America is in the middle of an affordable housing crisis. Mortgage rates are at their highest in two decades, and the supply of homes for sale is near a record low. In the middle of all of this, the vast majority of new homes that are being built are in communities like homeowners' associations or hoas. That means they come with extra charges attached on top of a mortgage.
There are a lot of costs associated with living in an HOA. Among them are just the regular monthly dues, and those could be below one hundred dollars a month, it could be a one thousand dollars in a more expensive community. You also often have to pay assessments for upkeep and maintenance.
My colleague, Sarah Holder is a reporter for Bloomberg covering urban politics and housing, and she's recently been digging into the influence of hoas. Hoas are a large and growing share of the US housing market. Nearly a quarter of the country lives in hoa's or something like them, and part of living in one of these communities means following the rules they've set.
These rules can seem petty, but if people don't follow them, there can be pretty big consequences.
And the power of these associations to enforce the rules can threaten sustainable home ownership. Today on the show, we'll meet a family that's learned all of this the hard way.
This used to be somewhere we felt safe, We felt like, you know, like home, sweet home, and now it doesn't feel that way.
We'll also talk about how hoas can offer the hope of affordable housing, but in reality hold it just out of reach, and we'll hear what the government is doing or not doing to address the power of hoas.
These are basically private governments that are really underregulated, critics would say, by the federal government.
This is the big take Washington. From Bloomberg News, I'm your host Seleiah Mosen. In twenty sixteen, Naomi Mendoza Aleya's family but a new house. It was bigger and pricier than their old one and was in an hoa community called Green Valley Ranch. Picture cream colored houses with beige roofs, each spaced evenly apart, and the occasional basketball hoop visible against the horizon.
It was safe, it felt comfortable, neighbors were friendly. It just felt somewhere where you know, you could eventually be there for a while.
That was the idea, Just like a lot of us. Naomi's dad hoped his kids would inherit the house one day, and making it their own became his passion project. He added a deck in the back and remodeled the inside so.
My dad at the time freely enjoyed a lot of black so we have like marble floors, black cabinets.
It was a family effort. Naomi's stepbrother even came from Mexico to help. Soon, the house on Kirk Street had become a gathering place for their community.
We'd sometimes just throw parties for no reason, just like, hey, come over, let's have some music. We're Hispanics, so we had a lot of Mexican dishes all the time. Any small event, it would kind of always be like, hey, you guys can celebrate it here, like this is your home, just as was our home.
My colleague Sarah Holder told me that hoas were basically invented to make suburban life feel idyllic.
The seeds of what we now think of as hoas kind of started in the nineteen tens and the nineteen twenties with the rise of these community builders.
This is no mere.
Collection of homes, but a carefully planned community.
Think cookie cutter houses perfectly trimmed lawns. Among the promises of hoas were offering shared spaces and handling all the community upkeep, like making sure the roads were always freshly paved and clear of snow.
The sun and air and open green a part of the design.
Safe streets and quiet neighborhoods are not just matters of good luck. They're built into the pattern and built to stay there.
The developers who built these communities wanted them to stay that way, so they created rules governing the people who lived there. The idea was to keep the neighborhoods as idyllic as they were designed to be.
You can't start a gas station. You can only build a home. You can have a white house, you cannot have a pink house.
Back in the early days of hoas, that also meant governing who could live in the community and who couldn't. Some hoas had rules excluding people of color and people from certain religious groups.
They were able to codify segregation within their borders.
Apart from segregation, hoas, like so many things, come down to money. The developers said that all these rules were rooted in their desire to protect property values.
They thought that if they had this kind of control over a neighborhood, the valley, you of these homes would stay the same over a long period of time.
And this system of rules continues to this day in hundreds of thousands of HOA communities around the country.
So that's where these things like you can't have a basketball hoop, or you can't have shutters, or you can't not have shutters come into play.
Those rules and regulations that all residents have to abide by are part of what make hoa's appealing places to live. Some people like the idea that their neighbors can't let their lawns go on trimmed or blast music late at night, but the HOA board can take enforcement of these rules really seriously, and they punish residents who don't comply. In March of this year, Naomi's mom got a phone call from a number that she didn't recognize. She actually thought it was spam.
