Speaker 1: America is in the middle of an affordable housing crisis.
Speaker 1: Mortgage rates are at their highest in two decades, and
Speaker 1: the supply of homes for sale is near a record low.
Speaker 1: In the middle of all of this, the vast majority
Speaker 1: of new homes that are being built are in communities
Speaker 1: like homeowners' associations or hoas. That means they come with
Speaker 1: extra charges attached on top of a mortgage.
Speaker 2: There are a lot of costs associated with living in
Speaker 2: an HOA. Among them are just the regular monthly dues,
Speaker 2: and those could be below one hundred dollars a month,
Speaker 2: it could be a one thousand dollars in a more
Speaker 2: expensive community. You also often have to pay assessments for
Speaker 2: upkeep and maintenance.
Speaker 1: My colleague, Sarah Holder is a reporter for Bloomberg covering
Speaker 1: urban politics and housing, and she's recently been digging into
Speaker 1: the influence of hoas. Hoas are a large and growing
Speaker 1: share of the US housing market. Nearly a quarter of
Speaker 1: the country lives in hoa's or something like them, and
Speaker 1: part of living in one of these communities means following
Speaker 1: the rules they've set.
Speaker 2: These rules can seem petty, but if people don't follow them,
Speaker 2: there can be pretty big consequences.
Speaker 1: And the power of these associations to enforce the rules
Speaker 1: can threaten sustainable home ownership. Today on the show, we'll
Speaker 1: meet a family that's learned all of this the hard way.
Speaker 3: This used to be somewhere we felt safe, We felt like,
Speaker 3: you know, like home, sweet home, and now it doesn't
Speaker 3: feel that way.
Speaker 1: We'll also talk about how hoas can offer the hope
Speaker 1: of affordable housing, but in reality hold it just out
Speaker 1: of reach, and we'll hear what the government is doing
Speaker 1: or not doing to address the power of hoas.
Speaker 2: These are basically private governments that are really underregulated, critics
Speaker 2: would say, by the federal government.
Speaker 1: This is the big take Washington. From Bloomberg News, I'm
Speaker 1: your host Seleiah Mosen. In twenty sixteen, Naomi Mendoza Aleya's
Speaker 1: family but a new house. It was bigger and pricier
Speaker 1: than their old one and was in an hoa community
Speaker 1: called Green Valley Ranch. Picture cream colored houses with beige roofs,
Speaker 1: each spaced evenly apart, and the occasional basketball hoop visible
Speaker 1: against the horizon.
Speaker 3: It was safe, it felt comfortable, neighbors were friendly. It
Speaker 3: just felt somewhere where you know, you could eventually be
Speaker 3: there for a while.
Speaker 1: That was the idea, Just like a lot of us.
Speaker 1: Naomi's dad hoped his kids would inherit the house one day,
Speaker 1: and making it their own became his passion project. He
Speaker 1: added a deck in the back and remodeled the inside so.
Speaker 3: My dad at the time freely enjoyed a lot of
Speaker 3: black so we have like marble floors, black cabinets.
Speaker 1: It was a family effort. Naomi's stepbrother even came from
Speaker 1: Mexico to help. Soon, the house on Kirk Street had
Speaker 1: become a gathering place for their community.
Speaker 3: We'd sometimes just throw parties for no reason, just like, hey,
Speaker 3: come over, let's have some music. We're Hispanics, so we
Speaker 3: had a lot of Mexican dishes all the time. Any
Speaker 3: small event, it would kind of always be like, hey,
Speaker 3: you guys can celebrate it here, like this is your home,
Speaker 3: just as was our home.
Speaker 1: My colleague Sarah Holder told me that hoas were basically
Speaker 1: invented to make suburban life feel idyllic.
Speaker 2: The seeds of what we now think of as hoas
Speaker 2: kind of started in the nineteen tens and the nineteen
Speaker 2: twenties with the rise of these community builders.
Speaker 1: This is no mere.
Speaker 2: Collection of homes, but a carefully planned community.
