Actual data on what impacts property values?

If you Google "property values", you'll find a lot of information including white papers on the subject - although the ones I've looked at tend to focus on a single topic (eg. wind turbines) because that's generally how you go about statistical studies, and many of the papers conclude that "the jury is still out" because what one person finds attractive will be a deal breaker for someone else.

I work for a new home builder in the sales area, so I look at what features our new communities include, what the floor plans are like, and what our model homes look like. These things are a pretty good proxy for what increase sales (and sales prices), and you can look at builders' web sites to see these things.

On the other hand, any new home builder need to know their market and cater to it - you can't be all things to all buyers, and we've targeted a particular market (ie, not the million-dollar plus buyers).

Finally, property values are going to be impacted by things outside of anyone's control such as shifts in the broader economy and developing trends. The recent floods such as in Tennessee are demonstrating that communities that felt themselves to be immune to such things no longer are, and this will impact home buying patterns. That lovely detention pond in my community that sits behind the building next to mind will not handle 17 inches of rain, and I assume anything like what Tennessee got will take out that building and the ones on either side. Time to start asking pointed questions of the board...

Here's the problem with all of this: these things can change, and I'm not sure that any of it is solid enough that you want to put it into restrictions in CC&Rs. If you're working with a lawyer, that person may be helpful since they've seen *many* CC&Rs, they know what the general consensus is, and they know what sorts of restrictions cause legal conflicts and get boards into trouble.

Many CC&Rs I've seen sort of punt: rather than put in a lot of little piddly restrictions, they give the board and maybe an architectural committee the right to make reasonable rules regarding community aesthetics. This has the advantage of allowing a community to respond to changes in home buyers' demographics and tastes (and they do change). The trouble is that you exchange flexibility for the black-and-white restrictions that are easier to enforce. Definitely a trade-off.

The things I've noticed that definitely will affect property values:

* Too many rentals, especially airbnb-style. Not only do banks not want to lend in such communities, investors have now started to target single family homes (prior to this it was mostly condos), and they can destroy a community. Not only are they absentee owners who are unlikely to do their fair share of the work, their interests are at odds with the resident owners.

I *strongly* recommend a rental restriction that's as strict as you can make it - at the very least prohibit hotel-style and corporate rentals.

* Shaky finances. Poor maintenance and poor enforcement will hurt property values. A well-maintained pink house is better than a tastefully decorated home that's allowed to deteriorate. Banks also look at reserves. Make sure your CC&Rs also spell out insurance requirements. Also make sure your bylaws spell out things like the right to fine for violations. Ohio allows foreclosure for non-payment of fines which are considered assessments (some other states do not).

* Problem neighbors. This can include hoarders, drug dealers, noisy tenants (them again). At our attorney's suggestion, we passed an amendment prohibiting Tier 2 and Tier 3 sexual offenders from living in our community - they can own property, they just can't live here. You'll want the board to have as much authority as possible to deal with these things.

You'll notice that these are all big-picture things. They may be harder to wrap your brain around, but I think they make a bigger impact on home values than mail box styles and the like. And neglecting them *will* cause your community to go downhill.

And let's not forget the board of directors - the decisions they make (or not) will impact the Association's operations and we know what happens if THAT goes to hell.

Just in time for this discussion - here's an interesting article I read on corporate boards and how much oversight should they be imposing on a company's CEO. This article may focus on for-profit companies, but I think there are a lot of implications for boards of non-profit organizations, which is what a HOA is supposed to be - https://theconversation.com/corporate-directors-dont-see-stopping-wayward-ceos-as-their-job-contrary-to-popular-belief-165788

As for actual data on property values, you have to remember "property value" itself is subjective, so in order for any data to make sense, there would have to be universal agreement on what values are important and what goes into making that value more or less attractive. Since it's all subjective, you'll never get that level of agreement, as Cathy notes.

