The Private Government Next Door

Mary Kunic received a foreclosure notice in 2021. The judgment against her was $5,311.50. The amount she actually owed in unpaid assessments was $480. The rest — nearly $4,800 — was attorney fees and legal costs, billed by the law firm her own HOA hired to pursue her. In Colorado, the HOA's legal fees are paid from the same assessment pool that every homeowner, including Mary Kunic, contributes to. She was, in the most literal sense, paying for her own prosecution. She was one of 2,400 homeowners in Colorado that the same law firms pursued over four years.

Prologue: The Government That Wasn't There at Closing

When you buy a home in an HOA community — and today, if you buy a new home anywhere in the Sun Belt, there is a 67% chance you are — you receive a packet of documents at closing. The CC&Rs. The bylaws. The rules and regulations. They are long, written in legal language, and almost nobody reads them completely. The real estate attorney moves through them quickly. You sign. You get keys.

What you have just joined is the most consequential form of local government most Americans will ever encounter — one that can tax you annually, fine you for paint colors and political signs, restrict you from installing solar panels or planting a vegetable garden, ban your short-term rental even if the city permits it, block your ADU even if the state mandates it, and in 26 states, take your home through a non-judicial foreclosure process that never requires a judge. You did not vote for this government. No one in it was elected in any meaningful public sense. And you agreed to it by signing a contract at closing that most attorneys in America would classify as one of adhesion — a take-it-or-leave-it instrument binding not just on you but on every future owner of your property in perpetuity.

There are 370,000 of these governments in the United States. There were 10,000 in 1970.

This is not a story about paint colors. It is a story about what happens when private governance is allowed to accumulate the coercive powers of public government while remaining exempt from its constitutional constraints — and about who pays the price when that arrangement is used against them.

Part One: How a Private Government Becomes the Default

The Arithmetic of Proliferation

The growth of HOAs follows a logic that has very little to do with what homebuyers want and a great deal to do with what developers, municipalities, and the federal mortgage apparatus have built together over fifty years.

Developers discovered early that HOA communities let them shift the cost of amenity maintenance — pools, gates, landscaping, private roads — off their balance sheets and onto future homeowners, while using those same amenities as marketing differentiators during sales. A 2024 Frontdoor survey found 70% of Americans would prefer to buy outside an HOA, and 45% say HOAs have negative effects on their community. Yet 67% of new single-family homes are being built inside them. The mismatch is not a market failure. It is a supply design.

Local governments have their own incentive. CAI's CEO Thomas Skiba told CNBC bluntly: HOA communities mean that governments "don't have to plow the street anymore, don't have to do all that maintenance — and they still collect the full property tax value." The city captures the tax. The homeowners pay the maintenance. It is a clean transfer of public cost to private obligation, rationalized as community governance.

Federal mortgage policy provided the structural scaffolding. The FHA Underwriting Manual of 1934 — which shaped American residential development for the next four decades — explicitly incentivized deed-restricted subdivisions. Fannie Mae and Freddie Mac approval criteria reward HOA governance. The developer, the municipality, and the federal government have all pointed in the same direction for fifty years, and the result is what it was always going to be: by 2024, roughly 30% of Americans live under HOA governance, collecting $120.9 billion annually in assessments, managing home values approaching $12.9 trillion in aggregate.

The Racial Genealogy

It is impossible to understand the modern HOA without understanding where it came from. The model was invented — or rather industrialized — by J.C. Nichols, the Kansas City developer who began the Country Club District in 1908. Nichols did not create racial covenants in American real estate, but he systemized them: he embedded self-renewing racial exclusions into deed restrictions, attached mandatory homeowners associations to enforce them, and then spent decades promoting the model through the National Association of Real Estate Boards and the Urban Land Institute. His standard deed read that lots could not "be conveyed to, used, owned, nor occupied by negroes." The FHA, when it built out its underwriting framework in the 1930s and 1940s, adopted Nichols' methods almost verbatim, requiring racial covenants for FHA-insured development and explicitly recommending highways as physical barriers between Black and white neighborhoods.

