Homeowners Associations Assume New Roles

Homeowners associations (HOAs) are increasingly taking on responsibilities traditionally managed by local governments, while more are being run by national management companies. These associations, once small community groups, are now handling tasks such as recreation, trash collection, lighting, and street maintenance. This shift represents a significant privatization of local government services.

Some experts suggest that transferring these responsibilities to HOAs places a financial burden on homeowners, increasing housing costs. The expenses for major repairs, such as fixing aging streets or retaining ponds, can overwhelm small communities, especially as many HOAs continue to be affected by lost revenue due to foreclosures.

Financial Planning for Future Repairs

Industry management companies advise that associations plan for costly future repairs by setting aside a portion of their income each year. For example, if a roadway is expected to need repairs costing $150,000 in 15 years, an association should save $10,000 annually.

In various states like Arizona, Nevada, and Florida, where rapid growth occurred during the mid-2000s housing boom, new residential developments are often required to be managed by HOAs. Approximately 20% of homes across the nation are part of a community association, and this number is likely to increase as local governments seek ways to operate efficiently with limited resources.

The Shift to Professional Management

Many HOAs are choosing to hire management companies to handle the day-to-day operations, such as hiring maintenance contractors, even though about 15% to 25% of communities remain self-managed.

Some homeowners appreciate the enhanced services and economies of scale provided by these larger companies, while others are wary of potential market dominance. There are concerns about the relationships between these management companies and the contractors they recommend, although these companies assure transparency and independence.

Overall, this evolution in HOA management reflects a broader trend of privatizing local government functions, with varying reactions from communities based on their experiences and expectations.