A Brief History of The HOA: Part I

Fifty years ago the term “homeowners 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 and the CID is considered by many to be one Ebenezer Howard, an Englishman 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 this book which arguably began 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 new infrastructure that was destined to be built, were significant forces that helped give birth to the common interest development (CID) movement within the real estate industry. The term “common interest” refers to the shared or “common ownership” aspects of such developments, in which the individual home owners share in the use, benefit and ownership responsibility of a wide variety of community owned assets and amenities.

In some instances these commonly owned assets have come to include major infrastructure components such as community water systems and roads but in the majority of cases these “common area improvements” are more often things like recreational amenities, fencing and barrier walls, landscaping, green space and other site improvements.

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 homeowners association or HOA.

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

The rules and restrictions established by the developer and recorded with the deeds to the lots would become known as the Declaration of Covenants, Conditions & Restrictions (CC&Rs); although in the vernacular of the layperson and even many industry professionals, the term CC&Rs is now used in a broader sense when referring to the HOA’s bylaws, rules and regulations as well as the actual CC&Rs. It is these CC&Rs, combined with the bylaws, rules and regulations of the HOA which have, in effect, become the de facto “charter” for a new form of privatized residential government known as the homeowners association.

In the 1960s condominiums and other attached housing schemes were not nearly as common as they are today, which was perhaps a good thing as the governance and administration of HOAs in general would prove to be more of a challenge than many may have anticipated. As a result, homeowners and industry practitioners would face a long, steep learning curve to acquire the skills needed to manage and govern these organizations effectively. In particular with respect to the management and governance of condominiums.

The legal construct of the modern day HOA has evolved over the last fifty years. This is particularly true of condominiums and other attached housing schemes, which have become the predominant form of new housing in many of the nation’s larger cities.

In Part II of this series we will examine the emergence of the HOA as the predominant form of residential development in the United States.