HOA Fees Are Adding to the Housing Affordability Problem

Prospective homebuyers face limited supply, historically high mortgage rates, plus increasingly high homeowners association fees.

Photo by Dillon Kydd via Unsplash

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That gated community doesn’t lock itself.

Prospective homebuyers face limited supply and historically high mortgage rates, plus something they didn’t see coming: homeowners association (HOA) fees. In a recent The Big Take podcast, Bloomberg reported that 80% of new homes for sale are in neighborhoods with HOAs.

How Do You Live?

HOAs and similar systems are often found in condominiums and enclosed neighborhoods, but roughly one-quarter of the country lives in some kind of HOA-style setup. The goal is to maintain a clean and cohesive look that keeps property values up. But for a long time, even in some cases today, the result perpetuated racial, ethnic, religious, and income segregation.

HOA residents make regular payments on top of their mortgages to cover costs for shared spaces or other community assets like landscaping, trash removal, tennis courts, and more. Payments can range from a few hundred dollars a month to more than $1,000, as well as possible fines for not following the upkeep rules. For those shopping for a new home, the fees and fines can be overwhelming:

  • One resident told Bloomberg that her HOA fined her for a litany of arguably petty violations like oil stains in her driveway, a dying tree on the property, and garage doors that weren’t the same color. When combined with late and legal fees, the resident eventually owed the HOA more than $6,000. When she couldn’t pay that, the HOA sold her house.
  • About 20 states give HOAs “super-lien” priority, meaning the HOA can claim ownership of a property, even outranking a bank, if residents don’t pay up, Bloomberg reported. Some state and local governments are beginning to regulate HOAs, but there’s not much federal oversight.

Back to ‘80s: The US housing market is the least affordable it’s been in roughly four decades. The average sale price of homes in the US was $513,400 in this year’s third quarter, a near 60% jump from a decade ago. As a result, pending home sales have dropped to record lows, even worse than during the Great Recession, according to the National Association of Realtors. However, Zillow just predicted a little more breathing room in the new year, with more homes hitting the market, slowing price growth. Plus, by the second half of 2024, the Fed might be in the position to start slashing rates. We’re all crossing our fingers.

– Griffin Kelly