Sault Blog

In the United States, in 2023, about 65% of new single-family homes were built within HOAs, up from 49% in 2009, according to the U.S. Census. I became familiar with this housing concept after researching the differences between Canadian and United States housing after the housing crisis 2008. Homeowner associations exist in Canada but are less prevalent than in the United States. In Canada, HOAs are common in planned communities and can be found in single-family and townhouse developments.

What is an HOA? An HOA is a private, legally incorporated organization that governs a planned and built community where you purchase a home and property and where homeowners share the entire development as a collective. This residential community is managed by a homeowners’ association or a non-profit organization that oversees and maintains the community’s common areas, enforces rules, and manages shared amenities. HOAs typically have a board of directors elected by the homeowners, and members pay dues to cover the costs of maintaining the community. The key difference is that the municipality does not own the community’s infrastructure (the street, sidewalks, underground infrastructure); the collective membership owns the community. Does this preclude you as a property homeowner from paying municipal taxes; no, it does not. If the community is built within the municipality’s boundary, you must pay the municipal taxes and the HOA fee for all the work needed to maintain the community.

The fact that a homeowner has to pay full municipal taxes and a sizable HOA monthly fee made me ponder why these planned communities are becoming so popular. What is the benefit for the homeowner in an HOA? There are many benefits to being part of a HOA, including shared responsibilities. HOAs maintain all landscaping, shared pathways, and sidewalks, including snowplowing streets, driveways, and other community facilities. Many HOA neighborhoods may include and maintain amenities like parks, swimming pools, gyms, and clubhouse facilities that can foster a sense of community.

HOAs are legally designed to protect your home as an investment. HOA communities require all members to adhere to the Declaration of Covenants, Conditions, and Restrictions (CC&Rs), a legally binding document that outlines the rules and regulations for the community. This provides the legal mechanism for the HOA board to enforce fines or legal action for violations of the CC&R. Property standards are maintained without question because the HOA has the right to issue fines and/or take legal action.

Many citizens have come to the understanding that municipalities are not capable of maintaining municipal property standards. Sault Ste. Marie is a city plagued with blighted, boarded-up houses and neighbourhoods that have been allowed to fester in a culture of blight for decades. I had many neighbours in various parts of our city who did not maintain property standards. Resulting in neighbour conflict and frustration that the City Building Standards Department could not enforce property standards. Some property owners knowingly violate municipal property standards by having too many dogs, cars, and generally unmaintained yards without concern for their neighbours. Homes are costly, and if property standards are not maintained, they drive down property values.

HOAs have varying levels of exclusivity, privacy, and security. HOAs can be walled and gated with limited entry to members only; some have private security patrols. Property owners are paying for increased protection for their family and property because homeowners believe the level of police protective services is no longer adequate for their family, and community.

HOAs are a form of NIMBYism; because the entire community is privately owned, including the streets and infrastructure, nobody can dictate what happens in the community, including city council, city administration, or any other organization. A city council or any other organization will never build, let’s say, a men’s transitional shelter in the middle of the community because the community as a whole is privately owned. City council cannot dictate the type of housing that is built in the community; again, that is dictated by the CC&R. This eliminates outside urban planning interference, and the HOA protects your housing investment; new housing costs are upwards of a million dollars plus and represent Canadians’ most significant single-asset investment. Ultimately, the HOA protects your investment, and many citizens believe that the city council acquiesces to special interest groups rather than the taxpaying homeowners.

Municipalities greatly benefit from the creation of HOAs. As these developments are usually away from the city core, the municipality does not want to absorb the increased cost of equipment and personnel to maintain the subdivision. The tax yields are not there; some subdivisions with McMansion homes, massive yards, and excessively wide frontages cost municipalities more to maintain than the actual municipal tax revenues generated. From a tax yield management point of view, the municipality cannot accept them into the tax levy because they are net tax negative. We have many new subdivisions in the Sault that should have been HOAs because they will never generate the amount of tax dollars it will cost the municipality to maintain these massive McMasion home subdivisions over the long term. American municipalities have moved to GIS yield management systems away from a broken MPAC model to determine if the subdivision is a money loser to the municipal levy. So, rather than encumber the existing municipal tax base, these city municipalities force the new subdivisions to become HOAs, because they want the residential housing tax dollar; they just cannot absorb the increased cost of maintaining these subdivisions.

HOAs provide several benefits to its members: increased privacy and security by design, exclusivity, and private security patrols. HOAs also offer a uniform, homogenous neighbourhood community strictly controlled by the CC&Rs, enforced by the HOA executive, and a shared sense of community appealing to specific demographic groups with social amenities included.

Municipalities have embraced HOAs because they generate additional tax dollars; without being responsible for municipal services delivery. It’s a win/win for the HOA members and the city, as long as YOU can afford it.

Thank you:
HOA, The Village at Bay Harbor and Harbor View Condos, Petoskey, MI.

Mark Menean, http://www.saultblog.com