News and commentary on HOA, condo, and co-op market trends, homeowner challenges and financial risks.
By Deborah Goonan, Independent American Communities deborahgoonan@gmail.com
HOA Market Trends
Survey of Construction data shows flat growth in demand for HOA homes
For several years now, I have been predicting that the common interest community, more commonly known as a Homeowners Association, has reached the peak of its product life cycle. Take a look at the bar chart in this NAHB article shows that the percentage share of new construction of homes that are made part of an HOA. The data is provided by the U.S. Census Survey of Construction characteristics of new homes. The bar graph illustrates that the percentage of new build houses in HOAs peaked in 2020 (67.1%) but has remained within the 3% margin of error since 2021 (range of 62.6-65.5%).
In business marketing circles, a product life cycle typically follows a bell curve. After introduction of the new product, sales of the product increase rapidly as consumer demand increases and people buy the product. At some point, newer, better alternatives arrive on the market. Consumer demand for the now mature product levels off (the top of the bell curve). Then it begins to drop off as people choose to buy a product with superior quality, value, or technology. As percentage market share drops, product life cycle data typically exhibits a downward curve.
HOAs are not a product of a free market
Now keep in mind that HOAs were not created as a product of a free housing market. Rather, starting in the 1970s HOAs became a compromise deal between local governments and real estate developers. This was the deal: HOA developers would build all the infrastructure, then future homeowners would pay for ongoing maintenance. In addition, each community would govern its own internal code enforcement forever more. Local government would collect property taxes on new neighborhoods, but would provide few, if any, direct services to the HOA for those tax dollars.
Over the course of 5 decades, the HOA has become a fourth layer of government, cloaked in a corporate identity.
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If home buyers knew the truth about HOAs, they would not be eager to buy in. That’s why home builders and real estate agents have been selling housing consumers on the many ‘benefits’ of HOAs for more than 50 years.
The HOA industry sold homebuyers on promises of protecting property values, providing convenient “lock-and-leave” lifestyles, promoting prestige of exclusive communities, or, at the other end of the market, so-called affordable housing options.
At first, consumers bought into the marketing hype. But then reality set in.
Government props up HOAs
By the time most homeowners realized the false promises and downsides of HOAs, the vast majority of new construction approved at the local level essentially required HOAs.
Due to historical changes in local zoning in many housing markets, it has become nearly impossible to buy a home that has been built in the last 30 years that is not part of a homeowners’ association.
Therefore, it’s my opinion that the current peak of the HOA product life cycle has been artificially delayed. Why? Because there simply aren’t enough non-HOA housing options available for sale.
Echoing IAC’s long-held concerns about the forced institutionalization of HOAs, a new grass roots advocacy organization is also making the public aware of the role government has played in propping up the HOA industry.
BACKROOM DEALS THAT SHAPED COMMON INTEREST COMMUNITIES – USCFAR
Countless sources now reveal that public opinion of HOAs is increasingly negative. That’s because the risks and disadvantages of HOAs are becoming painfully obvious to millions of homeowners and would-be-homebuyers across the U.S.
Two HOA reports shed light on the current state of HOAs in the U.S.
iPropertyManagement HOA Statistics (August 2024)
Some notable highlights taken from this report:
- 23% of HOA residents report that living in an HOA has made their lives more difficult.
- 18.3% of HOA residents say paying dues is the worst part of living in an HOA.
- 17.1% of residents say restrictions on landscaping and exterior projects is the worst.
- 13.44% of HOA residents report a bad or very bad experience with their communities.33.0% of residents report that parking is the most likely cause of conflict in their associations.
- 31.9% of residents say noise is the biggest complaint while 25.1% say pets cause the most conflict.
As you can see, money is the primary driving factor behind the HOA management industry!
While approximately 35% of HOAs are operated by neighborhood volunteers, the rise of the HOA has created a market for professional community managers.
- Approximately 62,500 HOAs have community association managers.
- The U.S. market supports approximately 9,500 community association management companies.
- The community management industry employs over 105,000 Americans. HOA residents pay a total of $108.8 billion annually for professional management services, including capital improvement projects.
Wow. That’s $108 billion, with a b. And recent legislative action in Florida, which is spreading to other states, ensures a perpetual gravy train of maintenance and capital improvement projects in homeowners, condominium, and cooperative associations. Read on to learn more.
Residential rules: How Americans view HOAs and their influence | YouGov (December 2023)
This report verifies a well-known fact that the HOA industry has hidden from the public for decades: Most homeowners prefer to live in a neighborhood without an HOA.
Other highlights:
More Americans believe HOAs have a very or somewhat negative effect on the communities they govern (45%) than a very or somewhat positive effect (21%); 21% say the effect is neutral.
