A very important point by LisaS - these days, anything other than a extremely careful use of the Internet for personal information should be avoided.
Here's a checklist of items you should look for in a solution:
1. "Opt-in" capability. Members should have the ability to provide personal information to the HOA without having the information necessarily published to anyone else. In practice, this means your solution should presume that the member DOES NOT WANT their information published and only wish to have it used for official business of the HOA.
2. Spam precautions. If email addresses are part of the directory, members should have the ability to "mask" their email address from anyone browsing the directory online or downloading the directory. If it is searchable online, limit the number of records that can be accessed at one go. If you don't think someone in your neighborhood is capability of mis-using the directory, think again!
3. Data security. Many HOA use "free" webspace from an Internet Service Provider - not a good idea because the HOA has no idea what individuals have access the data on the server and what happens when the member with the account leaves??
4. Protection of minors. Members should never be required to document their family members who are minors. In some communities, this would make sense as a way to help the community protect the children through awareness of their presence. In others, this could be a very bad idea. Parents/Guardians should always have the option of organizing this information but under no circumstances should they be required by the software or the HOA to do so.
5. Dislcaimers/Policy Statement. Any HOA planning to use the Internet for maintain member directories should carefully document Proper Use and Pivacy policies and insure that these are displayed to the members or easily available for viewing on demand.
5. Data maintainence. If members can't maintain their own information or do not have incentives to do so, your directory will never be up-to-date. Your solution has to be easy-to-access, use, and provide some value to the member for maintaining.
I am sure there's more but if you cover these bases, you've done your due diligence! As for money, my experience is that "free" or shortcut approaches invariably fail because they do not meet one or more of the above criteria. You can find solutions out there for $30/mo ... how much trouble does it save your HOA? Every HOA will have a different answer but our HOA was never happy with our directory until we "did it right." Good luck!