How are homeowners associations capitalized into property values?

• We explore whether or not, and to what degree, the value of membership in homeowners associations (HOAs) is capitalized into housing values.
• We construct a map of HOAs and the land parcels that are contained within them for Florida.
• We find that holding other determinants of house prices constant, properties in HOAs sell at a five percent premium compared to non-HOA properties.
• When the price effect is allowed to vary over time, the HOA premium is immediately larger, but then decreases over time.
• Membership in larger HOAs devalues the price of HOA properties.
• Properties located immediately outside of HOAs also sell at a premium relative to other non-HOA properties, and it marginally decreases in the size and increases in the frequency of neighboring HOAs.

Private homeowners associations (HOAs) levy binding fees and provide local services to members. Both should be capitalized into the value of member properties, but the net effect is ambiguous. We construct the most comprehensive, longitudinal database to date on HOAs for Florida and estimate the impact of HOAs on property values. We find that properties in HOAs sell at a premium just under 5%. The premium is strongest immediately following HOA formation and declines over time, suggesting quick capitalization of HOA benefits. Properties in larger HOAs sell for less, and this is particularly true for properties in the biggest HOAs. Finally, properties located immediately outside of an HOA sell at a premium relative to other non-HOA properties, and this premium marginally decreases (increases) in the size (frequency) of neighboring HOAs.