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Speaker 1: America is in the middle of an affordable housing crisis.

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Speaker 1: Mortgage rates are at their highest in two decades, and

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Speaker 1: the supply of homes for sale is near a record low.

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Speaker 1: In the middle of all of this, the vast majority

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Speaker 1: of new homes that are being built are in communities

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Speaker 1: like homeowners' associations or hoas. That means they come with

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Speaker 1: extra charges attached on top of a mortgage.

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Speaker 2: There are a lot of costs associated with living in

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Speaker 2: an HOA. Among them are just the regular monthly dues,

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Speaker 2: and those could be below one hundred dollars a month,

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Speaker 2: it could be a one thousand dollars in a more

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Speaker 2: expensive community. You also often have to pay assessments for

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Speaker 2: upkeep and maintenance.

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Speaker 1: My colleague, Sarah Holder is a reporter for Bloomberg covering

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Speaker 1: urban politics and housing, and she's recently been digging into

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Speaker 1: the influence of hoas. Hoas are a large and growing

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Speaker 1: share of the US housing market. Nearly a quarter of

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Speaker 1: the country lives in hoa's or something like them, and

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Speaker 1: part of living in one of these communities means following

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Speaker 1: the rules they've set.

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Speaker 2: These rules can seem petty, but if people don't follow them,

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Speaker 2: there can be pretty big consequences.

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Speaker 1: And the power of these associations to enforce the rules

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Speaker 1: can threaten sustainable home ownership. Today on the show, we'll

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Speaker 1: meet a family that's learned all of this the hard way.

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Speaker 3: This used to be somewhere we felt safe, We felt like,

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Speaker 3: you know, like home, sweet home, and now it doesn't

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Speaker 3: feel that way.

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Speaker 1: We'll also talk about how hoas can offer the hope

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Speaker 1: of affordable housing, but in reality hold it just out

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Speaker 1: of reach, and we'll hear what the government is doing

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Speaker 1: or not doing to address the power of hoas.

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Speaker 2: These are basically private governments that are really underregulated, critics

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Speaker 2: would say, by the federal government.

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Speaker 1: This is the big take Washington. From Bloomberg News, I'm

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Speaker 1: your host Seleiah Mosen. In twenty sixteen, Naomi Mendoza Aleya's

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Speaker 1: family but a new house. It was bigger and pricier

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Speaker 1: than their old one and was in an hoa community

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Speaker 1: called Green Valley Ranch. Picture cream colored houses with beige roofs,

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Speaker 1: each spaced evenly apart, and the occasional basketball hoop visible

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Speaker 1: against the horizon.

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Speaker 3: It was safe, it felt comfortable, neighbors were friendly. It

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Speaker 3: just felt somewhere where you know, you could eventually be

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Speaker 3: there for a while.

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Speaker 1: That was the idea, Just like a lot of us.

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Speaker 1: Naomi's dad hoped his kids would inherit the house one day,

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Speaker 1: and making it their own became his passion project. He

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Speaker 1: added a deck in the back and remodeled the inside so.

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Speaker 3: My dad at the time freely enjoyed a lot of

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Speaker 3: black so we have like marble floors, black cabinets.

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Speaker 1: It was a family effort. Naomi's stepbrother even came from

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Speaker 1: Mexico to help. Soon, the house on Kirk Street had

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Speaker 1: become a gathering place for their community.

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Speaker 3: We'd sometimes just throw parties for no reason, just like, hey,

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Speaker 3: come over, let's have some music. We're Hispanics, so we

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Speaker 3: had a lot of Mexican dishes all the time. Any

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Speaker 3: small event, it would kind of always be like, hey,

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Speaker 3: you guys can celebrate it here, like this is your home,

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Speaker 3: just as was our home.

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Speaker 1: My colleague Sarah Holder told me that hoas were basically

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Speaker 1: invented to make suburban life feel idyllic.

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Speaker 2: The seeds of what we now think of as hoas

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Speaker 2: kind of started in the nineteen tens and the nineteen

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Speaker 2: twenties with the rise of these community builders.

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Speaker 1: This is no mere.

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Speaker 2: Collection of homes, but a carefully planned community.

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Speaker 1: Think cookie cutter houses perfectly trimmed lawns. Among the promises

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Speaker 1: of hoas were offering shared spaces and handling all the

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Speaker 1: community upkeep, like making sure the roads were always freshly

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Speaker 1: paved and clear of snow.

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Speaker 3: The sun and air and open green a part of

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Speaker 3: the design.

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Speaker 2: Safe streets and quiet neighborhoods are not just matters of

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Speaker 2: good luck. They're built into the pattern and built to

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Speaker 2: stay there.

