A Brief History of HOA Formation

A look at the current Colorado landscape shows the formation of more than 5,800 homeowner associations (HOAs) over the years.

With so many in our state, and many more throughout the country, it’s hard to help but wonder: how did HOAs come to be in the first place?

First, it is important know the definition of a HOA. It is a corporation formed, usually by a real estate developer, to market and manage homes that all share a common interest. These days, whether it’s an extensive suburban subdivision with similarly built single-family homes, a development of townhomes, or an urban condominium tower, most multi-unit residential developments where the units are individually owned are controlled by a mandatory association of owners with a common interest in the property.

It is said that years before World War II, property owners with shared interests were voluntarily creating associations to best manage their common needs. However, in the prosperous years following the War, when many people fled the cities in their freedom-giving automobiles, HOA formation really took off.

It was of great help that the Federal Housing Administration (FHA) aided in the HOA upsurge by offering home mortgage insurance specifically to newly-constructed condominiums and suburban subdivisions. The Interstate Highway System allowed people to come and go from downtown jobs to their suburban homes with ease. The Clean Water Act, believe it or not, was also a driver of the HOA formation boom as it requires storm water management for new construction that frequently includes detention and retention ponds, which are common elements in residential developments.

While many early covenants were highly restrictive (sometimes even racially), a series of court actions over the years have led to the very agreeable and useful covenants we have today. The Community Associations Institute (of which CAP Management is a huge fan!) estimates that HOAs currently govern about 25,000,000 homes in the United States and at least 62,000,000 residents.

Today, HOAs keep building maintenance in check, provide for the consistent good looks of landscaping, make sure finances are in order and so much more. We love HOAs!