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Homeowner Associations (HOA): Everything You Need to Know

Imagine you’re house shopping. You spot a beautiful neighborhood with landscaped shrubs, freshly cut grass and color-coordinated houses. It looks like suburban heaven.

Then your real estate agent says the neighborhood looks this way because it’s part of an HOA. But what’s an HOA? And how will it affect you and your family if you move into the neighborhood?

An HOA is a homeowners association. We’ll walk you through exactly what that means, what an HOA does, how much it costs, and the pros and cons of living in a community that has one.

Let’s dig in!

What Is an HOA?

HOA stands for homeowners association. It’s an organization made up of people who own homes in the same community, like a condo, townhouse or planned development—which is basically a fancy subdivision with extra features like a shared swimming pool and landscaping services.

The HOA helps manage the community, and it collects monthly fees to pay for shared amenities. (More on that in a minute.)

What Is the Purpose of a Homeowners Association?

An HOA’s main goal is to increase property values in the community. To do that, the HOA sets and enforces rules for how properties in the neighborhood should look and what homeowners can—or can’t—do.

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When potential home buyers visit the neighborhood, they’ll see that everything looks nice and neat, and they’ll be willing to pay more money to live there. (Which is really helpful when you’re ready to sell your house!)

How Does an HOA Work?

HOAs usually form when a community is built. The developer creates the homeowners association, then hands it off to the people who buy houses in that community. Those people automatically become members of the HOA.

The homeowners vote for a board of directors to run the HOA. The board chooses the community’s features and services, collects monthly fees to pay for those things, and sets and enforces community rules.

The HOA lists those rules in a document called a Declaration of Covenants, Conditions and Restrictions (CC&R). And anyone who buys a house in the community must agree to live by those rules and pay monthly membership fees.

How Much Are HOA Fees?

HOA fees vary widely, with an average cost of $170 per month.1 You might pay less than that or a lot more depending on your property value, location and what extras your HOA offers. Some HOA fees for high-end communities can shoot up to thousands of dollars per month!

Housing Type

Average Monthly HOA Fee

Single-family home

$2502

Condo

$2903*

High-end housing

$7004

*This number is the median HOA fee for condos—not the average.

Generally, you’ll have to pay HOA fees every month (or every three months) for as long as you live there—even after you pay off your home.

You’ll need to count those HOA fees as part of your monthly budget. We teach that your budget for housing costs should be no more than 25% of your monthly take-home pay, including your mortgage, homeowners insurance, property taxes and HOA fees. That’s because we want you to have money left at the end of the month to actually put toward your financial goals—so you’re not just sinking everything into a house you can’t afford.

So if an HOA fee is going to put you outside that 25% range, you’ll need to either look for a cheaper HOA or for a home that doesn’t have an HOA.

What Do HOA Fees Cover?

Most of your HOA fees help cover the costs of shared amenities. But part of your fees go into a reserve fund. It’s basically a savings account that helps pay for big expenses, like replacing the old roof on your condo building or resurfacing the parking lot.

You may also have to pay a special assessment. That’s when all the homeowners pitch in to pay for a big, one-time expense. Usually those expenses are unexpected—like repairs after a tornado or flood—but some HOAs use special assessments to cover costs if they don’t have enough money in the reserve fund.

What Amenities Do HOAs Offer?

Hey, if you’re shelling out all that money, you’ve got to know what you’re paying for! Different HOAs have different features—and high-end HOAs will likely have more to offer. Some popular amenities are:

  • Security
  • Clubhouses
  • Playgrounds
  • Golf courses
  • Fitness centers
  • Parking garages
  • Swimming pools
  • Community events
  • Senior centers or amenities for retirees

HOAs also provide services like building maintenance for shared spaces, trash removal and landscaping.  

Just remember: The more the HOA does, the more you’ll pay. Yippee, right? So make sure you choose an HOA where you’ll actually use the amenities and services they offer.