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Speaker 1: The developers who built these communities wanted them to stay

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Speaker 1: that way, so they created rules governing the people who

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Speaker 1: lived there. The idea was to keep the neighborhoods as

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Speaker 1: idyllic as they were designed to be.

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Speaker 2: You can't start a gas station. You can only build

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Speaker 2: a home. You can have a white house, you cannot

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Speaker 2: have a pink house.

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Speaker 1: Back in the early days of hoas, that also meant

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Speaker 1: governing who could live in the community and who couldn't.

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Speaker 1: Some hoas had rules excluding people of color and people

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Speaker 1: from certain religious groups.

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Speaker 2: They were able to codify segregation within their borders.

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Speaker 1: Apart from segregation, hoas, like so many things, come down

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Speaker 1: to money. The developers said that all these rules were

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Speaker 1: rooted in their desire to protect property values.

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Speaker 2: They thought that if they had this kind of control

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Speaker 2: over a neighborhood, the valley, you of these homes would

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Speaker 2: stay the same over a long period of time.

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Speaker 1: And this system of rules continues to this day in

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Speaker 1: hundreds of thousands of HOA communities around the country.

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Speaker 2: So that's where these things like you can't have a

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Speaker 2: basketball hoop, or you can't have shutters, or you can't

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Speaker 2: not have shutters come into play.

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Speaker 1: Those rules and regulations that all residents have to abide

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Speaker 1: by are part of what make hoa's appealing places to live.

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Speaker 1: Some people like the idea that their neighbors can't let

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Speaker 1: their lawns go on trimmed or blast music late at night,

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Speaker 1: but the HOA board can take enforcement of these rules

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Speaker 1: really seriously, and they punish residents who don't comply. In

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Speaker 1: March of this year, Naomi's mom got a phone call

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Speaker 1: from a number that she didn't recognize. She actually thought

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Speaker 1: it was spam.

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Speaker 3: But for some reason she answered, and when she answered,

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Speaker 3: they told her, hey, like, I'm the new owner's mom,

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Speaker 3: just calling to let you know that your husband like

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Speaker 3: does and own the house no more.

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Speaker 1: At first, they were sure there had been a misunderstanding.

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Speaker 3: But then my dad kind of was like, well, let

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Speaker 3: me just double check with like the realtor that sold

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Speaker 3: us the house. He called the realtor, and the realtor

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Speaker 3: was like, yeah, I wasn't aware of this, but like,

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Speaker 3: your name isn't on the title anymore. It's under someone else.

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Speaker 3: And they kind of got us all in shock, as

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Speaker 3: we were all kind of like, well, you know, like

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Speaker 3: what do you mean, Like, how is that even possible?

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Speaker 1: Before that fateful phone call, Naomi's family had been happily

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Speaker 1: living in the Green Valley Ranch community. There was one thing, though,

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Speaker 1: that had been nagging at them. The HOA had been

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Speaker 1: docking them for a laundry list of violations, things that,

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Speaker 1: to Naomi seemed pretty inconsequential.

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Speaker 3: Oil stains on the driveway. We had this tree that

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Speaker 3: was growing on the side of our house. They wanted

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Speaker 3: us to take it off since it was dying.

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Speaker 1: Garage doors two different shades of beige. A broken window

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Speaker 1: then another. After their home was vandalized.

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Speaker 3: We called someone to come see if we could repair.

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Speaker 3: You know, both windows turned out to be way more

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Speaker 3: than we thought it would be. So it was like, well,

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Speaker 3: we have to prioritize one or the other.

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Speaker 1: The HOA one of these things fixed. So they sent

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Speaker 1: the family letters and the mail. Naomi says her family

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Speaker 1: was focused on staying on top of their mortgage payments

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Speaker 1: and their taxes, not addressing HOA infractions.

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Speaker 3: We weren't doing it on purpose, and they kept being

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Speaker 3: on our butts about it.

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Speaker 1: When the HOA didn't see the violations being addressed, they

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Speaker 1: charged Naomi's family a fine. Her family didn't realize that

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Speaker 1: those fines, which started off in the low hundreds, could

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Speaker 1: quickly balloon if they went unpaid. The HOA tacked on

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Speaker 1: late fees and legal fees to pay for the attorneys

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Speaker 1: the board employed to enforce the rules. It all added up,

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Speaker 1: and eventually Naomi's family owned the HOA over six thousand dollars.

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Speaker 1: And then came that call in March, the one that

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Speaker 1: delivered the news of their house had been sold.