Speaker 1: Think cookie cutter houses perfectly trimmed lawns. Among the promises
Speaker 1: of hoas were offering shared spaces and handling all the
Speaker 1: community upkeep, like making sure the roads were always freshly
Speaker 1: paved and clear of snow.
Speaker 3: The sun and air and open green a part of
Speaker 3: the design.
Speaker 2: Safe streets and quiet neighborhoods are not just matters of
Speaker 2: good luck. They're built into the pattern and built to
Speaker 2: stay there.
Speaker 1: The developers who built these communities wanted them to stay
Speaker 1: that way, so they created rules governing the people who
Speaker 1: lived there. The idea was to keep the neighborhoods as
Speaker 1: idyllic as they were designed to be.
Speaker 2: You can't start a gas station. You can only build
Speaker 2: a home. You can have a white house, you cannot
Speaker 2: have a pink house.
Speaker 1: Back in the early days of hoas, that also meant
Speaker 1: governing who could live in the community and who couldn't.
Speaker 1: Some hoas had rules excluding people of color and people
Speaker 1: from certain religious groups.
Speaker 2: They were able to codify segregation within their borders.
Speaker 1: Apart from segregation, hoas, like so many things, come down
Speaker 1: to money. The developers said that all these rules were
Speaker 1: rooted in their desire to protect property values.
Speaker 2: They thought that if they had this kind of control
Speaker 2: over a neighborhood, the valley, you of these homes would
Speaker 2: stay the same over a long period of time.
Speaker 1: And this system of rules continues to this day in
Speaker 1: hundreds of thousands of HOA communities around the country.
Speaker 2: So that's where these things like you can't have a
Speaker 2: basketball hoop, or you can't have shutters, or you can't
Speaker 2: not have shutters come into play.
Speaker 1: Those rules and regulations that all residents have to abide
Speaker 1: by are part of what make hoa's appealing places to live.
Speaker 1: Some people like the idea that their neighbors can't let
Speaker 1: their lawns go on trimmed or blast music late at night,
Speaker 1: but the HOA board can take enforcement of these rules
Speaker 1: really seriously, and they punish residents who don't comply. In
Speaker 1: March of this year, Naomi's mom got a phone call
Speaker 1: from a number that she didn't recognize. She actually thought
Speaker 1: it was spam.
Speaker 3: But for some reason she answered, and when she answered,
Speaker 3: they told her, hey, like, I'm the new owner's mom,
Speaker 3: just calling to let you know that your husband like
Speaker 3: does and own the house no more.
Speaker 1: At first, they were sure there had been a misunderstanding.
Speaker 3: But then my dad kind of was like, well, let
Speaker 3: me just double check with like the realtor that sold
Speaker 3: us the house. He called the realtor, and the realtor
Speaker 3: was like, yeah, I wasn't aware of this, but like,
Speaker 3: your name isn't on the title anymore. It's under someone else.
Speaker 3: And they kind of got us all in shock, as
Speaker 3: we were all kind of like, well, you know, like
Speaker 3: what do you mean, Like, how is that even possible?
Speaker 1: Before that fateful phone call, Naomi's family had been happily
Speaker 1: living in the Green Valley Ranch community. There was one thing, though,
Speaker 1: that had been nagging at them. The HOA had been
Speaker 1: docking them for a laundry list of violations, things that,
Speaker 1: to Naomi seemed pretty inconsequential.
Speaker 3: Oil stains on the driveway. We had this tree that
Speaker 3: was growing on the side of our house. They wanted
Speaker 3: us to take it off since it was dying.
Speaker 1: Garage doors two different shades of beige. A broken window
Speaker 1: then another. After their home was vandalized.
Speaker 3: We called someone to come see if we could repair.
Speaker 3: You know, both windows turned out to be way more
Speaker 3: than we thought it would be. So it was like, well,
Speaker 3: we have to prioritize one or the other.
Speaker 1: The HOA one of these things fixed. So they sent
Speaker 1: the family letters and the mail. Naomi says her family
Speaker 1: was focused on staying on top of their mortgage payments
Speaker 1: and their taxes, not addressing HOA infractions.
Speaker 3: We weren't doing it on purpose, and they kept being
Speaker 3: on our butts about it.
