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Do homeowners associations mitigate or aggravate negative spillovers from neighboring homeowner distress?

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  • Cheung, Ron
  • Cunningham, Chris
  • Meltzer, Rachel
Abstract
Experiences reveal that the monitoring costs of the foreclosure crisis may be non-trivial, and smaller governments may have more success at addressing potential negative externalities. One highly localized form of government is a homeowners’ association (HOA). HOAs could be well suited for triaging foreclosures, as they may detect delinquencies and looming defaults through direct observation or missed dues. On the other hand, the reliance on dues may leave HOAs particularly vulnerable to members’ foreclosure. We examine how property prices respond to homeowner distress and foreclosure within HOA communities in Florida. We combine datasets of HOAs, sales and aggregate loan delinquency and foreclosures from 2000 through 2008. We find properties in HOAs are relatively less impacted by more distressed neighbor homes compared to non-HOA properties, but only when considering less severe delinquency rates. We also find that negative price effects from higher delinquency exposure rates are ameliorated for properties in larger and newer HOAs.

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  • Cheung, Ron & Cunningham, Chris & Meltzer, Rachel, 2014. "Do homeowners associations mitigate or aggravate negative spillovers from neighboring homeowner distress?," Journal of Housing Economics, Elsevier, vol. 24(C), pages 75-88.
    • Handle: RePEc:eee:jhouse:v:24:y:2014:i:c:p:75-88
    DOI: 10.1016/j.jhe.2013.11.007
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    1. Kristopher Gerardi & Eric Rosenblatt & Paul S. Willen & Vincent W. Yao, 2012. "Foreclosure externalities: some new evidence," Public Policy Discussion Paper 12-5, Federal Reserve Bank of Boston.
    2. Rachel Meltzer, 2013. "Do Homeowners Associations Affect Citywide Segregation? Evidence From Florida Municipalities," Housing Policy Debate, Taylor & Francis Journals, vol. 23(4), pages 688-713, October.
    3. Zhenguo Lin & Eric Rosenblatt & Vincent Yao, 2009. "Spillover Effects of Foreclosures on Neighborhood Property Values," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 387-407, May.
    4. Ron Cheung & Rachel Meltzer, 2013. "Homeowners Associations And The Demand For Local Land Use Regulation," Journal of Regional Science, Wiley Blackwell, vol. 53(3), pages 511-534, August.
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    9. Schuetz, Jenny & Been, Vicki & Ellen, Ingrid Gould, 2008. "Neighborhood effects of concentrated mortgage foreclosures," Journal of Housing Economics, Elsevier, vol. 17(4), pages 306-319, December.
    10. Cheung, Ron, 2008. "The interaction between public and private governments: An empirical analysis," Journal of Urban Economics, Elsevier, vol. 63(3), pages 885-901, May.
    11. Tracy M. Gordon, 2004. "Moving Up by Moving Out? Planned Developments and Residential Segregation in California," Urban Studies, Urban Studies Journal Limited, vol. 41(2), pages 441-461, February.
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    Cited by:

    1. Fernando Ferreira & Joseph Gyourko, 2015. "A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012," NBER Working Papers 21261, National Bureau of Economic Research, Inc.
    2. Piotr Lis & Zuzanna Rataj & Katarzyna Suszyńska, 2022. "Implementation Risk Factors of Collaborative Housing in Poland: The Case of ‘Nowe Żerniki’ in Wrocław," JRFM, MDPI, vol. 15(3), pages 1-12, February.
    3. Jeffrey P. Cohen & Cletus C. Coughlin & Vincent W. Yao, 2016. "Sales of Distressed Residential Property: What Have We Learned from Recent Research?," Review, Federal Reserve Bank of St. Louis, vol. 98(3), pages 159-188.
    4. Bostic, Raphael & Ellen, Ingrid Gould, 2014. "Introduction: Special issue on housing policy in the United States," Journal of Housing Economics, Elsevier, vol. 24(C), pages 1-3.
    5. Kathleen Grace & Joshua C. Hall, 2019. "The Value of Residential Community Associations: Evidence from South Carolina," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(1), pages 121-129, February.

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    More about this item

    Keywords

    Homeowners associations; Foreclosures; Delinquency; House prices;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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