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Speaker 3: My dad told us, if someone comes to the house

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Speaker 3: and tries to evict, you stand your ground, just because

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Speaker 3: you know. We were still in doubt, and then we

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Speaker 3: later found out that we weren't the only ones that

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Speaker 3: this has happened to.

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Speaker 1: We'll get to that after the break, we're back with

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Speaker 1: the story of Naomi Mendoza Olea and the HOA that

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Speaker 1: took her family's home away. Naomi says that her family

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Speaker 1: had no idea that unpaid fines could actually lead to

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Speaker 1: losing their home. But my colleague Sarah Holder told me

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Speaker 1: that this can happen because of a specific power ahoays

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Speaker 1: have to enforce their rules. Hoas can get a lean

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Speaker 1: on a property, which is essentially the ability to hold

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Speaker 1: onto a piece of property until someone pays the debt

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Speaker 1: that they owe. You think about what happens if you

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Speaker 1: don't pay a mortgage, which the bank can take your home.

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Speaker 1: And in Colorado, where Naomi's family lives, hoas can get

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Speaker 1: what's called a super lean, which means an HOA that's

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Speaker 1: owed money can claim the property even over the bank.

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Speaker 2: These super leens or priority lians, they're meant to give

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Speaker 2: aja's first DIBs on the proceeds from a foreclosure sale.

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Speaker 2: So during the two thousand and eight financial crisis, for example,

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Speaker 2: it ensured that hoas that were owed money were paid

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Speaker 2: back before the bank if homeowners defaulted on their mortgages.

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Speaker 2: And HOA advocates say this is so that you don't

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Speaker 2: have to pay for the mistakes of your neighbors. But

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Speaker 2: in some states, an HOA superleen can wipe out that

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Speaker 2: mortgage entirely, and that allows Hias to move to foreclosure

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Speaker 2: and really be ruthless in getting that debt paid off.

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Speaker 1: The HOA ended up selling Naomi's family home at a

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Speaker 1: foreclosure auction for just eighty five thousand dollars.

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Speaker 3: It's not even like close to what my dad even

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Speaker 3: bought it for. It was like, how is that house

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Speaker 3: worth such nato amount of money now, especially because you know,

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Speaker 3: we remodeled all the inside, it has a deck, like,

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Speaker 3: it is worth more than they sold it for.

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Speaker 1: Zillo estimated the house was worth over five hundred and

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Speaker 1: fifty thousand dollars. That's more than six times what the

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Speaker 1: HOA sold it for. The HOA and their legal representatives

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Speaker 1: did not respond to a request for comment. In legal documents,

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Speaker 1: the HOA said that they had reached out to Naomi's

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Speaker 1: father about what was happening and didn't hear back. Naomi

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Speaker 1: says that communication never reached him.

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Speaker 3: They claimed that they served my dad papers, but there's

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Speaker 3: this miscommunication with my dad. He doesn't speak English fluently,

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Speaker 3: and like They say that they served him the papers

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Speaker 3: at the house that we currently live at, where he

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Speaker 3: hasn't lived there for four or five years already.

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Speaker 1: We reached out to the HOA for and they didn't respond.

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Speaker 1: Naomi says the realization that her family was losing their

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Speaker 1: home was crushing.

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Speaker 3: I know how hard my parents have work for that

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Speaker 3: home so it could stay and be you know, inherited

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Speaker 3: to us. That for it to be snatched, you know,

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Speaker 3: from one day to another is very like heartbreaking. It

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Speaker 3: was also like what happens now? We could have been

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Speaker 3: evicted at any second without us having nowhere to go,

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Speaker 3: and like, you know, everything economically has been so expensive

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Speaker 3: that it was like, how are we going to do this?

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Speaker 1: The family is currently challenging their foreclosure in court, and

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Speaker 1: Bloomberg's Sarah Holder says she spoke to several other families

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Speaker 1: in a similar position.

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Speaker 2: One of the things that I learned in this reporting

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Speaker 2: is that not everyone knows what they're getting into, and

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Speaker 2: they felt that they had a cheat one part of

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Speaker 2: the American dream, which for years has been home ownership.

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Speaker 2: You know, they had settled in this community, they had

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Speaker 2: bought a house that was affordable to them at the

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Speaker 2: time they were paying their mortgage, and the HOA rules

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Speaker 2: and the punitiveness of this HOA was threatening to destroy that.

