Do Shantytowns Have Condo Fees?

Shantytown

Of shantytowns and homeowners associations.

There’s usually a sizable difference in the purchase price of single family homes and condominiums of similar grade. Adjusting for differences in square footage and certain amenities, the required condo fees are usually higher than single family homeowner association (HOA) fees.

Could that difference in fees make up for the difference in purchase prices? How much more property could you buy if, instead of acquiring a property with a condo fee, you bought one without? Here’s one way to look at it.

I have a condo where the fee is over $300 per month. That includes trash service, water and electricity, as well as maintenance of common areas and all that good stuff. But let’s suppose I had instead bought a home nearby that didn’t have a homeowner association. How much more home would that $300 condo fee buy?

First, realistically it would be more like a $200 difference since I would have to pay for utilities and such any way. Assuming a 30 year mortgage and 5% annual interest, that extra $200 per month works out to a little more than $37,000 – an amount that will, unlike fee increases, appreciate in the owner’s favor.

In other words, if I had put that extra $200 per month toward buying a bigger property, I could have bought a home that cost about $37,000 more. Would that have been likely in that area? No. But that doesn’t mean that’s always the case.

Condo and homeowner associations reduce autonomy of the individual owners in order to maintain more uniformity. Neighborhoods which don’t have them increase the autonomy of the homeowner. You could say that HOAs protect the community from you while not having one protects you from the community.

The factors that influence the condo or HOA fee include management and staff salaries, whether utilities are included or if they’re metered by individual units, what kinds of amenities are available (club houses, pools, etc.) and when owners agree to capital projects and upgrades.

Decisions are generally reached by committees consisting of homeowners or their proxies. If quorums aren’t reached during meetings then decisions aren’t voted through. If they committees can’t agree or come to a decision, often times things don’t get done. Or procedures get railroaded. HOA committees aren’t always efficient but they generally work.

So do shantytowns have associations? I can’t imagine any do. Further, if a neighborhood doesn’t have one, and especially if it’s not one of those really affluent ones, not having an HOA puts it at greater risk of becoming a shantytown.

However, if you can do better maintaining a single family home for proportionately less than a condo association’s dues, aren’t wasteful with your utilities and feel a neighborhood or community isn’t likely to decline from a lack of an association, then you may be better off without one.

Just be sure to weigh how much purchasing power you’re trading off for the sake of uniformity, and how much that uniformity is worth to potential buyers.

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