HOA dissatisfaction is tied to concerns about overregulation: 72% of people living under an HOA they disapprove of say the rules and regulations set by their HOA are too restrictive. A total of 38% of HOA residents think their HOA is too restrictive; roughly half (46%) say the rules are about right and just 8% say they are not restrictive enough.
What do Americans think HOAs should and should not regulate? A plurality of Americans support HOAs setting rules for noise levels (64%), trash and recycling bins (50%), and parking (46%). More oppose than support HOA rules for yard signs, fences, landscaping, pet ownership, exterior paint colors, home renovations, and holiday decorations.
These statistics should help lawmakers and local government planning commissions see that the U.S. needs more non-HOA housing options. And homeowners want few, if any, restrictions and rules governing the use of their private property.
Lawsuits and legal action involving HOAs
ACLJ legal action challenges HOA’s clear violation of religious liberty
A South Carolina HOA is banning one of its residents from displaying a cross on the outside of their home. The HOA cites a covenant rule that no ‘denominational’ items may be displayed in the community.
The American Center for Law and Justice (ACLJ) is assisting the homeowner by taking legal action against the HOA under the Fair Housing Act of the U.S.
About the ACLJ: “Founded in 1990 with the mandate to protect religious and constitutional freedoms, the American Center for Law and Justice (ACLJ) engages legal, legislative, and cultural issues by implementing an effective strategy of advocacy, education, and litigation that includes representing clients before the Supreme Court of the United States and international tribunals around the globe.”
Read or listen to more details here:
Homeowner weighs the cost and benefits of winning a lawsuit against her HOA
Sherry Loeffler is one of the rare homeowners that has won a lawsuit against her HOA. The dispute started in 2019, when Loeffler sought and obtained approval from her HOA to replace the windows on her townhome. But after she spent thousands of dollars to replace the windows, her Wylie Lake area HOA notified Loeffler that they had made an error, that the windows don’t meet the Architectural standards according to its HOA covenants.
The HOA wanted the homeowner to tear out brand new windows and replace them again, at her own expense! Naturally, Loeffler balked at the idea and refused to comply. That led the HOA to impose $100 per day fines and to file a lien in excess of $12,00 against her home. When the HOA threatened to foreclose, the homeowner had no choice but to take legal action to defend her rights and keep her home.
It took five years, but the HOA finally chose to settle out of court, just prior to a trial date. The HOA has agreed to allow Loeffler to keep her windows and to pay her $75,000 in damages.
Was the fight worth it?
That sounds like a great victory. But Loeffler borrowed $30,000 and had to refinance her home at a much higher interest rate to pay for ongoing legal fees. She also experienced stress and panic attacks related to the prolonged and expensive HOA dispute, requiring her to seek medical attention. And now many of her neighbors shun her as a perceived enemy of the community.
It’s another warning to homeowners to avoid HOA lawsuits whenever possible. Unfortunately, in some cases, a property owner has no choice but to engage in a protracted legal battle.
War over windows: Charlotte homeowner wins 5-year fight with HOA, gets $75K settlement
Also, check out my legacy post on the subject of HOA lawsuits.
How much does it cost to win a lawsuit against your condo association/HOA?
When Eleanor and Edward Lepselter filed a lawsuit against the Boca View Condominium Association in 2020, they never expected the legal battle to last more than four years.
The dispute started in 2019, when the Lepselters requested access to financial records. According to Florida law, condo associations are obligated to provide access to financial records “to an association member (unit owner) or the authorized representative of such member.” In this case, Lepselters hired Jonathan Yellin’s law firm to represent them, and to inspect financial records on their behalf.
Boca View condo board balked at allowing a non-owner to examine the financial records. That led to a non-binding arbitration followed by a lawsuit against Boca View. The case dragged on for two years. In 2022, the court ruled in favor of the condo owners, ordering the condo association to allow Yellin to inspect records on behalf of Lepselters and to compensate them for their legal fees.
Boca View Condominium Association appealed to the Florida Supreme Court, and the court declined to hear the case.
Therefore, the ruling in favor of Leselters stands. However, the homeowners’ battle for recovering their legal fees continues. The court will eventually decide the amount of money that Lepselters may recover as the prevailing party. Will the court make them whole? That’s doubtful.
More details of the case are available in the linked article:
Florida Supreme Court declines to hear Boca View condo board’s appeal. But is it over?
HOA risks, disadvantages, and pitfalls
Condo board President arrested, accused of stealing $1.5 million from owners
Gregori Arzumanov had served as condo president of Turnberry on the Green since 2008. During that time, he appointed himself as property manager and maintained control over HOA funds. The arrest warrant alleges that Arzumanov hired his own companies for services that were never rendered.