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Speaker 1: While there's no national data on HOA foreclosures, reporting from

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Speaker 1: the Colorado Sun found that since twenty eighteen, hoas have

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Speaker 1: filed about three thousand foreclosures in the state. About eight

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Speaker 1: percent of those homes have been sold at auction. Bloomberg

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Speaker 1: News reached out to the Community Association's Institute, a lobbying

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Speaker 1: group representing hoas. Their spokesperson Don Bawman told us that

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Speaker 1: while communities should allow time for due process, having the

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Speaker 1: power of foreclosure is a matter of fairness. That way,

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Speaker 1: she said, community members don't have to make up the

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Speaker 1: extra costs if they're neighbors aren't paying their share. Bauman

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Speaker 1: also emphasized that hoas offer potential home buyers an affordable

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Speaker 1: and worthwhile investment opportunity. But stories like that of Naomi's

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Speaker 1: family are getting attention, and lawmakers in some states have

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Speaker 1: started to take action. In California, Governor Gavin Newsom signed

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Speaker 1: a law to cap HOA fee increases. In North Carolina,

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Speaker 1: a bill to make it harder to move to foreclosure

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Speaker 1: is working its way through the state Senate, and in

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Speaker 1: Naomi Mendoza Aleya's home state of Colorado, a new law

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Speaker 1: took effect in the summer of twenty twenty two. Among

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Speaker 1: other things, it capped the interest rate on unpaid HOA

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Speaker 1: fines and barred foreclosures triggered by minor violations. It now

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Speaker 1: requires hoas to repeatedly communicate violations to homeowners. For Naomi

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Speaker 1: and her family, it was too late. A lawyer filed

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Speaker 1: the paperwork that set off the foreclosure process just two

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Speaker 1: days before the new law went into effect. But some

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Speaker 1: people believe that there is more that needs to be

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Speaker 1: done on a national scale to protect homeowners like them.

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Speaker 1: Michael Neil is a researcher at the Urban Institute focusing

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Speaker 1: on housing finance policy. Neil used to work at Fannie May,

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Speaker 1: a federal mortgage lender. He pointed out that higher prices

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Speaker 1: don't just limit a person's ability to buy a home.

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Speaker 1: There's also the issue of sustainability.

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Speaker 4: That is, if I'm not able to pay my mortgage

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Speaker 4: because I've got a high payment with higher interest rates,

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Speaker 4: plus I've got the high HOA fee. In times of

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Speaker 4: stress where i might lose my job, i might be

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Speaker 4: less likely to actually make all of those payments.

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Speaker 1: Which isn't just a risk to individual homeowners. Too many

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Speaker 1: people defaulting on their mortgages can tank an economy. That's

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Speaker 1: a lesson we learned the hard way. In two thousand

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Speaker 1: and eight, I asked Neil about what the HOA spokesperson

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Speaker 1: said that hoas offer potential home buyers an affordable investment opportunity.

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Speaker 1: He told me that the data doesn't necessarily back that up.

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Speaker 4: Generally, the research suggests that the presence of an HOA

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Speaker 4: so not the level of the faith, but the presence

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Speaker 4: of an HOA typically coincides with higher house prices.

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Speaker 1: Will Some state and local lawmakers seem to be tracking

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Speaker 1: the complications that come with hoas. So far, the federal

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Speaker 1: government hasn't said anything. I reached out to the Department

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Speaker 1: of Housing and Urban Development and they told me that

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Speaker 1: they had no comment on hoas. I also tried tracking

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Speaker 1: down a number of former federal government officials, anyone who

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Speaker 1: could give me a window into the conversations around hoas

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Speaker 1: from the inside, and no one would talk. As for

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Speaker 1: Naomi and her family, they're stuck waiting for their day

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Speaker 1: in court. Their case was recently delayed until March, which

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Speaker 1: Naomi says is a relief because it gives them a

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Speaker 1: few more months in their home, but it's uncomfortable to

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Speaker 1: live in a place that could be taken away from

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Speaker 1: them at any moment. If they have to move, Naomi says,

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Speaker 1: it won't be to another hoa.

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Speaker 3: This used to be somewhere we felt safe, We felt like,

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Speaker 3: you know, like home sweet home, and now it doesn't

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Speaker 3: feel that way. So whether we win the house back

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Speaker 3: or not, I think we still kind of want to

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Speaker 3: move from there, just because we don't feel like it's

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Speaker 3: our home no more.

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Speaker 1: Thanks for listening to the Big Take from Bloomberg News.

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Speaker 1: I'm Seleiah Moson. This episode was produced by Julia Press,

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Speaker 1: Anna Masarakis, and Naomi Shaven. It's part of a special

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Speaker 1: series from our DC newsroom. Blake Maples is our mix engineer.

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Speaker 1: Our story editors are Wendy Benjaminson, Mike Shepard, and Caitlin Kenny.

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Speaker 1: Sage Bauman is our executive producer and head of Podcasts.

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Speaker 1: Thanks for tuning in. I'll be back next week.