HOAs in Residential Development: Who Really Requires Them, and Who Should Pay

HOAs: Everybody's Favorite Punchline

I recently saw a funny HOA video on Facebook. You've probably seen one like it. A board member with a tape measure. A lawn half an inch too tall. A standoff over an inflatable pumpkin.

We all laugh. I laugh too.

But here's something most homeowners don't know: in most new communities, nobody chooses the HOA. Not the homeowner. Not the builder. Not me.

The government does. Well, sort of. The government requires a list of facilities, then politely declines to own any of them. Somebody has to take them home. That somebody is your HOA.

Let's look at how that works. It's more entertaining than you'd think.

Why HOAs Exist: The Great Government Hand-Off

Here's the formula. Take the list of what the government requires. Subtract the list of what the government will own. What's left over? Your HOA.

I develop in Pennsylvania, West Virginia, South Carolina, and Georgia. Different states, different townships, same story. Every level of government asks for something. Rarely does any of them assume ownership of what it asks for.

It's a little like a dinner guest who orders dessert for the whole table, then steps out to take a call when the check arrives.

Stormwater: A Federal and State Favorite

Federal and state law require stormwater management through the NPDES permit process. No permit, no project.

So we build the ponds, the inlets, the pipes, and the outfalls. When construction wraps up, the developer dredges the pond and stabilizes the site. That closes out the NPDES permit.

Then comes the fun question: who wants a pond?

Most local municipalities pass. They'd rather skip the maintenance, the liability, and the cost. They love the pond. They just don't want to take it home.

So the HOA adopts it.

Mailboxes: Courtesy of the U.S. Postal Service

The USPS requires consolidated mailboxes in new developments. Goodbye, mailbox at the end of every driveway. Hello, cluster box unit.

The Postal Service requires them. The Postal Service doesn't own them. And I've yet to meet a local community that wants them either.

So the HOA adopts those too.

Open Space: A Local Specialty

Many municipalities require new communities to set aside a share of the land as open space. Great. Everybody likes a little green.

But requiring open space and owning open space are two different things. Most municipalities sign up for the first and skip the second.

You can guess who adopts it.

Sidewalks: Everybody's Favorite, Nobody's Property

Sidewalks are funny. Homeowners say they love them, so builders provide them. Municipalities love them too, and many require them.

Then most municipalities decline to own them. Sidewalks may be the most popular orphans in America.

Roads: The One Everybody Wants

Municipalities happily accept roads. Why? Roads bring money. In Pennsylvania, municipalities receive liquid fuels revenue based on the road miles they own.

Ponds don't earn that revenue. Neither do sidewalks or mailboxes.

Funny how that works. When a facility brings in money, the government welcomes it with open arms. When a facility brings in only bills, the government sends it your way with a nice bow on top.

The Bottom Line on Mandates

The HOA isn't a developer's scheme or a builder's preference. It's the only guest at the party willing to take the leftovers home.

These are unfunded governmental mandates. The government writes the requirement. The homeowner writes the check.

What It Costs the Homeowner

In the communities I see, HOA dues typically run $50 to $200 a month. That's $600 to $2,400 a year, on top of property taxes.

The Long-Term Shopping List

The developer dredges the pond at the end of construction. After that, the HOA takes over a long shopping list:

Cluster mailbox repair and replacement
Sidewalk repair and replacement
Snow and ice removal on sidewalks and common areas
HOA-owned grinder pumps
Stormwater facility inspection and maintenance
Open space mowing and upkeep
Insurance on all of it

Take a closer look at that list. Grinder pumps move sewage, a public utility job. Stormwater management, a public job. Mail delivery, a federal job.

Your HOA handles all three. Not bad for a group of neighbors who meet once a year in somebody's living room.

Paying Twice

Here's the whole thing in one sentence: HOA homeowners pay property taxes for public services, then pay HOA dues to provide those same services themselves.

It's like buying a movie ticket, then getting handed the keys to the projector booth.

