How Are Homeowners Associations Capitalized Into Housing and Land Values?

Abstract

Private homeowners associations (HOAs) levy binding fees and provide local services to members. Both should be capitalized into the value of member properties, but the net effect is ambiguous. We construct the most comprehensive, longitudinal database to date on HOAs for Florida and estimate the impact of HOAs on property values. We find that properties in HOAs sell at a premium just under 5%. The premium is strongest immediately following HOA formation and declines over time, suggesting quick capitalization of HOA benefits. Properties in larger HOAs sell for less, and this is particularly true for properties in the biggest HOAs. Finally, properties located immediately outside of an HOA sell at a premium relative to other non-HOA properties, and this premium marginally decreases (increases) in the size (frequency) of neighboring HOAs.

Publisher

Elsevier

Publication Date

5-1-2014

Publication Title

Regional Science and Urban Economics

Department

Economics

Document Type

Article

DOI

https://dx.doi.org/10.1016/j.regsciurbeco.2014.03.005

Keywords

Private government, Homeowners association, Property values, Capitalization

Language

English

Format

text

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