Let’s say you’re looking into purchasing or renting a house. Everything about the house looks great; it’s in a great area, the schools are good, there’s a backyard, and it has a nice living room. You are just about committed and ready to make an offer when you discover an HOA. Now you aren’t so sure!
An HOA, or a ‘Homeowners Association,’ is an agreement or requirement that many neighborhoods now have. HOAs get plenty of negative press, and nobody seems to like them, but are they that bad?
Let’s discuss.
Why do HOAs exist?
If you ask the average person why an HOA exists, they may answer that it gives everyone grief, and one person self-declares they are president and then becomes an over-ruling monarch, creating rules and regulations that only benefit them.
That isn’t the truth, at least, not really. Okay, sometimes it is, but that isn’t why HOAs exist, and it certainly isn’t how an effective HOA is run.
An HOA aims to create a self-governing organization in “common-interest” communities where homeowners collectively pay fees to maintain the neighborhood. This can include street lights, a community pool, a playground, or, in some cases, a golf course.
Homeowners associations also require specific standards to be maintained, such as a cut lawn, street parking rules, the color of the house, or a noise curfew. Often, this is where the drama and issues arise.
Pros of an HOA
Despite their bad reputation, living in an HOA community can actually have a positive role. Here are some examples of how it can be a good thing for homeowners (or renters) and increasing property values.
- Amenities: Sometimes, an HOA will add amenities to a neighborhood, such as a park, pool, tennis courts, or walking trail. These amenities can be covered in a big neighborhood for a low monthly or annual fee.
- Garage Sales: About 20 years ago, yard sales were an American tradition. Every Saturday, on just about every corner, there were “garage sale” signs and sales. That culture has changed in much of the country, and those signs are becoming less common. Instead, many HOAs are putting on Neighborhood Garage Sales where everyone in the neighborhood is encouraged to have a yard sale on a specific day. This can bring in many potential buyers and be a serious money-maker for many who participate.
- Neighborhood Standards: This can be positive or negative, depending on how you view it. An HOA members or board of directors can make community rules or basic standard of living that prohibits specific actions. Examples include setting a noise curfew, not allowing cars to park on the street, snow removal, lawn standards, or how bright a light can be on a house. Additionally, HOA fees cover road maintenance, street lights, security, and landscaping in public areas.
- Sense of Community: An HOA, if done correctly, can create a sense of community and belonging. Some HOAs will sponsor events such as a summer BBQ, back-to-school activities, or a golf tournament.
Negatives of an HOA
Stereotyping is not something anyone should be doing. However, at the same time, stereotypes do typically stem from some truth. Not every HOA will have these issues, but some more common ones are below.
- High Fees: An HOA can charge high fees. For example, if living in a neighborhood with a golf course, two swimming pools, tennis court, fitness center, tree parks, and a nature trail, the HOA fees can be hundreds of dollars every month.
- Not Always Applicable: Yes, there is something to being part of a community association, and sometimes that means paying money for things that may not be applicable or used by that person. Sometimes, it can feel over the top. If someone never golfs, spending $50 a month for the golf course adds up and can feel like throwing money out the window, only to have a few golf balls land in the backyard daily.
- Social Club: Yes, some HOA boards of directors can be sort of like a high school clique group. When and if this happens, this group of friends can get together and make changes that they find convenient while leaving everyone else behind. In other words, if they all have young kids, here comes a splash pad! The tricky part is that there isn’t an actual election for this. Once a group is formed, there isn’t a way to officially overthrow or change that group.
- Too Big or Too Small: If a neighborhood is too small, it can lead to high fees since the cost of road maintenance, lights, and any amenities is being divided up by a small group. If a neighborhood is too large, it can be challenging to have a voice, and the HOA can feel distant.
- Some HOAs Won’t Allow Rentals: Depending on the neighborhood, they won’t allow owners to rent out their homes. This is usually only in the highest-level neighborhoods, but it’s certainly something to check in on if there is any chance that the house may be rented out later.
HOA’s and Rentals
Assuming you can rent out a home in a neighborhood with an HOA, remember a few things.
- HOA fees shouldn’t be passed on to the renter. If you want to add a bit to the cost of the monthly rent to help cover fees, you should always pay the fees directly.
- Renters still have to follow the HOA rules, which should be explained very clearly before renting. If there is a rule against having a trailer in the driveway, there can be no exception, even for renters.
- Renters usually won’t be given their own passcodes. If there is a gate code to enter the neighborhood or a community pool, you might have to provide them with your password as they likely won’t get their own codes. This is particularly true in more prominent neighborhoods.
If you have questions or want help running a rental property, try a company like Green Residential, a Houston-based property management business that can help with all the ins and outs of renting out a house. This includes collecting rent, maintenance, and, in rare cases, eviction.
Conclusion
HOAs usually are better than the reputation that they’ve been given. While there are some terrible experiences and situations, for the most part, an HOA’s benefits and purpose outweigh the negatives. When purchasing a home, an HOA shouldn’t get in the way unless you know you don’t want to live up to the standards the neighborhood has put out.
Tiffany is the Director of Operations at Green Residential.She has been in the multifamily property management industry for 7 years, serving most recently as an Area Manager in Nashville, TN. Tiffany specializes in all aspects of the property management process.
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