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Most individuals don’t question how HOAs were first started. They live in a HOA and pay their dues and follow the rules and that is the most they know about their HOAs. What most people don’t realize is that this concept has been studied and researched and talked about in urban planning for about two decades.
In 2019, Wyatt Clarke and Matthew Freedman conducted a study never before done on HOAs and published their findings in the Journal of Urban Economics. I won’t bore you with the technical stuff, but you should read the article if you are interested (it cost money but I think it was worth it). *Citation below. The authors used a hedonic progression model to test the data. I went to law school because I hate math. So, I will leave all the math to the authors. But, what is interesting about the article is that HOAs are somewhat secret and unknown. All documents are filed in the real property records and difficult to compile. The authors used data from Zillow (Zillow Transaction and Assessment Dataset or ZTRAX) to compile their HOA data. The database does not list the specific HOAs. The authors used mortgage riders as a way to not only look at how many HOAs exist but who lives in HOAs, the cost of the houses and diversity of communities that have HOAs, etc. etc. This type of data has never before been compiled. In Texas, we could look at TREC’s management certificate database but I don’t think it would give us the plethora of data tested for the article I am referencing.
What did the research conclude? HOAs are actually a valuable tool in substituting for local government. Houses in a HOA sell at a premium, usually 4% higher than equivalent non HOA homes. These conclusions also were determined based on location as well. The Southern Core Based Statistical Areas (CBSAs) benefitted generally more than others. But, overall for every $1 spent on HOAs dues, members benefitted $1.19. That is very interesting and surprising based on all the articles I read stating that homeowners hate their HOA.
The authors stated that more research needs to be conducted and that diversity and segregation need to be considered where those issues arise in HOAs. I agree. Texas local and state government can benefit from the research on HOAs and frame policies and laws that work with HOAs.
*Wyatt Clarke, Matthew Freedman
The rise and effects of homeowners associations
IBM, US, University of California, Irvine
Journal of Urban Economics 112 (2019) 1-15