Homeowners Association Rules and Regulations

The rules vary from one HOA to another. Some HOAs are pretty relaxed—they just have rules that are common sense or common courtesy like, “Pick up after your dog” or “Don’t paint your house pink.”  

Other HOAs have lots of rules. Their CC&Rs feel like they’re three miles long and cover everything from “Your grass must be three inches tall” to “Your mailbox must be tan and plastic.”

Believe it or not, the type of property you buy affects the rules you have to follow. Let’s look at the HOA rules for different communities:  

Condo HOAs

A condominium (or condo) is like an apartment where you own the interior of your home. But the HOA owns and manages the exterior and common areas.

As an automatic HOA member, you’ll get to vote on who serves on the condo board—aka who manages the money and enforces the CC&R. Unfortunately, you won’t get much say on anything else.

Condo HOAs tend to have the most restrictive rules. They regulate everything from where you park to what color your window treatments can be to what type of holiday decorations you can display (or if you’re allowed to display any at all).

Townhouse HOAs

A townhouse is a single-family home that’s at least two stories and shares at least one wall with another townhouse. Townhouses typically offer the same types of features and services as condos—but since you own both the interior and exterior of your townhouse, you’ll face fewer HOA regulations.

While there may be rules about what landscaping you can have or what color your mailbox is, you can usually put up Christmas lights without having to fill out two or three forms.

Single-Family Home HOAs

While HOAs used to be just for condos and townhomes, they’re becoming more and more common for detached single-family houses in planned communities. In fact, nearly 65% of new single-family homes built in 2020 were in an HOA!5

That said, HOAs for single-family homes are more popular in the South and West (around 70% of new constructions) than in the Northeast and Midwest (around 30% and 50% respectively).6 

In these HOAs, you’ll typically have the fewest rules because you own more property. You’re responsible for maintaining your home’s interior, exterior, yard and other structures, like your garage—and for carrying the right homeowners insurance.

But these HOAs can still be demanding, especially in upscale neighborhoods. They can regulate everything from what type of trees you can plant to whether you can leave your garage door up during the day.

All that to say, before you buy a house (or a condo or townhouse), you’ll need to do your research to find out how restrictive the HOA is and if you can live with its rules.

Rules for the HOA to Follow

Hey, you’re not the only one who has to follow the CC&R! The HOA has to play by the rules too. Fun fact: All its board members live in the community—so they personally have to obey the CC&R too.

The HOA also has to follow all federal, state and local laws like the Fair Housing Act or the Americans With Disabilities Act. Plus, the HOA board members have a legal responsibility to act in the best interests of the homeowners in the community.

If they don’t do those things, homeowners can elect new board members who’ll do a better job or even file a lawsuit if there’s a really bad abuse of power, like housing discrimination or harassment.

Can You Ignore Homeowners Associations?

Heck no! You cannot ignore your HOA—and don’t even think about skipping out on paying your HOA fees. If you buy property in a neighborhood with an HOA, you commit to following the HOA’s rules and paying their fees. Period.

Here’s what happens if you don’t.

If You Don’t Pay Your Fees

Once you miss a payment, the HOA will start charging you interest and late fees. They may also say you can’t use common areas like the pool or clubhouse until you pay up. And if that doesn’t work, they’ll sue your butt.

But the worst thing that can happen? The HOA may be able to foreclose on your house. Most HOAs have the right to put a lien on your house. A lien says that if you don’t pay what you owe, then the HOA can take your house, sell it, and use the profits from the sale to pay themselves the amount you owed.

Some states don’t let HOAs foreclose until you owe a certain amount of money or you’ve gone a certain number of months—even a year or more—without paying. But eventually, the HOA will come after you.

If You Break the CC&R

Remember, the CC&R is the HOA’s list of rules. If you break those rules, they’ll punish you. For example, they might charge you a one-time fine . . . or they might fine you every day you violate the CC&R.

They may even trespass on your property to fix the issue themselves. (Which is cool if you’re okay with the neighborhood busybody repainting your front door when you’re not looking.) And again, the HOA may ban you from using common areas, sue you, or even foreclose on your home.

