What can homebuyers do when it’s hard to avoid an HOA?

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 HOAs, also known as association-governed housing.

And that’s not surprising when you look at the historical statistics for new home construction according to the U.S. Census Survey of Construction (SOC).

New homes built in HOAs

Since 2017, on a national scale, 60-65% of new homes completed (built) in the U.S. were in an HOA. Nationwide, two out of three new homes — both detached single-family homes and attached townhouses — are located in developments governed by a homeowners’ association.

However, the national average statistics don’t tell the whole story. A homebuyer’s difficulty in avoiding HOAs varies depending on where they live. Let’s look a bit deeper at statistics by region of the U.S.

As of 2023, a homeowners’ association exists for only about one-third of new detached homes built to completion in Northeast states, and a bit more than half of homes built in the Midwest. But an HOA governs at least 70% of new homes built in Southern and Western states.

You don’t have to take my word for it. Here’s the SOC spreadsheet with data on single family homes completed in the U.S. and its four regions.

Easier to avoid HOAs in some parts of the country

The share of the housing market in HOAs also varies within states and metropolitan areas. That’s because population growth, employment opportunities, and new home construction go hand in hand. So, if you happen live or work in any growing metropolitan area, chances are that nearly every home will include a mandatory membership HOA to manage community infrastructure or amenities.

By the way, if you think that you can avoid HOA homes by moving to a smaller town or a more rural area, think again. That’s not necessarily true. When my husband and I lived in a growing small town in Pennsylvania, almost all new construction was either expensive estate homes or townhouses, both part of HOAs. (My spouse and I eventually found a 10-year-old home in a more established neighborhood that wasn’t in an HOA.)

Likewise, a decade ago, we took our house hunting search to far flung rural counties in Florida — a long work commute — where (unfortunately) almost all of the homes were still part of planned communities in an HOA.

New construction of HOA homes sold

Note that the statistics differ somewhat for actual single-family home sales. Check out this spreadsheet for the data on HOA homes sold.

To some of you shopping for a home to buy or rent, this data may be shocking. Fact: Nationwide, while two thirds of new homes are built as part of HOAs, 4 out of 5 new homes sold are in HOAs. 

Why the discrepancy between stats for new homes completed vs sold? Contrary to HOA industry spin, it’s not because HOAs are more popular with home buyers than non-HOA homes.

It comes down to who builds the homes and where. 

Most new homes are built by large homebuilder corporations and land developers in planned communities with HOAs. Not surprisingly, the big home builders tend to acquire acres of land in the most desirable locations that are close to coveted school districts or within a reasonable commuting distance to work and leisure activities. People often choose a home for its location, despite the fact that it’s in an HOA.

However, the data show that 3 out of 4 homes built by a private contractor (i.e. a small independent home builder) are NOT in an HOA. These homes tend to be located on vacant lots in established neighborhoods or rural locations. Sometimes new homes are built in small neighborhoods with fewer than 20 homes, but no HOA. 

Another notable statistic: 89% of owner-built homes are not in an HOA either. Given a choice, few people actively choose to build in HOAs. (Shocker!!) But, let’s face it, most of you reading this post don’t have the money, knowledge or expertise to build (or manage the process of building) your own home on a vacant lot, from scratch to move-in ready. 

What to do if you hate HOAs, but you cannot avoid HOAs?

Here are a few options.

Option 1: Rent instead of buy

This is an obvious option for some housing consumers, especially if the budget is tight. Don’t dismiss the idea of renting too quickly. And don’t assume that buying a home is always a better investment than renting.

Even if the average rent in your real estate market is high, you could end up spending several hundred dollars more per month to own a home, especially if it’s a condo or townhouse with an HOA.

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 into a homeowners’ association?

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 your home. HOAs are notorious for enforcing rental restrictions or capping the percentage of rental properties within a community. Don’t neglect to research the HOA’s rental restrictions.

Option 2: Look for homes in older neighborhoods

HOA trade group Community Associations Institute (CAI), estimates that, as of 2023, 367,000 – 370,000 association-governed communities exist in the U.S. That equates to about 28.2 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.

This leads to an obvious conclusion. Many single-family homes built prior to 1970 or 1980 won’t be part of a mandatory homeowners’ association.

With this in mind, consider mid-century and older homes in well-established neighborhoods, where neighbors are repairing and renovating their properties.

There are advantages to living in an older single-family home. Older neighborhoods tend to be 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.

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 HOAs.

Even in your current state of residence, if you’re willing and able to move to a small town or a more rural area, it will be a bit 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.