Clients: Common Interest Realty Associations: History

Homeowner associations first emerged in the United States in the mid-19th century. Their growth was limited, however, until the 1960s, when several factors led to a period of rapid national growth, including, a push towards large scale residential development by the Federal Housing Authority and the Urban Land Institute; an increasing cultural preference for architectural uniformity; a decline of readily available land; rising construction costs; and a modification of federal mortgage insurance rules to include cooperatives and condominiums.

Early covenants and deed restrictions were exclusionary in origin, and in the first half of the 20th century many were racially motivated. In 1948, the United States Supreme Court ruled such covenants unenforceable, in Shelley v. Kraemer. However, private contracts kept them alive until The Fair Housing Act of 1968 banned them.

The explosion in the number of CIRAs can be traced back to a technical bulletin was funded by the National Association of Home Builders and by certain federal agencies: the FHA, United States Public Health Service, Office of Civil Defense, the Veterans Administration and the Urban Renewal Administration.

The Federal Housing Administration in 1963 authorized federal home mortgage insurance exclusively for condominiums or for homes in subdivisions where there was a qualifying homeowner association. The rationale was that developers wanted to get around density laws. The effect, however, was to divert investment from multifamily housing and home construction or renovation in the inner cities, speeding a middle-class exodus to the suburbs and into common-interest housing. The federal highways program further facilitated the process. In the 1970s, a growing scarcity of land for suburban development resulted in escalating land costs, prompting developers to increase the density of homes on the land. In order to do this while still retaining a suburban look, they clustered homes around green open areas maintained by associations. These associations provided services that formerly had been provided by municipal agencies funded by property taxes; yet, the residents were still required to pay those taxes. Accordingly, local governments began promoting subdivision development as a means of improving their cash flow.

Another primary driver in the proliferation of single family homeowners' associations was the U.S. Clean Water Act of 1977, which required all new real estate developments to detain storm water so that flow to adjoining properties was no greater than the pre-development runoff. This law required nearly all residential developments to construct detention or retention areas to hold excess storm water until it could be released at the pre-development flow level. Since these detention areas serve multiple residences, they are almost always designated as "common" areas, which becomes a reason to create a homeowner association. Although these areas can be placed on an individual homeowner's lot, eliminating the need for an association, nearly all U.S. municipalities now require these areas to be part of a common area to ensure an entity, rather than an individual or the municipality itself, has maintenance responsibility. Real estate developers, therefore, have established homeowner associations to maintain these federally mandated common areas. With the homeowner association already in place, the developers have expanded their scope to provide other requirements and amenities that they believe will help them sell homes.

Copyright Blythe Paperless 2011