The Encyclopedia of Housing

Homeowners' Association

Contributors: Evan McKenzie

Edited by: Andrew T. Carswell
Book Title: The Encyclopedia of Housing
Chapter Title: "Homeowners' Association"
Pub. Date: 2012
Access Date: April 6, 2019
Publishing Company: SAGE Publications, Inc.
City: Thousand Oaks
Print ISBN: 9781412989572
Online ISBN: 9781452218380
DOI: http://dx.doi.org/10.4135/9781452218380.n97
Print pages: 291-293
© 2012 SAGE Publications, Inc. All Rights Reserved.
This PDF has been generated from SAGE Knowledge. Please note that the pagination of the online
version will vary from the pagination of the print book.
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A homeowners’ association is an organization formed to maintain and enhance the appearance, property val-
ues, and quality of life in a residential neighborhood or subdivision. The term is used to describe two distinct
types of organizations. There are voluntary groups that are spontaneously organized by residents, usually
because of a belief that the neighborhood needs to be protected against something the participating resi-
dents view as a threat. Such perceived threats have historically included crime, low-income housing, racial
integration, perceived overdevelopment, or any other situation that might change the character of a residen-
tial neighborhood. The organizations, sometimes called property owners’ associations, are relatively informal,
may be organized in a variety of ways and for different purposes including political action, and may not exist
any longer than the particular situation that was the catalyst for their creation.

But by far, the more numerous and significant form of homeowners’ association is an established institution
that is subject to state and federal regulations and that has been playing an increasingly significant role in
the U.S. intergovernmental system since the early 1960s. This type of homeowners’ association is created by
real estate developers as part of the planning of residential subdivisions that are organized as common inter-
est housing developments. They are one of the three basic forms of common interest housing developments,
the other two being condominiums and housing cooperatives. Homeowners’ associations are deeply involved
in contemporary policy debates over the structures and functions of the private and public institutions in the
provision of local government services.

Characteristics
Developer-created homeowners’ associations have a distinct set of characteristics, including common proper-
ty ownership, a set of fully enforceable governing documents, and corporate private government that enables
them to perform traditional local government functions.

The system of common property ownership in a homeowners’ association-run development is structured so

that each owner has title to a lot, but the homeowners’ association is the owner of the “common areas” of the
project. This can include a wide variety of facilities. Typically, the association would at least own any private
streets in the development. Going beyond that, the association might also own parking lots; private water and
sewer systems; utilitarian water features, such as drainage areas and retention ponds; and recreational facil-
ities such as parks, golf courses, and lakes.

All homeowners’ associations employ a set of governing documents that typically include articles of incorpo-
ration for the association itself, a declaration of restrictive covenants, corporate bylaws that detail how the
association will conduct its business affairs, and often special sets of rules governing parking, pools, pets,
architectural modifications, and other matters of routine administration. The most important document is the
declaration of restrictive covenants, a detailed document often running into the hundreds of pages that is
often referred to informally as the “constitution” of the development. The declaration creates the system of
property ownership, defines the duties and powers of the members, association, and board of directors, and
includes many limitations on how the owners can use their own property. For example, home-based business
may be banned, owners may be held accountable for maintaining their yards to certain standards, particular
color schemes for houses may be prescribed, and activities such as outdoor parties and recreation on indi-
vidual lots may be restricted. Taken as a whole, these documents give the association the power to dictate
a particular style of life in a neighborhood, and in most cases, that lifestyle would have been envisioned by
the developer and incorporated into the marketing literature in order to attract particular demographic groups
who are in search of such a way of life. Homeowners’ association-run developments can be used in this way
to facilitate marketing projects to very particular slices of the public, such as horse fanciers, boaters, retirees,
families with young children, and those who desire a high level of physical security.

Homeowners’ associations are nearly always set up as not-for-profit corporations under the law of the state
in which they are located. Membership in the association is both automatic and mandatory, in the sense that
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each homeowner automatically becomes a member of the association upon acquiring title to the property,
and the only way to leave the association is by selling the unit. The association is run by an elected board
of directors that has the power to act on behalf of the corporation and its members. These boards function
as “minigovernments” in many respects and are modeled on the council-manager system of municipal gover-
nance. They have the power to collect assessments from all members and enforce their rules, including the
power to levy fines, budget for operating expenses and create reserve funds for future repairs to the common
areas, make decisions about architectural modifications to homes, and retain professionals such as lawyers,
property managers, and accountants to assist in complex matters. They also have the power to file lawsuits,
such as claims of defective construction filed against the original developer or suits for nonpayment of as-
sessments by owners, including the power to foreclose on and sell the homes of owners who fall too far in
arrears. Homeowners’ associations, acting through their boards of directors, are able to perform many of the
functions normally associated with local government, such as trash collection, snow and leaf removal, em-
ploying private security firms, and the lighting, maintenance, and repair of streets.

