How are homeowners associations capitalized into property values?

Rachel Meltzer and Ron Cheung

Regional Science and Urban Economics, 2014, vol. 46, issue C, 93-102

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.

Keywords: Homeowners associations; Property values; Capitalization; Private government (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:46:y:2014:i:c:p:93-102

DOI: 10.1016/j.regsciurbeco.2014.03.005

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