Homeowners Associations: On the Way Out?

NEW YORK (MainStreet) — Studies show that about 20% of U.S. homeowners are members of a homeowners association, but more and more of them may find the doors locked when they go to their next meeting.

Evan McKenzie, a political science professor at the University of Illinois at Chicago, argues in a new book that homeowners associations inherently infringe on people’s rights, and that their time is limited.

"Residents often contend with intrusions an elected government would not be able to make, like a ban on pets or yard decorations," McKenzie says. "If things go wrong, the contract residents must sign to purchase within the community to give them little legal recourse."

Nevada, Florida and Virginia recently enacted laws setting up consumer intermediary offices to act on behalf of homeowners who are being pushed around by community associations. The power structure, McKenzie adds, is rigged heavily in the associations’ favor at the expense of individual homeowners, particularly as such community groups tend to push big piles of money toward local governments and big developers in a sort of symbiotic power-sharing relationship.

"Developers use it to cram more people onto less land, thus increasing density," McKenzie claims. "Municipalities get more property tax payers without having to build or maintain services and infrastructure for them."

In 1970 there were only 10,000 U.S. community associations, according to the Community Associations Institute. Now there are about 300,000, covering 24 million housing units. Nearly one out of every six Americans (60 million) is part of a community association, the CAI says. Despite McKenzie’s idea they are doomed, other CAI statistics show a vibrant system of such organizations:

Between 9,000 and 11,000 community associations are formed every year.

In the largest metropolitan areas, more than 50% of new home sales are for houses included in community associations.

The real estate value of all community associations and their units exceeds $2.25 trillion, approximately 17% to 19% of the value of all U.S. residential real estate.

But McKenzie’s larger point is that once consumers gain some leverage against homeowner groups, these associations will begin to lose power and eventually fade away.

"We are all increasingly reliant on it, but there are serious problems with the viability of these residential private governments," McKenzie says.

What’s left unsaid is what kind of homeowner entity will take the place of homeowner associations if they do go the way of the dodo.