When they function as they’re supposed to, homeowners associations ensure neighborhood standards, property values and goodwill. Because many associations maintain private streets, sewers and water systems through fees homeowners pay, they relieve local governments of infrastructure costs.
But when HOAs don’t function as planned, homeowners pay a heavy toll in court costs, fines, liens and even foreclosures. Those were among the findings of Judy L. Thomas’ two-day series, “HOAs from hell,” which ran Sunday and Monday in The Kansas City Star after more than six months of examining the explosion of homes associations and the resulting problems.
For many people, their homes are their largest investment. Also because of the shift to HOAs, which date back to the 1800s, one in five people in the U.S. today lives in a homeowners or condo association, and 80 percent of new housing starts are in HOAs. Such associations are estimated to account for more than $5 trillion in home values and take in $85 billion a year in dues from homeowners.
But with so much at stake, more oversight, government regulations, mandatory training for volunteer association boards, background checks and financial accountability need to be put in place to ensure that the HOAs are managed well. The Great Recession, with more foreclosures and homeowners unable to pay HOA dues, left many associations with insufficient reserves to cover unexpected expenses. Some experts quoted in the series were right to call the underfunded reserves “the other housing crisis.”
The Star’s series unearthed many HOA problems in the Kansas City area and nationwide. Some disputes involved child safety concerns. Others ranged from theft of HOA funds to color choices for exterior paint. Bullying by board members only complicates disputes.
Many conflicts unnecessarily land in court, resulting in more costs and bad blood. Others have become violent, and some ended with suicides.
The series appropriately shows that problems and continuing personal costs have caused critics and some lawmakers to call for more regulations to protect homeowners. Kansas and Missouri are deficient in many areas of needed reforms. Such requirements should include an HOA ombudsman to investigate complaints from homeowners and provide informal mediation services. HOA board members and property managers should have mandatory training to better handle HOAs’ money and avoid conflicts with homeowners.
Background checks for board members also could help prevent financial problems.
Term limits for HOA board members could help. HOAs should conduct studies of their finances to ensure that enough is held in reserve for unexpected expenses. No homeowner in an HOA wants to be hit with exorbitant fee increases or special assessments to cover unanticipated costs because of poor financial planning.
States also should have a registry of all HOAs. Many cities and states have no clue how many there are, who’s in charge or what the boundaries are. Federal HOA disclosure laws are important, enabling homebuyers to find out what shape the association is in.
As governments cede more power and responsibilities to HOAs, for residents’ sake, they also should build in more safeguards for accountability.
Copyright Kansas City Star. Reprinted with permission.