Homeowners associations losing money and initiating foreclosures
Many people across the country live in neighborhoods governed by a homeowners association, a group that sets rules for living in an area. HOAs, as they are called, serve an essential purpose in many ways, but homeowners’ groups are coming under fire for ridiculous rules and foreclosing on residents.
Formerly booming homeowner boards losing money in recession
Thousands of residential neighborhoods and condominiums across the country are governed by homeowners associations. In fact, according to USA Today, approximately one in five homeowners in America belongs to an HOA, as they are often referred to. Of every 10 newly constructed homes, eight of them will fall under the jurisdiction of an HOA. Prior to the housing crash, many HOAs were fairly flush, but about half of all HOAs in the United States now have financial problems, mostly because people have stopped paying their monthly homeowners association dues. One study found that 5 percent or more of homeowners who belong to an HOA were behind on monthly dues in up to 65 percent of all such associations. In 2005, a delinquency rate of 5 percent or more was observed in only 19 percent of HOAs.
People who buy a house in an HOA-controlled area don’t have a choice in joining. A homeowners association board can fine a resident for not keeping up to HOA codes such as fence color and grass length. HOAs can foreclose on a home regardless of whether the owner is current with the mortgage, and the number of HOA foreclosures could be on the rise. According to USA Today, one study found that HOA foreclosures in the Houston area had increased from 500 in 1995 to more than 2,000 in 2007. Not every state allows HOAs to foreclose on homeowners, according to Wikipedia.
Boon or bane
HOAs often maintain certain aspects of the neighborhood privately, such as roads or sewer systems that would normally be municipal responsibilities, and that is what dues pay for. Community standards, such as keeping landscaping in good order or banning certain dog breeds, ensure homeowners do things that generally increase property values, which benefits the whole community. Also, because HOAs are often formed by real estate developers, when a homeowner in an HOA community is foreclosed by a bank, the rest of the community is stuck with the bill of maintaining the home while it sits unoccupied, according to The Consumerist. Many HOAs are formed in newly built neighborhoods by the developing company, so it’s in homeowners’ interest to have increasing home prices.