More thoughts:

* What's acceptable will depend to some extent on your community's demographics. Busy professionals have less time to worry about mailboxes and colors than people who sit at home looking for things to keep their minds occupied. And demographics can change over time.

* It will also depend on who owns what. An association has more authority to call the shots if it actually owns the items in question or the CC&Rs give the association the duty to maintain said items. Otherwise, courts often rule in favor of homeowners' free use of their own property, meaning the association will probably lose when it comes to enforcing the restrictions.

* K.I.S.S. Board members' time is limited, and time spend worrying about mailboxes is time taken away from things that are higher priority. Distracted boards tend to make poorer decisions.

That is interesting.

The boards' view of what their job is ("we're not management") reflects a similar difference between HOA/COA boards and property managers. Viewing it that way, I can sort of see corporate boards' position on rogue CEOs. On the other hand, HOA boards are in a position to replace a property manager or even do the job themselves, and you can make a good case that it's their fiduciary duty to do something when management is off the rails. Ultimately the buck stops with the board, not with a PM or CEO who is basically an employee.

With corporations, sometimes the only way a CEO is stopped is when an activist shareholder wins a proxy fight, gets a seat on the board and now holds a majority with others who see things his/her way, and management is forced to change direction. Something similar happened at P&G a few years ago (management was strongly in favor of the activist's opponent who supported the status quo, and many mailings with proxy forms went out ahead of the annual meeting - shareholders were very aware of the proxy fight and what was at stake).

It sounds like it's up to homeowners/stock holders to take control when boards aren't doing their jobs.

NZ,

Keep in mind that there are different "values" when referring to property value.

For example:

Market Value, Appraised Value, Perceived Value and all of these impact the Property Value.

In my opinion, an HOA can only affect the perceived value, which will vary person to person.

Thanks everyone, this is reassuring.

Good advice, thanks. I will pass that on to the committee.


This is the kind of claim that either needs to be more specific (by "appearances" do you strictly mean things that reflect the residences' level of maintenance and upkeep?) or else strikes me as an assertion lacking in empirical evidence.

I have had lots of Realtors as board members over the years, and they basically agree that home values are a mystery, wrapped in an enigma, etc.

The only thing they agree on is that adding a pool will not pay for itself in increased home value but updating the kitchen will.

Management companies and CAI emphasize "protecting property values" through enforcement of covenants because, in my opinion, its one the few measurable aspects of our job. I can't quantify for the board the number of weeds I prevented by working with the landscape company on turf management. I can't quantify homeowner satisfaction in regards to property maintenance - the better I am at my job, the less they even notice maintenance because things are fixed before anyone even knows they are worn out or broken.

But I can put in a report "sent 47 violation letters this month".

I also think that, because HOAs are so closely associated with rules, rules, rules, boards think that they MUST be nitpicky busybodies, measuring blades of grass and forming an opinion about yard art. Whenever I have been able to tell a board - there's nothing in your governing documents that specifically addresses X and you don't have to make a rule about X if you don't see it as a problem - they are relieved. Well, most of them. Sometimes people run for the board precisely in hopes of being able to measure blades of grass.

In short - "HOAs preserve property values" is a marketing slogan, not empirical fact. Many factors go into property valuation, and there is more than one kind of property valuation.

Another opinion of mine - CAI and management companies need to change their messaging to emphasize common area maintenance over rules enforcement. But "HOAs are required by cities and counties when there is common property and we are here to help you care for them, because you just wanted to live in a nice neighborhood not take on a second job managing a nonprofit corporation with physical assets" isn't much of a slogan.

I have done a little research on this and I have not found any clear evidence that strict HOA covenants raise or maintain property values. Yes, there are people who will pay more to live in a community with strict controls but I do not think that is the majority.

Very well said!

Yeah, I think those (plus stuff like turning your house into a rental or a multi-family dwelling) are the less controversial types of restrictions; the link between those things and diminished property values is much more intuitive and plausible. It's the extraordinary claims that require extraordinary evidence.

