’s research offers more hard evidence that HOAs do not result in higher property values in relation to homes in non-HOA communities.

As the subject of future research, Robertson suggests examining several possible causes for the correlation between HOAs and lower APR on investment in HOA-governed properties.

Home buyers cannot or do not want to pay HOA fees.

HOAs have a negative stigma, due to greater public awareness of frequent HOA disputes.

Consumers who value their rights tend to avoid HOAs.

 

Real-estate-home-buyer-house-house-keys
(Pixabay.com free image)

A new direction?

Now that the real estate industry’s ‘property values are higher in HOAs’ myth is busted, perhaps Americans can focus on what truly matters in our communities.

Instead of your neighbor fretting over the appearance of your mailbox, a few dandelions in your lawn, or neighborhood displays of flags, religious symbols, political signs, and holiday decor, maybe we can return to a time when one’s home was one’s castle.

What is the purpose of owning a home, if someone else is given virtually unchecked authority to dictate how you can and cannot use and enjoy your property?

Because, as it stands now in HOA-ville, if you choose not to comply with petty, unreasonable, or unconstitutional rules, you can be bullied into compliance with fines and the threat of losing your home.

No one benefits from that kind of stress, except maybe some of the HOA lawyers behind egregious lawsuits.

 

Value people, not property

As I’ve said many times, healthy communities value people, not property.

It’s time to acknowledge that real estate stakeholders have spent 50+ years pushing the concept of covenants and restrictions for only one reason. They cling to the belief that keeping the less well-off — what they used to call the “riff-raff” — out of new housing developments commands higher sale prices. And higher sale prices increase their net profits.

By now it should be abundantly clear that the HOA industry’s obsession with property values has only divided Americans more than ever. And, in their quest to keep housing consumers constantly moving up or downsizing, the real estate industry hopes to churn even more profit, even as housing becomes less affordable.

But times are changing. Today’s housing consumers aren’t buying the hype. More and more Americans are challenging the status quo of rule by HOA.

That anti-HOA sentiment is even reflected in HGTV’s newest programming, including Property Brothers Forever Home, Good Bones and Hidden Potential.

The theme of all three shows: to restore, refresh, and customize one’s home — the very kind of creativity that’s discouraged by cookie-cutter, conformist HOA-governed communties.

Quote Get what you want get rid of what you dont

What’s next for the HOA-industry?

How will common interest community developers and the community association management industry respond to the inconvenient facts revealed by recent research?

So far, there’s been no acknowledgement that the HOA-governed common interest community is a fundamentally flawed housing model. Of course, denial is a knee-jerk reaction that seems necessary for the HOA-industry’s self-preservation.

No surprise.

But, more importantly, when will leaders of local government acknowledge decades of misguided housing policy? And when will they correct their errors by promoting and approving new home construction that avoids common ownership?

When will local development planning and state law favor new housing construction that comes without mandatory HOA membership and its added restrictions, rules, and fees?

My hunch is that day will come when American housing consumers make it clear that they’re not willing to give up their rights and freedoms for the sake of mythically higher property values. ♦

News source:

IN MY VIEW: Are HOAs worth it?: A look at the numbers show they might not help home values
By Leon S. Robertson
Jun 12, 2019

Research paper:

Published in Critical Housing Analysis

Volume 6 | Issue 1 | 2019 | 42-50
Available online at www.housing-critical.com http://dx.doi.org/10.13060/23362839.2019.6.1.455

Correlation of Homeowners Associations and Inferior Property Value Appreciation ( 160,41 kB)
Author: Leon Robertson
Tags: home ownership , housing economics , metropolitan housing and urban policy , legal aspects of housing, land and planning , urban policy and planning
Document Type: article
ISSN: 2336-2839
Volume: 6
Issue: 1
Pages: 42-50
DOI code: 10.13060/23362839.2019.6.1.455
Date of publication: 17.2.2019

Read the 9-page summary