Why HOAs?

It is inevitable.  It happens to everyone in the industry at some point.  Someday, perhaps after being berated by an angry homeowner, you lean back in your chair, look at the ceiling, and ponder why homeowners associations exist at all.  To whom do we owe our gratitude (or, perhaps, the blame) for the existence of homeowners associations?

The concept of restrictive covenants (upon which planned communities and condominiums are based) dates far back into the history of the English common law.  Restrictive covenants were originally ways for owners of land to control how the land would be used after it was subdivided.  An owner could divide off portions of his farmland and include restrictions on the new owners, such as dictating that the new parcels would never be used for purposes other than farming or residential use, or prohibiting the sale of liquor on the land.  This ensured that the original owner, who often continued to reside on a portion of the original parcel, controlled how his new neighbors would use the land.  As the restrictive covenants became more specific and detailed, condominiums and planned communities eventually evolved.

For the sake of brevity, moving forward to modern Arizona, you may also wonder why condominiums and planned communities are so ubiquitous.  Condominiums are an easier answer.  They provide a means to own a home free from the maintenance headaches of owning a single-family house, and offer an affordable path to homeownership for individuals who are just starting out or have a lower budget.  Condominiums exist because the market demands them and they are profitable to build and sell.

The reasons for the proliferation of planned communities are not so obvious, and are based more on local government than on any market forces.  Most, if not all, municipalities in Maricopa County require all new development of any real scale to be in the form of a planned community.  The cities generally exercise this authority at the time they grant developers permits to subdivide parcels prior to developing them as single-family houses. 

By requiring the creation of homeowners associations with new development, local governments may require developers to build parks, drainage ways, and even streets at developers’ expense rather than the city’s.  Developers in turn pass these costs along to the new homebuyers.  This shifts the expense of new development to the new residents and away from public coffers.

Homeowners associations also typically assume the maintenance responsibilities for these amenities, giving local government substantial savings over time.  Homeowners associations are also required to keep their neighborhoods clean and enforce the restrictive covenants, which helps keep property values high (thus increasing property tax revenue) and reducing the need for city code enforcement (saving money on the city budget).

Given the list of benefits homeowners associations provide to local governments, it is easy to question why government is so rarely a friend to homeowners associations.  Healthy homeowners associations feed tax coffers and ease budget strain for cities and counties, yet cities (and especially the state) often act as though they believe homeowners associations are an untoward restriction on individual freedom.  The inherent contradiction in the local governments’ requirement that homeowners associations exist versus the state’s increasingly strict regulation of homeowners associations is the source of many difficulties the industry faces.  Realizing this contradiction exists and informing our legislators of the contradiction are two important steps towards eliminating it.

If the government wants homeowners associations, it should allow them to function pursuant to their CC&Rs with minimal governmental intervention.  If the government believes homeowners associations threaten individual liberty, it should not require their existence and let the market dictate their fate. 

Please contact Mark Holmgren or any attorney in our office about HOA questions.