But for some reason she answered, and when she answered, they told her, hey, like, I'm the new owner's mom, just calling to let you know that your husband like does and own the house no more.
At first, they were sure there had been a misunderstanding.
But then my dad kind of was like, well, let me just double check with like the realtor that sold us the house. He called the realtor, and the realtor was like, yeah, I wasn't aware of this, but like, your name isn't on the title anymore. It's under someone else. And they kind of got us all in shock, as we were all kind of like, well, you know, like what do you mean, Like, how is that even possible?
Before that fateful phone call, Naomi's family had been happily living in the Green Valley Ranch community. There was one thing, though, that had been nagging at them. The HOA had been docking them for a laundry list of violations, things that, to Naomi seemed pretty inconsequential.
Oil stains on the driveway. We had this tree that was growing on the side of our house. They wanted us to take it off since it was dying.
Garage doors two different shades of beige. A broken window then another. After their home was vandalized.
We called someone to come see if we could repair. You know, both windows turned out to be way more than we thought it would be. So it was like, well, we have to prioritize one or the other.
The HOA one of these things fixed. So they sent the family letters and the mail. Naomi says her family was focused on staying on top of their mortgage payments and their taxes, not addressing HOA infractions.
We weren't doing it on purpose, and they kept being on our butts about it.
When the HOA didn't see the violations being addressed, they charged Naomi's family a fine. Her family didn't realize that those fines, which started off in the low hundreds, could quickly balloon if they went unpaid. The HOA tacked on late fees and legal fees to pay for the attorneys the board employed to enforce the rules. It all added up, and eventually Naomi's family owned the HOA over six thousand dollars.
And then came that call in March, the one that delivered the news of their house had been sold.
My dad told us, if someone comes to the house and tries to evict, you stand your ground, just because you know. We were still in doubt, and then we later found out that we weren't the only ones that this has happened to.
We'll get to that after the break, we're back with the story of Naomi Mendoza Olea and the HOA that took her family's home away. Naomi says that her family had no idea that unpaid fines could actually lead to losing their home. But my colleague Sarah Holder told me that this can happen because of a specific power ahoays have to enforce their rules. Hoas can get a lean on a property, which is essentially the ability to hold onto a piece of property until someone pays the debt
that they owe. You think about what happens if you don't pay a mortgage, which the bank can take your home. And in Colorado, where Naomi's family lives, hoas can get what's called a super lean, which means an HOA that's owed money can claim the property even over the bank.
These super leens or priority lians, they're meant to give aja's first DIBs on the proceeds from a foreclosure sale. So during the two thousand and eight financial crisis, for example, it ensured that hoas that were owed money were paid back before the bank if homeowners defaulted on their mortgages. And HOA advocates say this is so that you don't
have to pay for the mistakes of your neighbors. But in some states, an HOA superleen can wipe out that mortgage entirely, and that allows Hias to move to foreclosure and really be ruthless in getting that debt paid off.
The HOA ended up selling Naomi's family home at a foreclosure auction for just eighty five thousand dollars.
It's not even like close to what my dad even bought it for. It was like, how is that house worth such nato amount of money now, especially because you know, we remodeled all the inside, it has a deck, like, it is worth more than they sold it for.
Zillo estimated the house was worth over five hundred and fifty thousand dollars. That's more than six times what the HOA sold it for. The HOA and their legal representatives did not respond to a request for comment. In legal documents, the HOA said that they had reached out to Naomi's father about what was happening and didn't hear back. Naomi says that communication never reached him.
They claimed that they served my dad papers, but there's this miscommunication with my dad. He doesn't speak English fluently, and like They say that they served him the papers at the house that we currently live at, where he hasn't lived there for four or five years already.
We reached out to the HOA for and they didn't respond. Naomi says the realization that her family was losing their home was crushing.
