Why do new home builders love HOAs

Question

Why do new home builders love HOAs? In a declining market instead of lowering your prices why not eliminate the HOA as that would be very attractive to buyers

Bryant Brislin · Answer

Besides everything written above, the Departments of Real State for the specific state they are in usually require it.  For smaller projects, sometimes you can get away with a "Maintenance Association" which is a bit less onerous than an HOA.

Stuart Udis · Answer

I don't believe builders love HOA's. CGL insurance is very expensive for builders who are delivering HOA units as opposed to other types of residential new construction and many CGL carriers will not even offer insurance to builders who build HOA units. In many instances the entitlement process requires HOA's or PUD's to obtain the necessary zoning approvals to build a housing community. The HOA's are also utilized to phase developments and sell housing units with warrantable mortgages. If you took a poll of builders who build for-sale housing, most would rather not have HOA's but they are often necessary.

Ricardo R. · Answer

Hey James,

Builders don’t push HOAs because they’re worried about buyers loving fees—they do it because HOAs protect the long-term value of the whole subdivision, which makes their job selling homes easier.

Here’s why:

• Property values stay consistent


HOAs enforce rules about lawn care, paint colors, parking, etc.


That means the house someone bought for $450K doesn’t end up next to one with a car on blocks in the yard six months later.
• HOAs enforce rules about lawn care, paint colors, parking, etc.
• That means the house someone bought for $450K doesn’t end up next to one with a car on blocks in the yard six months later.
• Builders can hand off responsibilities


Roads, stormwater ponds, shared amenities—without an HOA, the city might not maintain them, so the builder would be stuck.


HOA takes that off their plate.
• Roads, stormwater ponds, shared amenities—without an HOA, the city might not maintain them, so the builder would be stuck.
• HOA takes that off their plate.
• Financing gets easier


Lenders often like HOAs because they reduce risks tied to neighborhood upkeep, especially on big new developments.
• Lenders often like HOAs because they reduce risks tied to neighborhood upkeep, especially on big new developments.
• Price optics


Dropping the HOA doesn’t feel like a “discount” to most buyers; lowering the sale price does. Builders hate price cuts because it sets a new low comp for the whole neighborhood.
• Dropping the HOA doesn’t feel like a “discount” to most buyers; lowering the sale price does. Builders hate price cuts because it sets a new low comp for the whole neighborhood.

Property values stay consistent

• HOAs enforce rules about lawn care, paint colors, parking, etc.
• That means the house someone bought for $450K doesn’t end up next to one with a car on blocks in the yard six months later.

HOAs enforce rules about lawn care, paint colors, parking, etc.

That means the house someone bought for $450K doesn’t end up next to one with a car on blocks in the yard six months later.

Builders can hand off responsibilities

• Roads, stormwater ponds, shared amenities—without an HOA, the city might not maintain them, so the builder would be stuck.
• HOA takes that off their plate.

Roads, stormwater ponds, shared amenities—without an HOA, the city might not maintain them, so the builder would be stuck.

HOA takes that off their plate.

Financing gets easier

• Lenders often like HOAs because they reduce risks tied to neighborhood upkeep, especially on big new developments.

Lenders often like HOAs because they reduce risks tied to neighborhood upkeep, especially on big new developments.

Price optics

• Dropping the HOA doesn’t feel like a “discount” to most buyers; lowering the sale price does. Builders hate price cuts because it sets a new low comp for the whole neighborhood.

Dropping the HOA doesn’t feel like a “discount” to most buyers; lowering the sale price does. Builders hate price cuts because it sets a new low comp for the whole neighborhood.

In a slow market, they’d rather offer closing credits or free upgrades than remove the HOA and lose that long-term control over neighborhood quality. To them it's a long term outlook, I hope this sheds a different opinion, I sent you a DM on BP and hope you can assist. Thank you.

Benjamin Louie · Answer

@James McGovern

Oh, totally! Builders are kind of obsessed with HOAs. Think of them like a way to babysit the neighborhood without actually babysitting it. 😅 They make sure lawns aren’t a jungle, paint colors aren’t unique, and nobody turns their driveway into a junkyard.

Even if the market dips, they’d rather keep that monthly HOA fee than risk the neighborhood looking like a mess. It keeps home values from tanking long-term and keeps buyers feeling like they’re in a nice community.

Honestly, some buyers love it like, “Yay, no ugly fences! And some hate it because it’s just another monthly bill and someone telling them what they can or can’t do. It’s a love-hate thing.

Why do new home builders love HOAs

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