How I Build HOAs From the Start

If every new community needs an HOA, let's build a good one. My approach: build it around the mandates, and keep it there.

The HOA exists to take care of the pond, the mailboxes, and the open space. It doesn't exist to measure your grass.

Two Principles

Every HOA I build starts with two principles:

Protect the integrity of the community.
Protect the homeowner's right to enjoy their property.

The first keeps the shared facilities working. The second keeps the association out of your front yard.

Keep the Authority Narrow

I limit HOA authority to two things: common ownership and basic safety standards. That's it.

Fences? I only address them in communities where the HOA maintains the yard. If the HOA mows it, the HOA gets a say in what stands in it. If the HOA doesn't mow it, the HOA doesn't get a say.

Exterior colors? The builder picks them during construction. That leaves nothing for a board to debate later.

Decorations? Simple rules surrounding the holidays: when they go up and when they come down. That's it. What you hang is your business.

Why It Works

Nobody can enforce a rule that doesn't exist.

Every one of those viral HOA videos starts with a rule nobody needed. Grass height. Garage doors. What color pumpkin sits on the porch. Leave those rules out, and the board member with the tape measure has nothing to measure. Maybe he takes up golf instead.

Keep the documents simple. Keep the authority narrow. Tie every rule back to the reason the HOA exists. If a rule doesn't protect a shared facility or the integrity of the community, leave it out.

The Fix: Make HOA Fees a Property Tax Credit

Plenty of smart reform ideas exist. Municipalities could accept stormwater facilities once the NPDES permit closes. Municipal stormwater authorities could take over the ponds. Sewer authorities could own the grinder pumps. The USPS could chip in for the mailboxes it requires.

All good ideas. But one idea beats them all: make HOA fees a dollar-for-dollar credit against local property taxes.

Why a Credit Works

Notice the word: credit, not deduction. A deduction trims your income tax a little. A credit takes the HOA fee right off your property tax bill.

That one change flips the math. Today, a government that declines a pond pays nothing. With a credit, every dollar of HOA fees costs the government a dollar of tax revenue.

Governments know how to read a spreadsheet. Once the pond costs them money either way, owning it starts to look pretty attractive.

Let the government live with its own choices, and some of these mandates would go away. The government would finally own the ones that survive. Either way, the HOA stops being a necessity. Nobody has to ban it. The government simply pays for what it mandates.

Keep It Focused

The credit should cover mandated facilities only: stormwater, cluster mailboxes, required open space, sidewalks, grinder pumps. Not the pool. Not the clubhouse. Not the fancy fountain at the entrance.

That keeps the idea simple. If the government requires it and won't own it, the government pays for it. If a community wants an amenity, the community pays for it.

Somebody Already Thought of This

New Jersey already recognized the problem. Its Municipal Services Act requires municipalities to provide certain services (snow removal, street lighting, trash collection) to qualifying private communities, or reimburse them for the cost.

In other words, at least one state already agrees: HOA homeowners shouldn't pay twice.

The Pushback

Critics will say a credit shifts costs to homeowners outside HOAs. My answer: the cost already exists. The government created it when it wrote the mandate. The credit simply sends the bill back to the return address on the requirement.

Some states, Pennsylvania included, have constitutional uniformity rules on taxation that could complicate a property tax credit. That's a real hurdle. It calls for careful drafting, not giving up.

The Bottom Line

Today, nearly every new community needs an HOA. Developers didn't invent that. Unfunded governmental mandates did: federal, state, postal, and local.

Until that changes, I'll keep building HOAs the right way. Narrow authority. Simple rules. A clear focus on the facilities the government required and passed along.

And here's the good news: homeowners hold the real power to change this.

Call your state legislators. Ask them one friendly question: why do I pay property taxes and HOA dues for the same public services?

Then hand them the answer: make HOA fees a credit against property taxes. Then sit back and watch those mandates find a new home.

What do you think? Have you had a great experience with an HOA, or watched one take things a little too far? Do you know what your HOA dues actually pay for? Let me know in the comments.