The consequences for not paying HOA fees or violating the CC&R can be pretty intense. So you’ve got to ask yourself: Are all these rules and regulations worth it?

Let’s explore that.

Are HOAs Worth It?

Since you’re more and more likely to come across an HOA while house shopping, let’s cover the pros and cons so you can decide if living in a community with an HOA is right for you.

Pros

  • Possible increased home value. Many people in favor of HOAs believe they help increase your property value by a few percentage points. But the data’s mixed on whether that’s true or not. You’ll need to do your own research to see which HOAs in your area have actually upped property values.
  • Pleasant appearance. HOAs help keep shared spaces neat so you get to enjoy a well-maintained neighborhood at all times. And there’s something to be said for coming home to a beautiful community every day—it just makes you feel good.
  • Amenities. HOAs offer great amenities—from gyms and swimming pools to security and snow removal. It can be well worth the cost of HOA fees to have so much maintenance done for you or to have fun features so close to home.

Cons

  • Membership dues. HOA fees can be an expensive addition to your housing budget—especially on top of a mortgage. Plus, your fees can go up pretty much whenever the HOA board decides it’s time for a price hike.
  • Extra fees. If your HOA doesn’t have enough money on reserve to handle major maintenance projects and upgrades, you can be hit with special assessments that require you to cough up even more money. Ugh!
  • Restrictions and lack of privacy. Let’s get a quick show of hands: Who actually likes being told what to do? Most of us want to be treated like adults—and that includes maintaining our property the way we want. With an HOA, someone is telling you what to do . . . and you’re paying them to do it!
  • Sticklers. Just about every HOA has that one person who makes it their business to get all up in your business. They’ll complain about your curtains, the color of your mailbox and how many guests you entertain. That kind of attitude can ruin your relationships with your neighbors. And no matter how beautiful a community looks, it isn’t much of a community if you’re on bad terms with the people who live there.
  • Your home is at risk. Plain and simple, if you live in an HOA that has the right to foreclose, you run the risk that you could lose your house if you can’t cough up the HOA fees on time or if you get sick of playing by someone else’s rules. That’s a tough pill to swallow.

So . . . Should You Live Someplace With an HOA?

HOAs have some great perks, but they’re not for everyone! Here are some signs you shouldn’t buy property in an HOA:

  • You hate being told what to do.
  • You do things most HOAs won’t approve of (like working on cars in the driveway or letting your lawn get shaggy before you mow it).
  • You want your home to look unique on the outside.
  • You enjoy privacy.
  • You don’t want to pay the HOA fees (especially after your mortgage is paid off).
  • You want to own your home with no strings attached.

On the flip side, you may love living in an HOA if:

  • You’ll actually use the amenities and services your community offers—and you’re willing to pay a little extra to get them.
  • You have a high tolerance for rules and regulations.
  • You really like order and uniformity.
  • Your HOA has a proven track record of increasing property values, and you plan to sell in a few years.

All of that to say, whether you should live in an HOA depends on your preferences. And it depends on how the HOA is run. A well-organized, well-run HOA can make for a great experience living in your neighborhood. A crummy one can make you want to sell your house tomorrow.

If you think you might like to live in an HOA (or at least wouldn’t mind it), be sure to learn more about the specific HOAs where you might buy a home.

Look up the HOA’s rules, talk to the HOA representative, and even ask around the community to find out what other people think about the HOA. Learn as much as you can about how the HOA runs and how much it costs because—once you buy—you’re stuck with the HOA until you decide to move.

Ready to Buy a Home?

Whether you’re loving the sound of joining a homeowners association or you’d rather avoid HOAs altogether, you’ll need help from a real estate agent to find the right place for you.

We only recommend Endorsed Local Providers (ELPs). Since they’re local, these agents are familiar with the neighborhoods in your new town. So they can help you spot an HOA—and help you figure out which HOAs you might (or might not) want to live in. Plus, they’re RamseyTrusted. That means they meet our high standard of excellent service—so you only get the best!

Find your real estate agent today!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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