Tuesday, January 13, 2009

Goldwater Institute: The fix for HOAs won't come from government

By Nick Dranias

The Arizona Republic recently reported that developer abandonment threatens bankruptcy for "as many as 200 of the more than 10,000" Arizona homeowner's association communities. If there is an HOA bubble that is about to burst, it was created by government mandates and subsidies, so the best reform option is to stop those policies, not throttle contractually-created communities with more regulation.

Az HouseTucked in the middle of the Republic's article is a fleeting mention of how towns like Gilbert force developers to create HOA communities for new developments by conditioning required permitting and approvals on HOA creation. But local HOA mandates aren't the only governmental intervention. For decades, the Federal Housing Administration has indirectly subsidized the creation of HOAs by giving buyers easier access to mortgage financing when buying into an HOA community.

Government policies have caused developers to oversupply HOAs to meet artificial demand for HOA communities. When HOAs are created to satiate government bureaucrats, rather than homeowners, it shouldn't be surprising that many HOA communities are neither well-crafted nor homeowner-friendly. But, the solution to the HOA problem is not more government intervention. It is less. The first step is for government to stop mandating and subsidizing the creation of HOAs.

Nick Dranias holds the Goldwater Institute Clarence J. and Katherine P. Duncan chair for constitutional government and is the director of the Institute's Dorothy D. and Joseph A. Moller Center for Constitutional Government.

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