Charges in the arrest include money laundering, racketeering, grand theft, fraudulent use of a credit card, organized scheme to defraud and making a false statement to Florida Department of State.
Side note: This story is a real-life example of why HOAs and condo associations should be required to comply with the Corporate Transparency Act.
Aventura condo board president arrested, accused of racketeering, stealing $1.5 million
Condo owners, residents of building with defective concrete face evacuation of building for a year
The Riverview Condominiums on Mt. Auburn Street in Cambridge will be evacuated for more than a year, as the luxury condo complex must address serious structural issues. The building is 60 years old, and was in the midst of a roofing project, when engineers discovered that “substandard concrete” was used in original construction.
A majority of the owners in the 66-unit building are senior citizens. The condo association gave the owners a month to move out and find a rental apartment or alternate housing. They informed owners that repairs are expected to take at least one year. In addition to moving expenses and renting elsewhere, owners will have to pay for costly repairs to reinforce the concrete infrastructure. According to one report, the cost is to be financed by a loan taken by the condo association.
Luxury Cambridge condo complex to be evacuated over structural concerns, reports say – masslive.com
Riverview condos in Cambridge evacuated – NBC Boston
Condo crisis / special assessments / reserves
After the catastrophic sudden collapse of Champlain Towers South condominium in 2021, lawmakers in Florida scrambled to enact laws to prevent a repeat of the tragedy that killed 98 people.
Florida’s condominium statutes now require all buildings three stories or higher to conduct regular Structural Integrity Reserve Studies (SIRS) and to catch up their reserve funding for essential maintenance and repairs.
The impact of these new laws is being felt by condo owners across the state, and not just in older buildings that have been neglected for many years. Several examples are cited with sources.
1060 Brickell, Miami:
In November 2024, in response to the results of the recent SIRS, the condo board passed a $21 million assessment. The condo association says it must make necessary structural repairs to the facade, roof, and pool deck. The building is only 16 years old.
According to the condo association’s attorney, Florida law provides that owners do not have the right to vote on special assessments for “necessary” or “essential” repairs. The condo board’s attorney says this is a matter of safety, and the board is obligated to fulfill its fiduciary duty. A three-member condo board voted to authorize the $21 million special assessment at a closed meeting.
The result: Each condo owner must now pay a special assessment of $40,000 to $50,000 per unit, in addition to regular monthly condo fees. The fees are payable beginning January 2025 and spread out over 9 additional quarterly payments. This is in addition to increases to regular monthly condo fees that have increased by 60% on average in Florida over the past five years.
Brickell Condo owners respond
Condo owners object to the size of the assessment and the scope of work that is necessary in the immediate future. They also cite Florida statute, which specifies that condo boards must hold a special meeting of owners when an assessment increase exceeds 115% of the previous year’s assessment. The statute does not specify that condo owners must vote to approve assessment increases.
In the December condo board election, frustrated condo owners ousted the board president. The new condo board apparently plans to reconsider the scope of work and the timing, in order to spread out the cost by delaying some projects. But most of the structural work is already underway.
$21 million special assessment sparks controversy among Brickell condo owners – CBS Miami
1060 Brickell Condo President Ousted After Special Assessment (Subscription required)
Miami condo owners vote in new board after a $21M assessment | Miami Herald
The Cloisters on the Bay, villas in Coconut Grove
These aren’t high rise buildings, but very high-end villa homes in need of repairs. Special assessments for the extensive repairs of these 40 luxury villas are $150,000-$175,000 per home, payable in just a few weeks! It appears that sometimes even the uber wealthy need an extension to come up with that kind of cash on short notice.
Coconut Grove condo owner upset over $7.1 million HOA assessment – CBS Miami
The Summit Condominiums, Hollywood
Owners of apartments in a 567-unit high-rise complex are facing a $56 million special assessment. On average, that will cost nearly $100,000 per condo unit.
The condo association completed its 40-year building certification less than two years ago and made extensive safety repairs at that time. Yet the current condo board claims that there is a lot more work to be done.
Some of the owners at The Summit aren’t buying it.
They have contacted two Florida lawmakers for their help. State Senators Jason Pizzo and Jennifer Bradley recently toured The Summit with condo owners. They also reviewed the board’s apparent “wish list” of expensive projects. They say that many proposed projects are not essential to resident safety, and, therefore, the board has no right to push through such an outrageously high special assessment.
Here’s my observation. This is what happens when you create laws that hand a lot of power over to a handful of board members, encouraged by management companies and HOA attorneys to exercise those powers to the full extent of the law.
