The Rise of Homeowners Associations: What Buyers Need to Know

The real estate market has witnessed a significant trend in recent years: the rise of homeowners associations (HOAs). HOAs have become increasingly prevalent, governing nearly 60% of recently built single-family houses and 80% of houses in new subdivisions. While HOAs offer certain benefits, understanding their implications is crucial for buyers considering purchasing a home in an HOA-governed community.

HOAs provide tailored amenities and enforce additional zoning restrictions, contributing to a premium in house prices. According to a study by the American Enterprise Institute, houses in HOAs have prices at least 4% higher, or $13,500 more, than similar houses outside of HOAs. This premium varies depending on local factors, such as the stringency of local land use regulation, local government spending on public goods, and social attitudes toward race.



The presence of HOAs can also lead to higher HOA fees, which can impact affordability and may deter some potential buyers. Homeowners in HOAs must pay regular dues and adhere to neighborhood rules and regulations controlled by the HOA. These funds are used to pay for upkeep of shared community space, but they can also be allocated and extended to meet the preferences of residents, such as landscape maintenance of private yards.



While HOAs offer certain benefits, it is essential for buyers to carefully consider the potential costs and implications. HOAs can act as a tool for exclusion, screening on household attributes or prohibiting activities more commonly undertaken by individuals in certain groups. This can lead to racially segregated communities and potential social tensions.

In conclusion, the rise of homeowners associations has significant implications for buyers in the real estate market. Understanding the benefits and drawbacks of living in an HOA-governed community is crucial for making informed decisions. Buyers should carefully evaluate the HOA premium, fees, and regulations, as well as the demographic characteristics of HOA communities, before purchasing a home. By doing so, buyers can make well-informed decisions that best suit their needs and preferences.