The Supreme Court's Shelley v. Kraemer decision in 1948 blocked judicial enforcement of explicit racial covenants. The Fair Housing Act of 1968 banned racial discrimination outright. But the private governance infrastructure — the CC&Rs, the architectural review committees, the HOA board structures — remained in place. What changed was the vocabulary, not the mechanism. Minimum lot sizes, single-family-only covenants, rental caps, source-of-income restrictions, and HOA opposition to affordable housing and missing-middle density can accomplish the same exclusion without naming a race. The lineage from Nichols to the modern HOA is direct, documented, and consequential — which is why the Urban Land Institute eventually renamed its J.C. Nichols Prize, and Kansas City removed his name from the Country Club Plaza fountain and the adjacent road.

Today, Urban Institute research has flagged HOA mechanisms — background checks, minimum credit scores, rental bans, source-of-income restrictions — that disproportionately exclude Black and Latinx Section 8 voucher holders, 66% of whom are households of color. The instrument evolved. The effect persists.

Part Two: The Shadow Mortgage

What the Fee Actually Costs

HOA fees do not appear in the headline price of a home. They do not show up in the mortgage payment calculator on Zillow. They are mentioned, sometimes briefly, in the listing, and disclosed in the closing documents that nobody reads. For a growing share of American homebuyers — and especially for the first-time buyers who are increasingly dependent on condos as their only entry into the market — they represent a second, uncapped, mandatory financial obligation that fundamentally changes the math of ownership.

The national median monthly HOA fee, combining single-family and condo associations, was $135 in 2024 according to Census ACS data. That median conceals what the distribution actually looks like: approximately 3 million households pay more than $500 per month. The median condo fee specifically was $420 per month in 2025, up 29% since 2019. In Miami — where 42% of first-time buyers now choose condos because nothing else is affordable — the median HOA fee is $835 per month, equivalent to 27% of a typical mortgage payment. Add it to the mortgage and most buyers in that market are immediately above HUD's housing cost-burden threshold, on a property whose purchase price already stretched them to their limit.

The mechanism is structurally different from every other housing cost. A mortgage payment is fixed and eventually ends. HOA fees are mandatory, non-tax-deductible, non-refinanceable, uncapped, and they survive mortgage payoff — meaning a homeowner who owns their property outright can still lose it to HOA foreclosure. Every $100 per month in HOA dues erases approximately $16,000 in mortgage purchasing power at current rates, because that $100 reduces the monthly payment a buyer can qualify for. The person who budgeted carefully for a $1,800 mortgage may not have budgeted for the $400 HOA fee, the $300/year insurance required by the CC&Rs, or the $15,000 special assessment arriving in Year Three because the reserves were underfunded when they bought.

The Surfside Cascade

On June 24, 2021, the Champlain Towers South in Surfside, Florida partially collapsed, killing 98 people. The investigation documented what turned out to be systematic: the building's reserves were approximately 7% funded. The association had just levied a $15 million special assessment — which individual owners had been informed would cost between $80,000 and $336,000 per unit — but had not yet collected it. Only 5 to 10% of Florida condo associations had properly funded reserves. Roughly half had none at all.

Florida's legislative response — mandatory structural inspections, full reserve funding for all buildings three stories and taller — was the correct policy response to a genuine safety emergency. Its financial consequence has been catastrophic for a generation of condo owners who bought into buildings that had been chronically undercharging for decades. Miami-Dade median monthly condo fees jumped from $567 in 2019 to $900 by 2023 — a 60% increase in four years. Individual special assessments exceeding $100,000 per unit have become common. Retired teachers are coming out of retirement to pay them.

The crisis has a secondary layer with national implications. Fannie Mae's internal list of ineligible condo projects — long kept secret, partially published through HUD in 2025 — has grown from a few hundred buildings before Surfside to more than 5,000 buildings classified as underinsured, under-reserved, in litigation, or otherwise non-compliant. Florida accounts for approximately 2,800 of them; California for another 2,500. In buildings on the blacklist, buyers cannot obtain conventional Fannie- or Freddie-backed financing. They are effectively cash-only sales — in markets already inaccessible to most buyers, now structurally inaccessible to everyone without capital to spare. Florida condo sales fell 9.2% year-over-year in Q1 2025. Active listings rose 35%. In Miami, 92.5% of condos sold below list price in February 2025. The phrase one South Florida attorney used to describe conditions — "the tip of the iceberg" — understates it. Illinois, California, New York, and Hawaii are all moving toward Surfside-style reserve mandates. The reckoning is spreading.