Lake Dow (GA) HOA members put a stop to $29K per acre special assessment
Lake communities across the U.S. are facing an increasingly common problem. The manmade dams that were built to create these lakes are deteriorating with age. State regulatory agencies – tasked with inspecting these dams – are mandating that the homeowners in these private lake communities repair their dams. And until that happens, the dams are breached, significantly lowering water levels in the lakes to prevent downstream flooding in the event of a future dam failure.
Many of these lake communities are governed by HOAs. The HOA is responsible for collecting fees from members to maintain the lake, to include the dam. Generally, if HOA members don’t raise the funds to repair the dam by a deadline set by the state, the dam is forcibly removed, and the lake runs dry.
Lake Down Estates Homeowners divided
At Lake Dow Estates, the HOA members are divided into two factions: lakeside homeowners who want to repair the dam and restore the lake vs. homeowners who don’t reside near the lake and don’t want to pay for restoration. A few months ago, the HOA board pushed through a $29,000 per acre special assessment to raise the funds to repair the dam.
But homeowners who don’t have a lake view don’t think they should have to come up with the money. They think that the county and state government should help cover the cost. Alternatively, at a minimum, homeowners with a direct lakeview ought to pay a higher share of the cost to repair the dam.
In November, HOA members voted to elect a new board, which promptly rescinded the $29,000 special assessment. However, the battle will continue until the matter is fully resolved one way or the other.
Corporate Transparency Act and HOAs
Since the beginning of 2024, certain trade groups have been fighting against reporting of Beneficial Ownership Information (BOI) under the Corporate Transparency Act. The CTA is an effort spearheaded by the Financial Crimes Enforcment Network (FinCEN) of the U.S.
In short, FinCEN seeks to build a nationwide database that identifies all of the owners of corporations in the U.S. The FinCEN database would limit access to its investigators. It will not be a public records database. The purpose of gathering information about corporate owners is to deter and help identify incidents of money laundering and domestic and foreign terrorism.
The federal law sets a deadline of January 1, 2025, for filing BOI under the CTA.
HOAs are required by CTA to file BOI by deadline
FinCEN has confirmed that HOAs (including condominium and co-op associations) are required to file the names, addresses, and copies of photo ID for each BOI of the HOA. In this case, that would include board members and possibly management agents.
Community Associations Institute is one of several organizations that is suing the Department of the Treasury and Janet Yellin, claiming that CTA is unconstitutional. CAI insists that filing BOI is unnecessary and expensive for HOAs and claims that HOAs aren’t likely to engage in fraud and money laundering through the use of shell corporations. (LLCs)
These claims are laughable, in my opinion. It’s obvious that HOA real estate is a primary avenue for money laundering and fraud through the use of LLCs.
What are corporations trying to hide?
It’s important to emphasize that FinCEN seeks basic identifying information from owners and directors of corporations. Americans provide the same information and much more when they file their taxes, apply for credit, and apply for a job.
Furthermore, the identity of beneficial owners of shell corporations (LLCs) is only available to law enforcement, not to the general public. If beneficial owners are not engaging in illegal or unethical activities, then why are they so desperate to hide their identities?
A commonsense appraisal of the big picture
In fact, why can’t owners and residents of HOAs know the identities of all beneficial owners of not only the HOA corporation, but also their management company, developers and homebuilders, and numerous contractors and service providers?
Why can’t consumers always know the names of the people behind any corporation? Why should the owners and directors of corporations have the legal right to hide behind a cloak of anonymity?
Obviously, trade groups like CAI, SBA, and others don’t want us to expose their conflicts of interest, their selfish and greedy motives, and potentially nefarious dealings.
Lawsuits against FinCEN challenge CTA’s constitutionality
Nevertheless, several lawsuits in circuit courts around the nation have resulted in conflicting rulings by judges. Courts in the Eastern District of Texas and Northern District of Alabama agree with the Plaintiffs that CTA is unconstitutional. Specifically, the court claims that Congress exceeded its authority in enacting the law.
However, courts in the District of Oregon and Eastern District of Virginia have ruled that the CTA is constitutional, and it is within the authority of Congress to enact the CTA in its capacity to fight money laundering.
As of December 5, 2024, a federal court in the Eastern District of Texas issued a nationwide injunction against FinCEN, denying the agency’s right to enforce compliance with BOI filing under CTA, pending the outcome of litigation. So, for now, FinCEN cannot impose punitive fines and possible jail time for failure to file BOI by the deadline.
Due to conflicting rulings, the matter of CTA’s constitutionality and enforceability may ultimately be decided by the U.S. Supreme Court. This is a developing story.
CTA references
The constitutional arguments surrounding the CTA are complex. I have provided several reference links to help readers better understand the controversy and implications for the future.
Corporate Transparency Act: FAQ
Corporate Transparency Act | Community Associations Institute
FinCEN Corporate Transparency Act Homeowner Associations | HOAs
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