A Primer On Community Living
History of Common Interest Developments
The Federal Housing Administration in 1963 authorized federal home mortgage insurance exclusively for condominiums or for homes in subdivisions where there was a qualifying homeowners' association. The rationale was that homes in tracts where there was a homeowners association would be more likely to maintain their value. The effect, however, was to divert investment from multifamily housing and home construction or renovation in the inner cities, speeding a middle-class exodus to the suburbs and into common-interest housing.
The federal highways program further facilitated the process. In the 1970s, a growing scarcity of land for suburban development resulted in escalating land costs, prompting developers to increase the density of homes on the land. In order to do this while still retaining a suburban look, they clustered homes around green open areas managed by associations. These associations provided services that formerly had been provided by municipal agencies funded by property taxes; yet, the residents were still required to pay those taxes. Accordingly, local governments began promoting subdivision development as a means of improving their cash flow.
In 1973, Community Associations Institute (CAI) was formed to deal with problems with association management. It was an educational organization then, but as problems continued CAI made substantial changes in 1992 to its structure and became a business trade group primarily to lobby state legislatures. In 2005, CAI dropped its membership category for HOAs. Today, the CAI no longer represents HOAs, but reperesents the service providers; lawyers, property managers etc, on the payroll of HOAs.
A homeowners' association is incorporated by the developer prior to the initial sale of homes, and the Covenants, Conditions, and Restrictions (CC&Rs) are recorded when the property is subdivided. When a homeowner purchases a home governed by an HOA, the CC&Rs are included with the deed.
Like a city, associations provide services, regulate activities, levy assessments, and impose fines. Unlike a municipal government, homeowner association governance is not subject to the Constitutional constraints that public government must abide by.Some of the tasks which HOAs carry out would otherwise be performed by local governments. A homeowners' association can enforce its actions through the threat and leving of fines, and private legal action under civil law.
Association boards appoint corporate officers, and may create subcommittees, such as "architectural control committees," pool committees and neighborhood watch committees. Association boards are made up of volunteers from the community who are elected by owners at the annual meeting to represent the association and make decisions for all homeowners.
Homeowner associations can compel homeowners to pay a share of common expenses, usually per-unit or based on square footage. These expenses generally arise from common property, which varies dramatically depending on the type of association. Some associations are, quite literally, towns, complete with private roads, services, utilities, amenities, community buildings, pools, and even schools. Many condominium associations consider the roofs and exteriors of the structures as the responsibility of the association. Other associations have no common property, but may charge for services or other matters. Assessments paid to homeowner associations in the United States amount to billions of dollars a year.
An HOA provides people with shared neighborhood values an opportunity to enforce regulations, consistent with overriding statutory constraints, to achieve a community representative of such values. In doing so, an HOA inherently restricts the freedoms that would otherwise exist for its members based on municipal codes. For instance, a degree of conformity is often required in exterior appearance of single family homes and there are often time limits and/or restrictions to activities generating noise. There are pre-existing rules in the form of CC&Rs and bylaws that a buyer has a right and an obligation to view before entering such a community, that also prescribe methods for modification of these regulations.
These bylaws are largely limited in various degrees by state laws, with some overriding federal judicial or statutory limits. In every association, board members and officers are chosen by election from its property owner-members, with the ability in some states for the membership to remove board members even during term.
Many homeowners' associations include management of a community's recreational amenities, maintained for exclusive use of its members. This can allow an individual homeowner access to a maintained pool, clubhouse, gym, tennis court or walking trail that they may not be able to otherwise afford or desire to maintain on their own.