The Growth of Community Associations

Matt Heron colorA community association is a group of owners who have agreed to share certain aspects of their community. In Cohan v Riverside Park Place Condo Ass’n, Inc, 123 Mich App 743, 746–748 (1983), relating to a condominium, the Michigan Court of Appeals described this relationship as follows:

Every man may justly consider his home his castle and himself as the king thereof; nevertheless his sovereign fiat to use his property as he pleases must yield, at least in degree, where ownership is in common or cooperation with others. The benefits of condominium living and ownership demand no less. The individual ought not to be permitted to disrupt the integrity of the common scheme through his desire for change, however laudable that change might be.  Cohan, 123 Mich App at 748.

With a condominium, there is shared ownership of common elements. The concept of a community association, however, is not limited to communities which share common ownership. Many homeowners share only the limitations and covenants contained in deed restrictions and yet still benefit from a community association. As to both types of such community associations, owners give up a certain level of control in order to live within a common community; however, it is most likely because of this shared control that community association living has seen tremendous growth since they first started to become popular in the early 1970s.

As of 2012, more than 63 million people lived in community associations throughout the United States, and 24% of all homes in the U.S. are in community associations. Community associations have grown from 701,000 housing units in 1970 to nearly 26 million housing units in 2012. The value of all homes in community associations as of 2012 ($4.237 trillion) exceeded the gross domestic product of all countries in the world except for the United States ($17.419 trillion); China ($10.355 trillion), and Japan ($4.601 trillion). In 2012 community associations collected $51 billion in assessments, and spent over $20 billion from accumulated reserve funds for capital improvements. The value of the time spent each year by association board and committee members, which is almost always performed on a volunteer basis, is $1.6 billion. In other words, community associations have grown to constitute a significant aspect of our economy and everyday living.

California and Florida lead the way in sheer numbers, with these two states having 88,500 community associations between them, or over a quarter (27.3%) of all associations in the U.S. Michigan has 7,900 community associations, or 2.4% of all U.S. associations. Homeowner associations account for about 50% of associations, condominiums about 45-48%, and cooperatives 3-5%.

There are several reasons why people like living in community associations. From a monetary perspective, community associations help maintain property values, minimize social costs by reducing the amount each resident needs to spend for common expenditures, and expand affordable home ownership. From an aesthetic perspective, community associations help maintain a community’s appeal by landscaping common areas and requiring owners to adhere to agreed standards on a home’s appearance and limitations on use. According to the Foundation for Community Association Research, more than 92% of residents rate their living experience as positive (70%) or neutral (22%), and 81% of residents say that they get a “great” or “good” return on their investment. Since community associations are almost always governed by residents with a vested interest in the longevity of the community, resident satisfaction should remain relatively constant as the number of community associations continues to grow.

Matthew Heron is an attorney in our Livonia office where he concentrates his practice on commercial litigation and real estate, including community association, condominium law, real estate litigation, and zoning and land use. He may be reached at (734) 261-2400 or mheron@cmda-law.com.