I'm certainly not advocating for abandoning any property standards. I just don't think writing violations should be the primary function of an association. I've never managed a property where the condition of the commons didn't mirror the overall quality of lot maintenance. There will always be people who have to be reminded every two weeks to mow their damn lawn already, but generally - if the common area landscaping, fencing, parks, pools, etc are well maintained the owners will meet that standard.

Granted, the association being able to take proper care of the commons requires setting the assessment rate correctly and not having rampant delinquencies. But then, if you have a massive delinquency problem you have owners who can't afford to take care of their lots, no matter how many letters you send (which was the case from 2008 to 2016 for many communities).

I always do what a board instructs me to do, but I certainly try my hardest to bring them around to my philosophy, which is that the association should serve the membership, not the other way around. We shouldn't sit in front of a house, looking for things to write letters about. A violation is something that makes you tap the breaks and say "yikes!".

We are hard wired to respect rule for no other reason than "It's the rule!" In many ways, this is good- it's what allows society to function. It's why we respect that 70 year old museum docent who asks us not to touch the paintings when really, there are fifty of us and one of her, we could totally overpower her and touch whatever we want!

But the downside of that is clinging to rules that don't make sense, don't serve a purpose, and nobody really wants anyway because "it's the rule!". An example: I once managed a small community whose governing documents required each lot to have a live oak in the front yard. These were tiny front yards. Live oaks would ruin their foundations, plumbing, sidewalks... most homeowners didn't want to have to have a live oak in the front yard. The developer even admitted that he hadn't intended for the docs to say "live oaks" just "oak" - other oak species that would have less invasive root systems would have been fine. But when the board tried to amend the governing documents to remove this requirement, they could not get 67% of the membership to agree because "it's the rule!"

I managed an old, old community whose docs forbade pickup trucks. Now, in the 70s, when these docs were written, pickup trucks were the vehicle of the working man (and the sort of people deed restrictions were originally intended to keep out). Well it's not like that anymore. In Texas, people who have never held a hammer in their lives drive pickup trucks and they cost eighty grand or more. And yet again, changing the documents was a chore because "it's the rule! We must follow a stupid, outdated rule!"

If you cannot articulate a reason for a enforcing a rule other than "it's the rule" it's a bad rule. And, most of the time when owners call me to tattle on their neighbors, they don't actually care about the truck, or the trash can, or the sign in the yard - they care because someone, somewhere isn't following A RULE.

I could not get the above link to work. I googled and found this site offering the above article. http://www.housing-critical.com/home-page-1/correlation-of-homeowners-associations-and-infe . Here the abstract of the study, with bolding added by me:

Housing developers’ claims of benefits led to exponential growth in neighbourhood homeowners associations in the U.S. during recent decades. Sanctioned by state laws, association rules governing homeowners are usually initiated by developers who claim that the rules protect property values. But the claim is not supported by empirical analysis. Inflation adjusted annual percentage returns in consecutive sales of a sample of 900 most recent home sales in Duval County Florida, Pima County Arizona and St. Louis County Missouri during late 2017 and early-2018 were examined. The results reveal that the annual percentage returns on homes sold in homeowners associations were significantly less than those of homes in other neighbourhoods statistically controlling for property characteristics and prevailing economic conditions at the time of the
original purchase. Correlates of home prices at any point in time are not predictive of percentage return from purchase to sale.

A few of my observations:
-- This study offers a short history of HOAs and restrictive covenants. I found it a good read for the most part.

-- The "significantly less" annual percentage returns of homes sold HOAs does surprise me.

-- I think a follow-up study, that identifies what fraction of suburban cities and counties require developers to establish HOAs, would be appropriate.

Nothing was directed specifically at you, Kerry.

I'm passionate about my job and happen to have particularly strong feelings about the way my industry positions itself. It wasn't personal.

Barbara
Sorry, off topic, but have you seen any lenders impounding HOA dues and paying them directly, like taxes and insurance. Just got off the phone with a lender that also has an office in Texas that is starting to do this.