Who says that all new construction must have HOA governance?

By Deborah Goonan

Over and over again, HOA industry proponents repeat the chorus, “HOAs are here to stay,” and “HOAs are necessary, because of shared common areas and amenities,” and “Buyers must want these amenity-rich HOAs, because they keep buying them.”

Time to debunk.

Are HOAs are here to stay?

I completely reject the notion that builders will never construct without an HOA. Nonsense. When sufficient numbers of taxpaying constituents and home buying consumers demand non-HOA housing – the kind that is NOT created under developer control (or de facto control) - and when banks stop lending on favorable terms, just watch and see how quickly the market shifts. We are already seeing a shift away from condominium construction, and a surge in construction of apartment communities. Homeownership rates have already dropped to levels prior to the real estate boom, and lots of people simply don’t want to risk investing their dollars in a still tenuous housing and employment market. Quite a few would-be buyers have taken a hit to their credit after short sale or foreclosure of their HOA homes. Younger consumers hold too much student loan debt, combined with relatively low wage jobs, and don’t take kindly to excessive restrictions and rules. Nor can they afford high assessments on top of property taxes and insurance.

More importantly, when local and state governments acknowledge the hidden financial costs of poorly managed private communities, deteriorating older housing developments well past their heyday, unfinished Master Planned Communities, crumbling roads, storm water systems that have never been properly maintained, obsolete water-sewer utilities, condemnations of crime-infested condo projects, etc. then there will be a change of heart - if only out of expediency. Someone will have to pick up the pieces, and it won't be HOA owners if they lack the financial resources!

Are HOAs truly necessary?  Are shared common areas necessary?

Of course not! We can prevent the issue of private communities not adequately maintaining common areas by not having them in the first place. Dedicate all roads and storm water structures to the county or city. Private developers and homeowners are usually not good stewards of conservation zones. Stop creating private parks and green spaces that few use, and fewer want to pay for. Stop creating HOA communities with contrived common space that consists of a single retention pond or small, unusable strip of lawn. Do we really need entry walls with the name of the community, with a flowerbed that must be maintained, and one or two fancy streetlights?

Common areas are NOT necessary for non-condo construction, and without common areas, there is no need for the HOA. That includes townhomes, also known as “row homes” and “twins,” by the way. Attached housing has existed for well over a century in the Northeast and Midwest without HOAs! Each owner takes care of his or her own yard, exterior maintenance, and roof.

The notion that 12 connected townhouses must all paint the exterior and change the roof at the same time is a relatively new concept. Visit any historical city or small town in America, and you will see that attached housing neighborhoods can be attractive, even if they don’t all look exactly alike.

What generally happens in today’s attached housing HOAs is that some owners want to be proactive about getting a new roof, while others want to spend a decade patching leaks that affect their neighbors’ units, to delay an increase in assessments.

When you own your own row home, free and clear, YOU can decide when it’s time to replace that roof.

Is it true that buyers want amenity-rich HOAs?

Some do, but most do not. According to NAHB (National Association of Home Builders) in its 2013 survey, less than half of buyers list recreational and security amenities as desirable. The vast majority can do without them or do not want them at all. Gated communities and golf communities, as well as mixed used arrangements, top buyers’ most unwanted list. Only half care about a community pool or walking paths. Many own their own pools, and enjoy walking in existing city or state parks instead.

Yet in many of the fastest growing real estate markets over the past 20-30 years, virtually all approved development has resulted in creation of HOA governance. Either the local government has mandated it, or there have been so many disincentives heaped on developers that they have built almost nothing but HOA residential housing.

Why? For local governments, HOAs have been seen as a way to increase property tax revenues by building homes closer together, while at the same time dumping responsibility for construction and ongoing maintenance of infrastructure and recreational facilities onto buyers and homeowners.

Thanks to local development codes, the HOA Cash Cow has taken over. Buyer choice for avoiding the HOA is rapidly disappearing across the country, and has already been severely limited in states such as Florida, California, Texas, Colorado, Arizona, and Virginia, to name a few.

Just as consumers cannot walk into any retail store in the US, and purchase needed merchandise that is NOT manufactured in China, India, Mexico, or countless other countries that export goods to this country, homebuyers cannot purchase homes that meet their needs without subjecting themselves to the HOA regime.

The truth is the HOA market is Supply side driven, not consumer demand driven. (See Privatopia and Beyond Privatopia both written by Evan McKenzie, Yale Press and ULI Press.)

In a free country, a consumer market is supposed to be dictated by consumer demand, not supplier control over profits, and acquiescence by political cronies.

But this is America, not China or Russia.

The way to change the course is for taxpayers and home buying consumers to put pressure on their local and state governments to stop creating nothing but more HOA mini-governments.

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