The Growth of HOAs

HOAs and COAs have continued to grow in the U.S. since their introduction in the late ‘60s. Nowadays, they represent more than  50% of American homeowners and are projected to grow by 1.3% over the next year.

Association-managed communities offer unique benefits like board-enforced rules, community upkeep, and a more active voice from the community members. However, ask people about their opinions on living in an HOA, and you’ll typically get a down-the-middle split of either approval or disapproval. While some experiences aren’t great, the original intentions of HOAs were good. The experience can be very different from one community to the next, depending on how well the community is maintained.

Before closing on a home in an HOA, you should understand the roots of their existence and how it alters the homeownership experience. Working with your title agent to request the proper information will help you make your decision.

What is an HOA?

Homeowner’s associations (HOAs), condominium owner’s associations (COAs), and other forms of community management are there to act as a regulatory board for the community. In general, the regulations are for bettering the community and maintaining a sense of uniformity in the styles, landscaping, and more.

An association includes a board of directors comprised of a president, secretary, and treasurer alongside other appointed positions as needed by the community. They exist in multiple levels where a master association will manage multiple sub-associations, each with its own board of directors (BOD). At times, the sub-associations are entirely independent of the master association, so it can be challenging to track them all down for an estoppel.

The Beginning of HOAs

The first planned community was Levittown, a community built in Long Island in the late 1940s, intending to offer low-interest homes to veterans. They didn’t have a formal board, but the intention to have enforced rules and standardization was there. 

It wasn’t until the 1960s that community associations began popping up. The significant movement of people to suburban areas brought the price of land up higher. Instead of allowing for homes to be built on large plots of land, developers packed houses in clusters and offered shared open spaces.

The intent was for the community spaces to be managed by a local association instead of municipal workers. In some cases, this was seen as a good thing where municipal upkeep wasn’t as widely available. With time HOAs began shifting more into what we see today.

Curious about other historical moments related to real estate? Check out The History and Value of Land Records and The Impact of Legal Descriptions on Land Value.

Why Be Part of an HOA?

The perks of being a community association member are numerous. The most appealing aspect is probably the amenities that some offer — having a community pool, tennis courts, park, and more makes for a better experience. Not all HOAs and COAs offer the same amenities, but it’s something to ask about when considering a home within an association.

Here are some of the main benefits:

• Low maintenance for your house or condo
• Access to amenities (pools, parks, walking trails, etc.)
• Higher selling value from HOA benefits

Not everyone seeks out a home in an HOA because some prefer the freedom and flexibility of remodeling their home as they please. HOAs can have strict rules that even dictate what color you can paint the shutters on your home. If you don’t comply, you can be fined thousands of dollars by the HOA.

Here are some of the downsides:

• Monthly, bi-annual, or annual fees for membership
• Hidden costs like application fees, transfer fees, and special assessments
• Mixed levels of involvement by the board

An association isn’t for everyone, but you can compare the pros and cons and decide your preference before placing an offer on a home. Involvement in the association can also enhance your experience and allow you to voice your opinions as well as the opinions of your neighbors.

HOAs Today

Today, the U.S. is home to an estimated 370,000 community associations compared to just 10,000 in 1970. Within those community associations live approximately 25-27% of the U.S. population.

HOAs and COAs tend to be common in states where outdoor amenities are bountiful. The top 5 states with the highest number of associations are California, Florida, Texas, Illinois, and North Carolina.

HOAs, COAs, and other forms of community associations exist in other parts of the world too. In countries and regions like Canada, Australia, the U.K., South Africa, New Zealand, India, Central and South America, and the Middle East, community associations go by various names. Each operates in a similar fashion, where membership is automatic once you purchase a condo or home within an association.

Before You Close on a Home in an HOA

You’ll likely encounter at least one property that falls within an association during the homebuying process. After you’ve taken time to consider the pros and cons of a home within an association and decide to make an offer, you should work with your title company or title agent to order an HOA estoppel or resale certificate.

An estoppel is essential for understanding the fees and state of a home regarding those fees. Delinquency on the fees could end up being your responsibility as the new homeowner. This is because those fees are tied to the home and if left unpaid for long enough, the association can place a lien on the property.

Additionally, annual dues don’t always cover larger projects that occur less frequently than general upkeep and landscaping, so a special assessment is required. A whopping $96 billion was collected for special assessments in 2019, and they are not something to take lightly. 

An estoppel will typically outline any future plans for improvement to the community along with their costs, giving a better idea of the financial burden an association home might bear. If it doesn’t, ask the association if they’ve conducted a reserve study to determine any upcoming special assessments that may occur.

Tracking down the information isn’t always as easy as it seems; you need to know how many associations govern a property and order estoppels or resale certificates from the ones that require dues. It’s not always clear how many levels of governance there are on a single property. This is where the legal description of a property can help define those associations.

The origins of associations were the result of high demand for a sense of community in newer neighborhoods as people moved further from downtown areas. For many, it still provides this today. 

Although polarizing, HOAs and COAs offer unique benefits and can help maintain property values for members. It’s important to look at all the facts before closing on a property in an association, and ordering an estoppel or resale certificate is an essential part of that process.

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