History
The homeowners’ association developed as an institution through the convergence of several different
threads, including the legal evolution of restrictive covenants, utopian theories of land planning, the rise of
large-scale real estate developers, and the spread of privatism as an ideological movement.

Restrictive covenants are promises made by buyers and sellers of land concerning how the land can be used
after the sale, and they run with the land, meaning that these obligations move automatically from buyer to
buyer as the property changes hands. They originated in Great Britain centuries ago and made their way to
the United States, as a way for a landowner to sell some or all of his land and yet still be certain that the new
owner would be legally bound not to use that land in some noxious way that would destroy the character of
the area. For example, a seller could attach a restrictive covenant to a deed stating that the land could never
be used for commercial purposes. The new owner, and all subsequent purchasers, would be bound by that
restriction. Restrictive covenants were also used during the 19th century for maintenance of commonly owned
parks, by requiring all present and future landowners to contribute to a fund for their upkeep. Over time, these
simple usages of the restrictive covenant gave way to much more elaborate schemes of limitations that now
routinely cover virtually every modification to the exterior of a house and practically anything that might be
done to the private yard, such as fences, swing sets, parking in one's own driveway, and the color of mailbox-
es.

The utopian land-planning theories of Ebenezer Howard contributed an important chapter to the story of
homeowners’ associations. This British court reporter was horrified by what he saw as the anarchic spread
of 19th-century London, and he envisioned a better world of planned, self-sufficient “garden cities” built on
undeveloped land that would harmonize the best aspects of country and city life. In his 1902 work Garden
Cities of Tomorrow, he advocated that these cities should be governed by councils of experts and that net-
works of these new cities, each housing up to 30,000 people, would connect to each other by road and rail,
leading to the demise of the large, unplanned urban concentration. His ideas influenced the creation of the ur-
ban planning profession, and in the United States, Howard's vision directly shaped several significant planned
communities in the early 20th century, including Radburn, New Jersey, and the federally sponsored greenbelt
towns that were built during the Great Depression.

Howard's utopian ideas and the potential of restrictive covenants for large-scale private land planning con-
verged in the minds of certain American real estate developers, most notably Jesse Clyde Nichols, who
founded the Urban Land Institute. Nichols pioneered the use of mandatory membership homeowners’ asso-
ciations that could take the place of municipal governments in running large planned communities, such as
his Country Club District in the Kansas City, Missouri, area. Nichols and other developers made use of race

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restrictive covenants, which were enforced by homeowners’ associations in order to promote racial segrega-
tion in new housing. The Federal Housing Administration endorsed such practices until these covenants were
held unenforceable by the U.S. Supreme Court in the case of Shelley v. Kraemer, 334 U.S. 1 (1948).

The elements of the contemporary homeowner association-run development were in place and in practice
by the late 1920s, but the Great Depression and World War II slowed housing construction dramatically. The
postwar housing boom produced sprawl instead of master planning, and as land costs and transportation dis-
tances increased in the early 1960s, large-scale builders began to return to the idea of master-planned new
communities run by homeowners’ associations. Construction of “new towns” was supported in various ways
by the Federal Housing Administration, including provision of mortgage insurance, proposing new planned
unit development zoning ordinances, and production of joint how-to publications with the Urban Land Institute
to aid developers in creating homeowner association-run developments.

The rise of privatism in American politics provided an ideological rationale, and an economic impetus, for an
astonishingly rapid spread of homeowners’ associations in the new housing stock. The property tax revolts of
the late 1970s threatened the fiscal foundation of local governments, which spurred a search for alternative
sources of revenue. At the same time, advocates of privatization were extolling the superior virtues of the
private sector and advocating privatization of many government functions. These factors contributed to an ex-
plosion in homeowner association-run communities. In 1964, there were fewer than 500 such developments
in the nation. By 2010, according to industry sources, there were between 160,000 and 170,000 homeowners’
association-run communities in the United States. Such developments have now become the norm in new
residential construction in most rapidly growing parts of the nation. In some areas, particularly in the Ameri-
can Southwest, municipalities have for years been requiring that all new single-family home construction must
include creation of homeowners’ associations. Many municipalities have embraced this idea because they
perceive fiscal benefits to this approach. Local governments collect a full share of property taxation from the
owners in these new subdivisions, but because the owners pay assessments for privatized public services
through their associations, local governments do not need to provide the same level of services to them and
thus receive a cash windfall.