Part Three: The NIMBY Machine

Solar in the Suburbs

In 2025, roughly 29 states plus D.C. have adopted solar access laws that limit HOA authority to ban panel installation. This sounds like a solved problem. It is not.

The quality of these laws varies so dramatically that the word "protection" overstates what many of them provide. Florida's statute is near-absolute: it voids any covenant that "prohibits or has the effect of prohibiting" solar and allows HOAs only to designate roof location within rules that don't impair panel function. California's Solar Rights Act voids restrictions that effectively prohibit installation and requires applications to be approved or denied within 45 days — or they are deemed approved. At the other end: states with unquantified "reasonableness" standards that effectively let HOA architectural review committees delay, condition, and obstruct solar installations indefinitely without ever technically banning them. Twenty-one states have no meaningful protection at all.

The practical result, for tens of millions of Americans in HOA communities in those 21 states, is that a private board can veto a solar installation based on aesthetics — too visible from the street, inconsistent with community character, the wrong shade of black — and the homeowner's only recourse is litigation that typically costs $50,000 to $500,000, funded out of their own pocket while the HOA's legal bills are paid from the assessment pool they contribute to.

ADUs, EV Chargers, and the Energy Transition

The pattern repeats in every dimension of the energy and housing transition. California's AB 670 voids any HOA restriction that "effectively prohibits or unreasonably restricts" an accessory dwelling unit — but enforcement requires homeowners to know the law and be willing to fight for it. Outside California, HOAs are largely free to block ADU construction even in states that have passed sweeping ADU-enabling legislation. Oregon's HB 2001 preempted single-family zoning statewide — but CC&R preemption in HOA communities is still evolving case law. Washington's HB 1337 strengthened ADU rights statewide — but HOAs there regularly respond with architectural review requirements, parking mandates, and procedural obstacles that a statute didn't anticipate.

For EV charging: only five states plus D.C. have right-to-install laws that cover both owners and renters in multifamily buildings. The other 45 states leave condo and townhome owners — who represent a growing share of first-time buyers and who disproportionately lack garage access to install chargers privately — subject to whatever their HOA board decides about infrastructure on common-area parking. In a country that has set aggressive EV adoption targets, a private board in a Houston townhome complex has the legal authority to tell its residents they cannot charge an electric car at home.

Housing Supply and the Courtroom Veto

Perhaps the most consequential HOA-adjacent NIMBY behavior is the use of litigation to block or delay housing supply. The Arlington, Virginia case is the clearest recent example. In March 2023, Arlington County adopted its Expanded Housing Options ordinance, allowing townhomes, duplexes, and small apartment buildings in formerly single-family neighborhoods. Within months, a group of homeowners sued. All Arlington Circuit judges recused. 45 building permits were put on hold. A developer took a second mortgage to keep his company solvent through the delay. The Virginia Court of Appeals reversed on procedural grounds in June 2025, but the pattern was already established: organized, well-resourced homeowners — predominantly in HOA communities or adjacent neighborhoods with similar interests — using the courts to impose a years-long delay on policy that legislatures and local governments had already approved.

This is the homevoter hypothesis in action. Economist William Fischel's framework argues that because homeowners can't diversify their largest asset, they rationally oppose any change they perceive as threatening and organize politically to prevent it. HOAs lower the cost of that organization and provide institutional infrastructure and legal standing to do it at scale. The distributional consequence is consistent across markets: HOA communities tend to increase insider home values while restricting outsider access to housing — a 4 to 6% premium on HOA homes coexisting with meaningful supply suppression in the surrounding market.

Part Four: A Government Without a Constitution

The Power to Take Your Home

Captain Michael Clauer was deployed to Iraq with the Army National Guard in 2008. While he was overseas, Heritage Lakes HOA in Frisco, Texas initiated foreclosure proceedings against his home over approximately $800 in unpaid dues. His wife, struggling with the stress of his deployment, missed the notices. The $315,000 home was auctioned for $3,201. It was resold for $135,000. Clauer's family received nothing. Federal intervention eventually produced a settlement, and the case drove multiple Texas legislative reforms and enforcement of the Servicemembers Civil Relief Act.

