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Living in an HOA Neighborhood: Pros, Cons, and Considerations
6 minute read
November 18, 2016

Homeowners association (HOA) neighborhoods have become increasingly popular in recent decades. They have several significant advantages that can make them more desirable than non-HOA neighborhoods. But there are also some downsides that you need to be aware of.

Consider both the advantages and disadvantages of an HOA neighborhood before deciding if buying in one is the right choice for you.

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The Advantages of an HOA Neighborhood

For many people, perhaps even most, HOA neighborhoods are a preferred choice. There are some reasons why this is true.

Recreational amenities. HOA neighborhoods usually have certain recreational amenities. These typically include tennis courts, swimming pools, playgrounds for kids, jogging trails, gymnasiums, a clubhouse, and sometimes beaches, golf courses and club memberships in higher-end neighborhoods. It can provide recreational opportunities without your ever having to leave the neighborhood.

Enforced property standards. It's not unusual for a neighborhood to have one or more properties that are not particularly well maintained. This has the potential to lower the property values in the entire neighborhood if the maintenance situation is bad enough. But HOAs enforce strict property standards, that require that everyone who lives in the neighborhood maintain their properties in good condition.

They also tend to limit certain behaviors that are recognized as undesirable. For example, they can prevent a neighbor from running a business out of their home, from parking jalopy-type cars in their driveway or on their lawn, and erecting outbuildings that might be an eyesore.

Greater security. Some HOA neighborhoods offer some measure of security. It can be a gate at the entryway, video cameras in certain locations, or even a security company running regular patrols throughout the neighborhood. This can reduce the potential for crime and other property invasions to your home and the neighborhood in general.

Stronger social environment. Many HOAs have regular social activities throughout the year. It may be holiday parties, or "meet-and-greet" affairs that are designed to get neighbors to get to know one another. These activities are not only fun, but they can help you to connect with your neighbors, including people who you might never get to know otherwise.

This can be especially beneficial for children. It will help them to get to know other kids around the neighborhood, through shared activities that help to generate common ground and friendships.

There's some evidence that property values are stronger in HOAs. Because of all of the factors above, houses located in HOA neighborhoods often have higher property values than similar properties in non-HOA neighborhoods. While this can make purchasing a home in an HOA neighborhood more expensive upfront, it can result in a higher sales price when the time comes to make a move.

The Disadvantages of an HOA Neighborhood

With the possible exception of HOA dues, most people are not familiar with the disadvantages of living in an HOA neighborhood. It's one of those things that you have to experience to know. But here are some considerations that you should be aware of.

HOA dues. This is probably at the top of just about everyone's HOA complaint list. HOA dues can be charged annually, semiannually, quarterly, or monthly. On an annual basis, they can be no more than a couple of hundred dollars, or they can be many thousands of dollars in higher-end neighborhoods with more amenities. What’s more, they can increase each year.

Naturally, this represents an additional payment, over and above your primary house payment. That means that the cost of living in an HOA neighborhood is usually higher than what it is in a non-HOA neighborhood.

HOA restrictions. The same restrictions that enforce property standards and better behavior by others can sometimes work against you. For example, you may want to start a business in your home, only to find out that that type of business is prohibited. The HOA may also restrict parking commercial vehicles - especially those with any business identification on them - in your driveway or on the street in front of your home.

They may also prevent you from taking in a border, or even an extended family member. For this reason, you should carefully read the HOA bylaws before moving into the neighborhood. Once you're in, those bylaws will become the equivalent of public laws and ordinances.

HOAs limit your ability to modify your home. HOAs enforce standardization in a neighborhood. That will prevent you from making an addition to your home, constructing outbuildings (even a tree fort for your kids), or even painting your house a certain color that is not approved by the board.

They may also require you to maintain your property at a higher level than you either desire or can afford. This can prove to be a problem if you face a time of prolonged unemployment, or experience a full-blown career crisis when money is tight.

HOAs are playgrounds for resident complainers. Because HOAs are"rule intensive," they can encourage resident complainers and other troublemakers to complain to the board about you or something that you're doing.

Some people move into HOA neighborhoods anticipating strict enforcement of all rules, sometimes because of a bad experience in a non-HOA neighborhood. Whatever the reason, if there's a neighbor that you don't get along with, that person will have a greater capacity to make your life uncomfortable in an HOA neighborhood.

Special assessments. HOA boards can establish special assessments to pay for expenses that are not covered by your regular HOA dues. It could be money to pay for improvements to recreational facilities, upgraded landscaping in common areas, or even to defend against a lawsuit.

If money is needed for any of these purposes, they can declare a special assessment that can be anywhere from a few hundred dollars to many thousands dollars. You will have no choice but to pay the assessment. If you are already struggling to make your monthly house payment and the regular HOA dues, a special assessment can prove to be a difficult burden.

None of this is to say that buying into an HOA neighborhood is either good or bad. It depends on your personal preferences, and whether or not you think that an HOA will work in your favor, or against your best interests.

If you're facing the choice to buy into an HOA neighborhood, be sure to carefully study the bylaws, covenants, and restrictions, and be certain that they don't contain any provisions that you might be uncomfortable with. You'll have to do that before you close on the property, because once you do, you will be bound by all of those rules - even the ones you don't agree with.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.