Homeowners’ associations and other forms of common-interest housing are now prevalent in Europe, the
Middle East, Africa, Central and South America, and Asia. Research is under way to determine whether this is
the result of diffusion from the United States, or, whether certain conditions such as high demand for housing
and limited local government capabilities give rise to this form of housing in many different locations.

Advocates and Critics

Homeowners’ associations are now the subject of considerable ideological debate. Writers proceeding from
the perspective of neoclassical economics, rational choice policy analysis, and libertarian philosophy approve
of this form of housing. They see homeowners’ associations as a superior alternative to cities for the provi-
sion of local goods and services, suggesting that they are consistent with microeconomic perspectives on the
creation of many small units of local government, whose competition for residents could produce efficiencies
in taxation and service provision. It is argued that homeowners’ associations represent the formation of club
economies that avoid the problem of overproduction of public goods. Supporters of this view also see these
associations as a superior form of local democracy, representing more direct control over the expenditure of
funds for limited shared purposes.

Critics, however, point to the potential for insularity and fortification in gated communities with their own pri-
vate governments, which would make the affluent less dependent on public services and thus less supportive
of them. They see homeowners’ associations more as bastions of homogeneous affluent property owners
isolating themselves from the larger society and its problems. It is also argued that homeowners’ associations

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are more prone to abuse residents’ civil liberties and afford them something less than due process of law
because, unlike the municipalities they emulate, they are not restricted by constitutional limitations on govern-
mental power. It appears that homeowners’ associations are now institutionalized as part of the intergovern-
mental system, at least for the foreseeable future. However, the roles they may play seem to vary from place
to place. In some places such as newly developed regions of the southwestern United States, there are few
incorporated municipalities, and homeowners’ associations are functioning almost as replacements for cities.
In other areas, established cities are creating formal connections with the associations within their jurisdic-
tion. There are also examples of associations that have been unable to meet their financial and organizational
obligations, particularly in areas impacted heavily by falling real estate prices beginning in 2007. Because of
the large number of people living in these associations, and the centrality of these organizations to the social
and economic functioning of local communities, state legislatures are beginning to focus increasing attention
on the internal workings of homeowners’ associations.

• homeowners' association
• restrictive covenants
• covenant
• developer
• common interest development
• local government
• land

Evan McKenzie
http://dx.doi.org/10.4135/9781452218380.n97
See also

• Behavioral Aspects
• Common Interest Development
• Condominium
• Exurbia
• Gated Community
• New Towns
• Property Rights
• Real Estate Developers and Housing
• Residential Preferences
• Restrictive Covenants
• Subdivision
• Subdivision Controls
• Suburbanization

Further Readings

Beito, D., Gordon, P., & Tabarrok, A. (2002). The voluntary city: Choice, community, and civil society. Ann
Arbor: University of Michigan Press.
Blakely, E. J., & Snyder, M. G. (1997). Fortress America: Gated communities in the United States. Washing-
ton, DC: Brookings Institution Press.
Community Associations Institute. (2011). Industry data: National statistics. Retrieved July 31, 2011, from
http://www.caionline.org/info/research/Pages/default.aspx
Dilger, R. J. (1992). Neighborhood politics: Residential community associations in American politics. New
York: New York University Press.
Federal Housing Administration (FHA). (1964). Planned-unit development with a homes association (Land

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Planning Bulletin 6). Washington, DC: Urban Land Institute.

Glasze, G., Webster, C., & Frantz, K. (2006). Private cities: Global and local perspectives. New York, NY:
Routledge.
Howard, E. (1965). Garden cities of tomorrow. Cambridge, MA: MIT Press.
(Original work published 1902)
Low, S. M. (2003). Behind the gates: Life, security, and the pursuit of happiness in fortress America. London,
UK: Routledge.
McKenzie, E. (1994). Privatopia: Homeowner associations and the rise of residential private government.
New Haven, CT: Yale University Press.
McKenzie, E. (2011). Beyond privatopia: Rethinking residential private government. Washington, DC: Urban
Institute Press.
Nelson, R. (2005). Private neighborhoods and the transformation of local government. Washington, DC: Ur-
ban Institute Press.
Siegel, S. (2006). The public role in establishing private residential communities: Towards a new formulation
of local government land use policies that eliminate the legal requirements to privatize new communities in
the United States. Urban Lawyer, 38(4), 859–948.

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