5 Pages Posted: 20 Sep 2005
It is commonly believed that residential community associations (RCAs)-a.k.a. homeowners associations and condominium associations - enhance the value of residents' properties. If RCAs provide a level of services with benefits equal to or exceeded by residents' willingness to pay for them, then property values should remain constant or increase. But the organizations may not provide an efficient level of services because of inadequate oversight by community residents. Instead, RCAs may adopt policies that reflect the preferences of community activists who have higher demands for services than the mean or median resident. In the most likely type of inefficient RCA, an increment in expenses for services reduces property values because the marginal purchaser gets less benefit out of the services than their cost. In that case, the excessive fee will be negatively capitalized into property values.
Keywords: residential community associations, RCA, RCAs, RCA's, homeowners associations, condominium associations, property, property values
JEL Classification: D23, G12, L85
Suggested Citation: Suggested Citation
Langbein, Laura and Spotswood-Bright, Kim, Accountability and Private Governments. Regulation, Vol. 28, No. 1, pp. 12-16, Spring 2005. Available at SSRN: https://ssrn.com/abstract=801525