Is Having A Homeowners Association Worth It?

One of the main purposes of a homeowners association is to maintain the common areas in a neighborhood like the parks and roads. The homeowners in turn are obliged to pay their dues to sustain these amenities. Often, these can be from $100 to $10,000 per year, based on the kind of neighborhood and their amenities. Moreover, not only do the residents have to pay their HOA dues, but they also are required to follow the rule book of the association.

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Community Associations Institute (CAI) presents the “Verdict: Americans Grade their Associations, Board Members, and Community Managers,” a 2014 survey of CIC residents, as evidence of “overwhelming” CIC resident satisfaction. CIC is an acronym for Common Interest Communities, industry-speak for homeowners’ and condominium associations, cooperatives, and variations such as planned communities, property owners’ associations, and other marketing catch-all phrases. I have blogged before about the results of this biannual survey, but, honestly, one has to take any market “research” conducted by an organization for its own benefit with more than a grain of salt. There are plenty of reasons to be skeptical about the validity and reliability of the statistics CAI presents to the media, and good reason to doubt the ability to generalize conclusions drawn by CAI to over 64 million people.In today’s blog, I merely play along with the assumption that CAI is the authority when it comes to CICs, because I know these survey summaries are presented as “authoritative” research to legislatures across the nation. The brief CAI summary presented in their surveys and statistical summaries gives disinterested legislators a seemingly valid reason to ignore constituent bill proposals for state level regulation of CICs. “Look how satisfied most residents are, ignore those few ‘unfair’ attacks upon our well-meaning volunteer Board members and well-trained community association managers, because residents do not want more government control.”So the industry says to validate its own existence.
Let’s look again at the industry’s own research, for what it’s worth.
When we look at the real estate industry’s OWN market research,we discover that there is little demand for HOA governance. There IS demand for newer homes with modern features such as extra bathrooms, efficient heating and cooling systems, and upgraded finshes. It just so happens that, due to political cooperation and/or demands from local governments, CICs are the only type of new construction or urban redevelopment permitted. If we as buyers want a newer home, we get a CIC by default. Increasingly, tenants end up in CICs, too, due to a shortage of rental properties in some markets.
When we compare 2012 and 2014 “Verdict” data on supposed overall satisfaction, we note that positive ratings dropped by nearly 9% (from 70%to 64%). At the same time, respondents rating their overall CIC experience as Negative increased by 25% (from 8% to 10%). Neutrals increased by 15% (from 22% to 26%). If we combine neutrals with negatives, and compare to 2012, there has been a 20% increase (from 30% to 36%) in the number of residents who cannot rate their overall experience as positive.
Note that these surveys only included a sample of current residents – one can assume that a significant proportion of dissatisfied or neutral residents that did not care for the CIC moved and then became FORMER residents. Was there an exit interview or poll taken for these folks? How many unhappy people just got out of Dodge?
The 2014 survey also compares data from previous surveys as far back as 2005. In 2005, 22% of respondents said that the Rules in their communities had NO impact upon or were harmful for property values. That figure jumed to 30% in 2014! That represents a whopping 36% increase in the number of CURRENT RESIDENTS who see no real value in the rules and architectural standards. At the same time, the percentage of residents who said rules and restrictions protect property values dropped from 78% in 2005, to 70% in 2014. That represents an 11.4% drop in confidence of the value of all those rules and restrictions.
Now let’s look at the National Asssociation of Home Builders report of What Home Buyers Really Want.
The 2013 NAHB survey indicated the following percentages of buyers that DO NOT WANT the following features in a new home, all of them synonymous with CICs:
70% – elevator (in condos)
66% – golf community
56% – high density community
48% – gated community
44% – mixed use community
Under current development policies throughout the US, none of these community housing features can exist without the establishment of an Association to cover costs of construction and ongoing maintenance.
When you combine NAHB data with the 36% of respondents whose overall CIC experience is either negative or neutral, there is a pattern that emerges: at LEAST one third of current residents are prone to make a change by moving out, or would be open to options and/or improvements in their communities. And more than half of buyers are not interested in a CIC with closely spaced housing, multifamily housing, a security gate or expensive common amenities. (The bulk of what has been constructed and continues to be constructed)
So, if market demand were driving the housing market then at least one third of new construction would be in non-CIC developments – ie in new public communities such as municipalities or special districts, or within existing municipalities. In fact, the data points to a pent up demand for such free communities, since almost nothing without CCRs and deed restrictions has been constructed in the last 20+ years – especially in the states with the highest population growth. Why not put a moratorium on CIC construction, to give the housing market time to self-correct?
Our elected officials should seriously reconsider their laissez faire approach when it comes to CIC legislation, because a significant portion of their voters are not as satisfied as CAI claims in its self-promotion campaign. More importantly, our state and local leaders need to put an end to continued creation of privately governed corporate communities – that’s what CICs are – and return property rights to homeowners. It is high time to end land use policies favoring deed-restricted HOAs in planned developments and condominiums.
Link to CAI 2014 Verdict survey summary
http://www.cairf.org/research/Americans_Grade_2014.pdf
Link to National Association of Home Builder’s survey of what buyers want
http://www.nahb.org/generic.aspx?sectionID=734&genericContentID=206669&channelID=311

Craziest Homeowners Association Laws

Get to know your neighbors

That used to be such wise advice handed out by law enforcement organizations. But times have changed, times have changed. These days it’s far more important to your safety and your financial health to get to know your neighborhood rules. (I continue to collect examples of such rules, so please feel free to contact me with new ones!)

The rules

Some New York co-ops don’t want just any itinerant artist in the building, only art projects officially approved by the board.

In some HOAs….no high heels. (understandable)

What Homeowners Associations Can Do For You, or To You

For you

A staggering number of communities across the nation have Homeowner $B!G (Bs Associations. Twenty percent of all American homes are in HOAs. But that belies the read figure. Almost 100% of all NEW homes are in Homeowners Associations. That’s because developers cannot get permits to build unless they agree to create restrictive covenants that subsume some of the traditional duties of government. It’s a form of tax-shifting. Instead of additional taxes, you pay neighborhood ‘dues’. It doesn’t feel like taxes, and it doesn’t create some of the legal complications involved in raising taxes.