NCPA - National Center for Policy Analysis

THE FIX FOR HOAs WON'T COME FROM THE GOVERNMENT

January 14, 2009

Homeowners associations (HOAs) are legal entities created by real estate developers for the purpose of developing, managing and selling a development of homes.  When the developer is ready, he turns over the HOA to a group of homeowners, who then take on community issues such as collecting dues from residents and enforcing any covenants, conditions and restrictions that apply to the property.  However, increased development standards are forcing developers to abandon their communities early, says the Goldwater Institute. 

Developer abandonment is likely to become a serious issue in the coming year for the state of Arizona, in particular, with as many as 200 of its more than 10,000 communities under HOA control. Partially completed subdivisions and newer communities more prone to home foreclosures are the ones most likely to suffer, says the Arizona Republic.

Take, for example, Arizona's San Tan Heights HOA:

  • When it switched from developer control to homeowner-elected leaders, its new board members and management company learned that the HOA was practically DOA.
  • Its problems included nearly $1.6 million in unpaid dues that the previous board had made no effort to collect; the biggest individual delinquencies belong to bankrupt home builders.
  • Moreover, homeowners in neighborhoods with underfunded HOAs have seen their association fees increase at the same time amenities and services are being reduced or eliminated.
  • They fear the worsening conditions will further hurt their property values and quality of life.

The main cause: government policies that force developers to oversupply HOAs to meet artificial demand for HOA communities, says Nick Dranias of the Goldwater Institute.  When HOAs are created to satiate government bureaucrats, rather than homeowners, it shouldn't be surprising that many HOA communities are neither well-crafted nor homeowner-friendly. 

But, the solution to the HOA problem is not more government intervention.  It is less.  The first step is for government to stop mandating and subsidizing the creation of HOAs, says Dranias.

Source: Nick Dranias, "The fix for HOAs won't come from government," Goldwater Institute, January 13, 2009; based upon: J. Craig Anderson, "Unfinished subdivisions stuck with underfunded HOAs," The Arizona Republic, December 21, 2008.

For Republic text:

http://www.azcentral.com/realestate/articles/2008/12/21/20081221biz-homeowners1221.html 

 

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