Freedom-loving Americans are rejecting homeowners’ associations (HOAs). Here’s why you should avoid them, if you can.
By Deborah Goonan, Independent American Communities firstname.lastname@example.org
Whether you are seeking to buy or rent your next home, here are 9 good reasons to reject and avoid HOAs. In the U.S. 27.5 million homes include HOAs that govern planned communities, condominiums, and housing cooperatives. The consumer backlash against these troublesome and expensive community housing regimes continues.
1. HOAs are not true communities.
One good reason to avoid HOAs is because they are not designed to be true communities.
The HOA-industry trade group uses the term “community associations” to describe HOA property regimes. But the term “community” is used loosely, because to be precise, an HOA is merely a legal framework for governance and management of planned subdivisions, condominiums, or housing co-ops.
In true communities, members share common values. People in a true community support and help one another. They share burdens with a joyful heart, and actively promote kindness. Think of your church community, a civic association, or a local charitable organization as three examples of communities of people with common values, who prioritize serving and helping others.
An HOA community association, by contrast, emphasizes enforcement of property covenants and restrictions, upholding superficial aesthetic rules, and collection of fees necessary to for management and maintenance of common property. Because of these legally assigned priorities, HOAs rarely offer actual care, kindness, or support to members.
2. HOAs have a political power hierarchy.
Another good reason to avoid HOAs is to avoid control over your life due to the political power hierarchy.
One of the biggest drawbacks of an HOA is its unequal power structure. The creators of HOAs intentionally crafted a legal governance hierarchy that grants developers and HOA board members excessive power and authority over the property rights of owners and residents.
Most importantly, state laws enable HOA developer and owner-controlled boards to wield near absolute control over community association finances.
The HOA board sets the budget and collects HOA fees, often with the assistance of HOA managers and attorneys paid for by members. An HOA also exerts considerable authority to enforce covenants, restriction and rules that apply to individual homeowners and non-owner residents.
This list summarizes the HOA Power Hierarchy, in order from most power to least power:
- Declarant (developers and investors)
- Owner – controlled HOA board
- Allies of HOA board
- All other property owners — voting power varies by quantity of property owned
- Everyone else (non-owners)
3. HOAs are hard to regulate, so there’s very little consumer protection against corruption or abuse.
Lack of regulation is another good reason for homebuyers to reject HOA homes. HOA-industry trade groups wrote practically all of the state laws that apply to them and have refined these statutes over the course of half a century. Needless to say, state laws primarily benefit HOA stakeholders, including local governments that view HOAs as independent private organizations that can take care of their own code enforcement and fund their own maintenance.
For this reason, state Legislators tend to avoid any meaningful regulation of HOAs.
Because HOAs are only loosely regulated, at best, and since owners and residents have no balance of power in terms of protecting their interests under state law, HOAs are ripe for corruption and abuse.
Abusive and corrupt influences of HOAs
In an ideal world, HOA board members would be servant leaders – the kind of leaders who put the needs of others above their own wants and desires. But, quite often HOAs attract authoritarian leaders instead. Self-centered board members are — all too often — motivated by greed and power.
An abusive HOA can use its powers, enabled by statute, to exploit homeowners in various ways. The problem is compounded by the fact that HOA governing documents and management policies are notoriously unconstitutional. It’s a sad reality which the courts allow to persist – most of the time.
As a result of weak regulation of HOA boards and the HOA industry in general, HOAs are plagued by the following common problems:
- Corruption and conflicts of interest
- Theft and embezzlement
- Corrosive division and internal conflict, both among members and between members and their HOA boards
- A highly litigious environment, where owners and HOAs sue and counter-sue each other
4. HOAs are designed to benefit real estate developers, not homeowners.
First things first. Housing consumers need to understand the true purpose and intent of HOAs.
Understand that HOA-industry stakeholders never intended to be the faithful stewards of communities for future property owners. Furthermore, developers and builders don’t necessarily provide high-quality construction, nor reliable maintenance services.
For HOA-real estate industry stakeholders, the primary goal is to maximize profit as quickly as possible. Developers and investors accomplish this goal in several ways. They might build and sell new construction, or simply rely on quick flips of renovated properties. Some developers creating ongoing revenue streams with management contracts of the community. Others may retain ownership of a percentage of housing units as rental properties.
HOAs primarily benefit the Declarant. In legal parlance, the Declarants are real estate developers or investor groups. Developers set up HOAs based upon Covenants and Restrictions and transfer their financial risk to homeowners.
One-sided CC&Rs contracts
In order to purchase a home, the buyer must agree to a one-sided, take-it-or-leave-it CC&Rs contract that binds the future property owners to pay HOA fees, which can increase over time without any meaningful limitations, as long as they own their home.
What this means is that developers tend to keep HOA fees artificially low during construction phases, in order to sell more homes. Later on, when all the properties are sold, the owner-led HOA must raise fees substantially. As the common property ages, it shows signs of wear and tear. The common property needs expensive maintenance and frequent repair.
At the same time, Declarants add provisions to the CC&Rs contracts that limit their liability for shoddy or defective construction, as well as poor or nonexistent service while the HOA for the community remains under control of said Declarant. Technically, the Declarant is legally required to uphold the terms of the HOA “contract.”
Deceptive marketing of HOA real estate is the norm.
But, practically speaking, property owners have little recourse to enforce compliance, unless they are willing to spend a fortune of their own money on attorney fees trying to force the developer and co-investors to make things right. After all, a developer-controlled HOA is not going to sue itself!
Speaking of developers and home builders, the HOA-industry has been selling common interest, common ownership housing for 5 decades. But they’ve done so under a cloud of deceptive marketing.
Some of the most common sales pitches include the following.
- Real estate developers and their sales agents claim that HOA covenants and restrictions protect property values.