I know how hard my parents have work for that home so it could stay and be you know, inherited to us. That for it to be snatched, you know, from one day to another is very like heartbreaking. It was also like what happens now? We could have been evicted at any second without us having nowhere to go, and like, you know, everything economically has been so expensive that it was like, how are we going to do this?
The family is currently challenging their foreclosure in court, and Bloomberg's Sarah Holder says she spoke to several other families in a similar position.
One of the things that I learned in this reporting is that not everyone knows what they're getting into, and they felt that they had a cheat one part of the American dream, which for years has been home ownership. You know, they had settled in this community, they had bought a house that was affordable to them at the time they were paying their mortgage, and the HOA rules and the punitiveness of this HOA was threatening to destroy that.
While there's no national data on HOA foreclosures, reporting from the Colorado Sun found that since twenty eighteen, hoas have filed about three thousand foreclosures in the state. About eight percent of those homes have been sold at auction. Bloomberg News reached out to the Community Association's Institute, a lobbying group representing hoas. Their spokesperson Don Bawman told us that while communities should allow time for due process, having the
power of foreclosure is a matter of fairness. That way, she said, community members don't have to make up the extra costs if they're neighbors aren't paying their share. Bauman also emphasized that hoas offer potential home buyers an affordable and worthwhile investment opportunity. But stories like that of Naomi's family are getting attention, and lawmakers in some states have started to take action. In California, Governor Gavin Newsom signed
a law to cap HOA fee increases. In North Carolina, a bill to make it harder to move to foreclosure is working its way through the state Senate, and in Naomi Mendoza Aleya's home state of Colorado, a new law took effect in the summer of twenty twenty two. Among other things, it capped the interest rate on unpaid HOA fines and barred foreclosures triggered by minor violations. It now requires hoas to repeatedly communicate violations to homeowners. For Naomi
and her family, it was too late. A lawyer filed the paperwork that set off the foreclosure process just two days before the new law went into effect. But some people believe that there is more that needs to be done on a national scale to protect homeowners like them. Michael Neil is a researcher at the Urban Institute focusing on housing finance policy. Neil used to work at Fannie May, a federal mortgage lender. He pointed out that higher prices don't just limit a person's ability to buy a home.
There's also the issue of sustainability.
That is, if I'm not able to pay my mortgage because I've got a high payment with higher interest rates, plus I've got the high HOA fee. In times of stress where i might lose my job, i might be less likely to actually make all of those payments.
Which isn't just a risk to individual homeowners. Too many people defaulting on their mortgages can tank an economy. That's a lesson we learned the hard way. In two thousand and eight, I asked Neil about what the HOA spokesperson said that hoas offer potential home buyers an affordable investment opportunity. He told me that the data doesn't necessarily back that up.
Generally, the research suggests that the presence of an HOA so not the level of the faith, but the presence of an HOA typically coincides with higher house prices.
Will Some state and local lawmakers seem to be tracking the complications that come with hoas. So far, the federal government hasn't said anything. I reached out to the Department of Housing and Urban Development and they told me that they had no comment on hoas. I also tried tracking down a number of former federal government officials, anyone who could give me a window into the conversations around hoas
from the inside, and no one would talk. As for Naomi and her family, they're stuck waiting for their day in court. Their case was recently delayed until March, which Naomi says is a relief because it gives them a few more months in their home, but it's uncomfortable to live in a place that could be taken away from them at any moment. If they have to move, Naomi says, it won't be to another hoa.
This used to be somewhere we felt safe, We felt like, you know, like home sweet home, and now it doesn't feel that way. So whether we win the house back or not, I think we still kind of want to move from there, just because we don't feel like it's our home no more.
Thanks for listening to the Big Take from Bloomberg News. I'm Seleiah Moson. This episode was produced by Julia Press, Anna Masarakis, and Naomi Shaven. It's part of a special series from our DC newsroom. Blake Maples is our mix engineer. Our story editors are Wendy Benjaminson, Mike Shepard, and Caitlin Kenny. Sage Bauman is our executive producer and head of Podcasts. Thanks for tuning in. I'll be back next week.