Why in the World are there HOAs?

Community associations have not always existed. They are relatively new to the way humans organize their living. They have always been political. In the United States, they were a product of builders not wanting to integrate their communities racially or religiously. In Pasadena, California, the Arroyo Seco Improvement Association was established in 1905 to establish an “upscale” community(1). Associations have continued to grow in numbers, size and influence. Community associations govern millions of people worldwide. 

Associations were and continue to be legally incorporated; their existence is codified by law. They self-fund their existence through dues paid by owners within the community. They have evolved in various forms to serve various purposes. 

Purpose

Not only do community associations exist for a few reasons, they go by many different names. Names like Community Association (CA), Homeowners’ Association (HOA), or Property Owners’ Association (POA) come to mind. The name points to the purpose. Tromler (2023) points out that HOAs tend to be family homes where POAs tend to be mixed use communities including residential, commercial and business entities(2). Regardless of the name, they all identify their purpose when they first organize. For a residential community that often starts with the builder of the community. 

Generalizing, the purposes are based on improving property values, maintaining amenities and communicating to owners and residents. Builders identify the lots (or plats) that comprise the community. They identify what initial amenities will be offered. They communicate with new owners as the lots are transferred from the builder to the owner. 

Increase Property Values - Community associations should create an environment that maximizes property values by establishing a set of rules, regulations and guidelines often referred to as covenants, conditions and restrictions (CC&Rs) on which every owner agrees before taking possession of their property. 

Manage Community Amenities - Community associations should create, manage and protect community resources for every owner/resident to enjoy. Also see the section above about increasing property values. 

Communicate between Associations and Owners - Community associations should serve as a source for information. Community associations should communicate expectations and issues consistently, timely and transparently. 

Authority

Owners Associations obtain their authority to exist from a variety of sources. Most are created as a non-profit organization dedicated to identified purposes. Their authority includes financial considerations for maintaining an operating budget that includes sufficient reserves for future expenses. Associations proscribe a process for changing the amount each owner pays based on a documented process. They can also levy monetary penalties against owners found in violations of CC&Rs based on a documented process. Ultimately, since there is a contractual relationship, the association or the owner can seek remedy in the courts system. 

Current State 

Most associations operate with 20th century processes and 20th century tools. While some associations provide their services using some technology, they follow very paper-intensive, point-in-time procedures. The technology used is often borrowed from another industry that does not always meet the needs of the association or its owners. There is no one platform designed for all three purposes of supporting increasing property values, maintaining amenities and communicating between the association and its owners/residents. 

United States 

Interestingly, the US real estate market is currently hot and cold, based on location. As such, owners’ associations are either sitting pretty or bearing the disappointment of owners’ who cannot sell their property for its perceived value. Consistently applying CC&Rs to owners equally ensures that all properties within the community meet community expectations. This should allow for the maximum property value to be realized. 

While amenities are an important selling factor, their upkeep can be daunting. Community associations have to do the day-to-day maintenance as well as prepare for future expenses. Roads, outdoor lighting, parkland, playgrounds, swimming pools, gyms, and community rooms are a few things associations establish, maintain and improve. There is an ongoing cost as well as future costs that need to be considered for useability and safety concerns. Associations include these costs in their monthly, quarterly or annual dues. Documenting and reporting on expenditures goes a long way to help owners understand the state of the community’s amenities. 

In the US, the relationship between owners and community associations is contentious and litigious. Email blasts and snail mail letters do not allow for real-time communication. The Cedar Management Group (2023) states “All homeowners associations will encounter some form of dispute or another. While disputes can be a pain to deal with, they are a normal part of community living.”(3). Communication is challenging and inconsistent. Remedying that through the use of 21st century technology is a huge step in preventing and minimizing negative relationships. 

Global 

Globally, community associations exist as they do in the US for similar reasons. They are growing in numbers. They tend to be organized around condominiums. Dillingham (2023) noted “Homeowners associations are becoming increasingly common among new real estate communities and while their purpose is certainly good for property owners and the overall community, in practice they can often come with their own unique problems.” (4) The growth of the industry would indicate there is value in organizing community governance. Regardless of location, all community associations face similar issues. 

The Future 

The future of community associations is consistency and transparency through automation and artificial intelligence. Through predictable and repeatable processes, associations can help their communities increase property values, maintain amenities and communicate effectively. GoodFences is positioned to provide a platform that is user-friendly, cost effective and furthers the purpose of the communities it serves.