- In planned communities, the industry claims that HOAs provide valuable maintenance services and amenities in private communities, which they claim is well worth the cost.
- The HOA-industry has also claimed that townhomes and condos provide more “affordable” housing options for buyers who cannot afford a single-family home.
All of these sales pitches are misleading. Let’s review them one by one.
5. HOAs don’t guarantee higher property values.
First, there’s no convincing proof that homes under various HOA regimes retain higher property values, when compared to non-HOA housing with similar attributes. In fact, as reported in a previous IAC post, recent research shows that HOAs do NOT protect property values over the long term. (Here’s the link to the source study.)
Furthermore, research on values of HOA homes has been limited to single family home neighborhoods with HOAs. IAC is not aware of any research of long-term property values for multifamily HOA-governed housing, such as townhomes, condominiums, or cooperatives.
There’s a good reason for the lack of data on home price trends in HOA-led communities. Neither the government nor the HOA-industry trade group collect reliable data that tracks the existence of properties subject to HOAs, so it’s nearly impossible to track home prices in at least half of the states in the U.S. (See this link to HOA statistics at ipropertymanagement.com, and read the fine print about half of the data being synthesized information.)
In addition, no organization, public or private, keeps track of the many defunct or barely functioning HOAs that exist in long-neglected subdivisions and condominium communities. For instance, even though CAI’s research foundation provides statistics of the number of new HOAs added each year, it fails to subtract the number of failed HOAs that no longer exist. (Link to statistics)
For all of these reasons, housing consumers should not believe the claim that HOAs protect property values.
6. Owners don’t necessarily get good value for their HOA fees.
Second, the truth is, property owners pay quite a bit extra for community amenities and common property. In all cases, owners pay HOA fees above and beyond property taxes for public services. And, in some cases, those property taxes pay for public services that their private community does not enjoy. Plus, state laws mandate payment of HOA fees, even if the homeowner derives minimal, if any value or benefit.
For example, most owners rarely use their community swimming pool. Others make limited use of children’s playgrounds or pocket parks. Yet they are still obligated to pay HOA fees. In essence, many owners in any particular community end up subsidizing the cost of amenities used by a small minority of residents.
But keep in mind that a vast majority of smaller planned communities contain fewer than 50 homes. As no-frills housing tracts, the only common property is a stormwater drainage pond or basin, and perhaps an entry monument with the name of HOA community. The HOA-industry claims of added value fall flat for these simple residential communities.
Some far flung, semi-rural gated communities require property owners to pay for maintenance of their own private roads. While it’s true that a few homeowners are willing to pay the extra cost for the sake of excluding public traffic in their exclusive communities, most homeowners don’t think about the real reason they get stuck footing the bill for private road maintenance.
Homeowners pay the price simply because the local town or county would not issue a construction permit unless the developer agreed to keep the roads private and funded by the HOA. In these cases, homeowners experience double taxation for public road maintenance as well as maintenance of their private roads. Few owners can call that a good value.
7. Owners cannot always rely on their HOA to provide good service.
In planned communities, HOAs typically maintain common property and amenities, if there are any. But owners of attached housing such as townhomes, condos, and co-ops pay much higher HOA fees for exterior and interior maintenance of their properties.
Unfortunately, there’s no guarantee that the HOA will manage and maintain the property well. In fact, poor maintenance is a common complaint of condo owners across the U.S. Deferred maintenance is all too common, and well-documented on IAC.
The most extreme example of the impact of deferred maintenance is the partial collapse and ultimate destruction of a 13-story condo towner in Surfside, FL in 2021. But countless other poorly maintained buildings and attached housing communities don’t see good value for their HOA fees.
8. Owners must pay HOA fees – no matter what.
Even worse, home, condo and apartment owners must continue to pay fees to their planned community, condominium, or cooperative for maintenance and other services, even if the HOA is negligent in its duties. Many consumers are not aware that an owner has no option to withhold HOA fees for bad service or negligence of the HOA. In fact, state laws give HOAs the authority to place a lien on any owner’s property for late payment or non-payment of HOA fees.
Most HOAs send or even sell their past due accounts to collections companies. Across the nation, HOA attorneys are notorious for charging excessive fees, which most owners pay under the threat of foreclosure or eviction. If an owner chooses to fight back, he must hire his own attorney, and pay many thousands of dollars in an attempt to obtain justice. But it’s usually a losing battle. After legal fees, even if the owner “wins” his case, he is not made whole.
HBO commentator-comedian John Oliver recently addressed the HOA collections issue for his cable TV audience.
9. Condos and townhomes are not more affordable.
When the HOA-industry claims condos and townhomes are “affordable housing,” they are referring strictly to the lower purchase price, relative to single family detached homes. But the real estate sales agents don’t necessarily tell buyers the truth. Attached housing is more expensive to build, so the cost to purchase is actually higher, on a per-square-foot basis.
But, when determining affordability, the purchase price is just one consideration.
As a rule of thumb, the older the condo or townhouse, the less affordable it will be, particularly if the HOA issues one or more special assessments to pay for big projects such as roof replacements, new exterior siding, or rebuilding of balconies or decks. Owners who are not members of their condo or townhouse board can do very little to prevent the HOA from increasing its fees and billing special assessments.
That’s why homebuyers should consider all HOA fees, condo insurance, and their potential personal maintenance costs for repairs to their unit, before making a decision to purchase a condo or townhouse. Combined, the total cost to own a condo or townhouse may exceed the cost of owning a detached single-family home, especially a home that has no common property requiring HOA maintenance fees.
HOAs make life more expensive and more complicated. They provide little real benefit for owners and residents. And HOAs significantly limit private property rights. For all nine of these good reasons, housing consumers — especially homebuyers — should avoid HOAs whenever possible.