In Nevada in 2014, the state Supreme Court affirmed that the 9-month HOA super-priority lien — an amount equal to nine months of assessments — is a true priority instrument whose non-judicial foreclosure extinguishes the first mortgage entirely. The UNLV LIED Institute subsequently found that HOA-foreclosed homes in Clark County sold at a 42% discount from market value, producing $840 million in wiped property value, with a further $253 million in Washoe County. These were not safety emergencies. They were assessment disputes. The homes were taken, at auction, for amounts smaller than their monthly mortgage payments.

This is the arrangement that the United States has built and that essentially no other developed country has replicated. Canada requires court-supervised strata foreclosure. Germany requires a civil judgment and judicial auction with strong debtor protections. The UK requires court process. Australia, Singapore — all require judicial oversight before a private association can take someone's home. The American HOA super-priority lien combined with non-judicial foreclosure is, in the comparative international record, an anomaly. It is also becoming more consequential as HOA-related foreclosures rise — up 50% nationally between 2022 and 2025, according to ATTOM, with Florida, Texas, and California leading.

The Governance Legitimacy Problem

The deepest problem with HOAs is not that they are bad at governance. It is that they exercise governance power — taxation, rulemaking, enforcement, adjudication, property seizure — while being treated by American law as private contracts entitled to near-complete judicial deference. The constitutional protections that limit what a government can do to a citizen — due process, equal protection, First Amendment speech, Fourth Amendment privacy — do not apply to a homeowners association, because it is a private entity. The practical result is that you can lose your home over an $800 debt, be fined $100 per day for a flag in a flower pot, have your mezuzah removed from your doorpost during the week of your husband's funeral, be prohibited from installing solar panels on your own roof, and have no constitutional recourse for any of it.

Professor Evan McKenzie of the University of Illinois Chicago, whose 1994 book Privatopia remains the foundational scholarly treatment of HOAs as "residential private government," has spent three decades documenting this mismatch. Professor Paula Franzese of Seton Hall has argued that the "zealous pursuit of 'the nice'" in HOA communities produces litigiousness and civic alienation rather than genuine community. Professor Andrea Boyack has characterized CC&Rs as contracts of adhesion — binding on parties who never negotiated them, running with land in perpetuity — and argued they do not deserve the deferential enforcement American courts typically extend.

Even Robert Nelson of the University of Maryland, the leading scholarly defender of HOAs, wrote in 2005 that private neighborhood association growth "probably resulted in a greater reduction in individual freedom of action than any other social development of the second half of the 20th century."

The Generation Paying for It

Forty-two percent of first-time buyers now purchase condos, up from 28% in 2001 — because condos are what is affordable, and condos almost always carry mandatory HOA fees. Forty-seven percent of Gen Z homeowners are already in HOA communities. They are entering these arrangements with the least reserves, the most stretched budgets, the most student debt, and the least ability to absorb an unexpected $15,000 special assessment or a 60% fee increase driven by an insurance market they didn't cause and can't control.

They are also the generation most likely to want to install solar, convert a garage to an ADU, charge an electric vehicle at home, or run a business from their residence — precisely the uses that HOA CC&Rs most frequently restrict. Colorado's 2022 to 2024 legislative package — capping non-safety fines at $500, banning daily fines, prohibiting foreclosure on fine-only liens, requiring 18-month payment plans, capping attorney fees — represents the most consumer-protective HOA reform regime in the country. California's AB 130 in 2025 capped most HOA fines at $100 per violation. These reforms are meaningful. They are also, in the forty-eight states that haven't enacted them, entirely absent.

The 370,000-association system was built by developers, ratified by municipalities, coded into federal mortgage policy, and staffed by an industry of attorneys and management companies whose financial interests run in the same direction as escalating fees and aggressive enforcement. The buyers who inherit it — especially the younger, more diverse, more financially stretched buyers entering the market now — did not design it and do not benefit from it. They arrived at closing, signed a packet of documents nobody explained, and joined a government that nobody voted for.