CIDA REPORT

A Brief History of Homeowner Associations: I

Fifty years ago, the term “homeowner association” or HOA for short, was relatively unknown in the United States.  Various sources have estimated that the total number of HOAs in the U.S. as of 1963 was perhaps no more than five hundred.  Other than a handful of large, established planned developments such as Rancho Santa Fe in San Diego County, California and Forest Hills Gardens in Queens, NY, most of these HOAs were small by comparison and were concentrated in relatively few areas of the country including Southern California, Florida and to a lesser extent fast-growing cities like Phoenix, AZ and Houston, TX.

As a result of increasing demand for new housing, which had been steadily growing since the end of World War II, development of residential real estate was booming.  Local municipalities were eager to enlarge the tax base of their communities through development that would lead to an increase in the inventory of taxable real estate.

As the urban core of many cities expanded into suburban sprawl, developers often found that local governments were reluctant to assume responsibility for the long-term stewardship of the growing infrastructure that was required to serve the emerging suburban landscape.

As urban planners, developers and municipal governments began collaborating on residential development projects to meet the demand for new housing, it became apparent that there was significant municipal economy and profit potential to be realized from the privatization of what had historically been publicly-owned infrastructure (the “commons”) and by condensing the footprint of residential developments. 

This strategy would allow more homes to be built on smaller parcels of land, with the goal of reducing the sprawling effects of residential development; or at least that was the hope.  In order to achieve the goal of smaller lot sizes, shared recreational spaces such as parks, playgrounds, swimming pools and green-space were proposed, thereby allowing homes to be built on smaller lots because less individual yard space was needed for outdoor recreation.

The inclusion of shared, or “common area” spaces within residential developments was not a new idea.  Although evidence of shared housing arrangements may be found in ancient cultures throughout the world, the modern-day “father” of urban planning is considered by many to be an English chap by the name of Ebenezer Howard, who in 1898 published a book titled, To-morrow: A Peaceful Path To Real Reform. 

In 1902 Howard published a revised edition of the book under the name, Garden Cities of To-morrow.  It is the publication of Howard’s book, which arguably marks the beginning of the century long march toward the privatization of the American neighborhood and the birth of the modern-day HOA.

In spite of the efforts of Mr. Howard, who died in 1928, and others, HOAs were not that commonplace even as recently as the 1960s.  Increasing demand for new housing, combined with the reluctance many municipalities had for maintaining the growing suburban infrastructure were significant forces that helped give birth to the “common interest development” (CID) movement within the real estate development industry. 

The term “common interest” refers to the shared or common ownership aspects of such developments, in which the individual property owners share in the use, benefit and responsibility maintaining a wide variety of commonly-owned improvements and amenities.

In the early days, CIDs were mostly what could be termed “traditional” subdivisions in which detached, single-family homes were located on individually platted lots.  Homeowners were left with the responsibility of maintaining their individual homes and lot improvements, often under mandatory guidelines imposed by the HOA.  Meanwhile the common area improvements would be owned and maintained by a legal entity comprised of the property owners who purchased homes in the development.  This legally incorporated entity is what we commonly refer to today as a “homeowner association” or HOA.

Less common in the early history of planned communities were condominiums and other attached housing schemes in which the common elements include components of the buildings in which residential living space is located.  As the popularly of condominiums and attached housing has increased, so too has the responsibility and cost of operating HOAs that must maintain the buildings where the HOA members live.

As condominiums become more elaborate, the cost of maintaining these buildings and the expertise required to manage the maintenance process continues to increase. So much so that a condominium in a modern high-rise building is arguably the most expensive housing available in many urban ares of the country on a per square foot basis.

In addition to the envisioned benefits of shared ownership of community assets, the early planners within the planned community movement perceived the need for a set of rules that would place restrictions on the use of the land within the development; to codify the rights and responsibilities of the individual property owners to the HOA, and the HOA to the property owners.

In future installments of this series we will continue our examination of the emergence of the HOA as the predominant form of residential development in the United States.