HOAs are spreading. But at what cost to cities?


Almost 60 percent of new single-family home construction today is in an HOA, according to the study.

HOA sign on pool

Photo: Wil C. Fry.

Almost 60 percent of new single-family home construction today is in an HOA, according to the study.

Homeowners associations represent a growing share of the country's single-family housing. More than half of new single-family home construction is in an HOA and roughly 80 percent of single-family homes built in new subdivisions are within an HOA, according to a recent study that argues for more research of the prevalent associations.

"These HOAs are a big deal," said Matthew Freedman, co-author of the study published in the Journal of Urban Economics. "They kind of fly under the radar a lot of times," he said, adding, "We really need to understand more about what these entities are doing because they could have potentially very profound implications.”

That's precisely what Freedman, with the University of California, Irvine and Wyatt Clarke, with IBM, set out to do in a near national review of homeowners associations, including how inclusion in an association affects single-family house prices, what the socioeconomic composition of HOA neighborhoods are and how they interact with things like the presence of local government, segregation and attitudes about race, among other things.

Pulling from over 35 years of Zillow, Inc. data, the researchers found that homes in HOAs tended to sell for more than similar non-HOA homes — on average 4 percent more. Part of that, the research suggests, is due to the services HOAs often provide, services, including a sort of "private zoning" that appear to be even more valued in regulation-lite cities, like Houston, where Freedman grew up.

"My perception, especially growing up in Houston in the suburbs, is that in the absence of strong government zoning there was an almost a sort of bottom-up approach to zoning where there were these HOAs created in new neighborhoods most often at the fringes of the city that essentially served the function of the public sector," he said. "HOAs provide local amenities, often in the same way governments do in many cities," explained Freedman. "They maintain parks and roads and swimming pools, all of that kind of stuff that people attach value to."

For local governments, this can look like a win-win. "It's almost, in some ways, a partnership between local governments and developers," in which the association is "really serving as a substitute for local governments."

But the research also points to another possible factor influencing the spread of HOAs: race. The larger the black population in 1960, right around when HOAs were being popularized and just before legislation took aim at housing discrimination, the higher the modern-day "premium" that HOA residents were willing to pay to live within an HOA.

"It's hard to avoid thinking about the relationship between HOAs and racial segregation because there is, from a historical perspective, there is a lot of discussion about the extent to which HOAs rose up as a substitute for racially restrictive covenants prior to the 1960s," said Freedman.

Today, HOA residents tend to be disproportionately white and Asian, according to the study, as well as wealthier than non-HOA residents. The researchers also found that HOA premiums were "higher in cities where the average white resident who takes the [Black-White Implicit Association Test administered by Harvard University] has a harder time associating good adjectives with 'black' faces, relative to their speed at the same task with 'white' faces," according to the study.

HOAs are sometimes portrayed as meddling menaces, busybodies but not particularly consequential perhaps. "It was poisoned goldfish in Palos Verdes, untrimmed bushes in the city of Orange, a basketball hoop in Newport Beach and dog droppings in Pomona. Catalysts for suburban catastrophe, each and every one," was how one 1988 Los Angeles Times piece exploring the tensions of living within an HOA began.

This study, however, suggests that the potential causes and consequences of HOAs are more significant than untrimmed bushes.

"This is just a correlation," said Freedman, "so it's hard to say for sure,'s not so clear that these HOAs are necessarily serving as a tool for exclusion, but there does seem to be some relationship."

Given the findings, Freedman argued, cities have a responsibility to think critically about HOAs.

"HOAs aren't kind of arising in a vacuum," he said. "They're often arising in part because local governments can be very positive about HOAs...they allow for new development but the local government doesn't have to pay for all of the expenses associated with new development."

But Freedman continued, cautioning, "There may be some social costs associated with these HOAs... We want to be careful about encouraging HOA growth if it is, in fact, contributing to segregation."



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