Speaker 1: When the HOA didn't see the violations being addressed, they
Speaker 1: charged Naomi's family a fine. Her family didn't realize that
Speaker 1: those fines, which started off in the low hundreds, could
Speaker 1: quickly balloon if they went unpaid. The HOA tacked on
Speaker 1: late fees and legal fees to pay for the attorneys
Speaker 1: the board employed to enforce the rules. It all added up,
Speaker 1: and eventually Naomi's family owned the HOA over six thousand dollars.
Speaker 1: And then came that call in March, the one that
Speaker 1: delivered the news of their house had been sold.
Speaker 3: My dad told us, if someone comes to the house
Speaker 3: and tries to evict, you stand your ground, just because
Speaker 3: you know. We were still in doubt, and then we
Speaker 3: later found out that we weren't the only ones that
Speaker 3: this has happened to.
Speaker 1: We'll get to that after the break, we're back with
Speaker 1: the story of Naomi Mendoza Olea and the HOA that
Speaker 1: took her family's home away. Naomi says that her family
Speaker 1: had no idea that unpaid fines could actually lead to
Speaker 1: losing their home. But my colleague Sarah Holder told me
Speaker 1: that this can happen because of a specific power ahoays
Speaker 1: have to enforce their rules. Hoas can get a lean
Speaker 1: on a property, which is essentially the ability to hold
Speaker 1: onto a piece of property until someone pays the debt
Speaker 1: that they owe. You think about what happens if you
Speaker 1: don't pay a mortgage, which the bank can take your home.
Speaker 1: And in Colorado, where Naomi's family lives, hoas can get
Speaker 1: what's called a super lean, which means an HOA that's
Speaker 1: owed money can claim the property even over the bank.
Speaker 2: These super leens or priority lians, they're meant to give
Speaker 2: aja's first DIBs on the proceeds from a foreclosure sale.
Speaker 2: So during the two thousand and eight financial crisis, for example,
Speaker 2: it ensured that hoas that were owed money were paid
Speaker 2: back before the bank if homeowners defaulted on their mortgages.
Speaker 2: And HOA advocates say this is so that you don't
Speaker 2: have to pay for the mistakes of your neighbors. But
Speaker 2: in some states, an HOA superleen can wipe out that
Speaker 2: mortgage entirely, and that allows Hias to move to foreclosure
Speaker 2: and really be ruthless in getting that debt paid off.
Speaker 1: The HOA ended up selling Naomi's family home at a
Speaker 1: foreclosure auction for just eighty five thousand dollars.
Speaker 3: It's not even like close to what my dad even
Speaker 3: bought it for. It was like, how is that house
Speaker 3: worth such nato amount of money now, especially because you know,
Speaker 3: we remodeled all the inside, it has a deck, like,
Speaker 3: it is worth more than they sold it for.
Speaker 1: Zillo estimated the house was worth over five hundred and
Speaker 1: fifty thousand dollars. That's more than six times what the
Speaker 1: HOA sold it for. The HOA and their legal representatives
Speaker 1: did not respond to a request for comment. In legal documents,
Speaker 1: the HOA said that they had reached out to Naomi's
Speaker 1: father about what was happening and didn't hear back. Naomi
Speaker 1: says that communication never reached him.
Speaker 3: They claimed that they served my dad papers, but there's
Speaker 3: this miscommunication with my dad. He doesn't speak English fluently,
Speaker 3: and like They say that they served him the papers
Speaker 3: at the house that we currently live at, where he
Speaker 3: hasn't lived there for four or five years already.
Speaker 1: We reached out to the HOA for and they didn't respond.
Speaker 1: Naomi says the realization that her family was losing their
Speaker 1: home was crushing.
Speaker 3: I know how hard my parents have work for that
Speaker 3: home so it could stay and be you know, inherited
Speaker 3: to us. That for it to be snatched, you know,
Speaker 3: from one day to another is very like heartbreaking. It
Speaker 3: was also like what happens now? We could have been
Speaker 3: evicted at any second without us having nowhere to go,
Speaker 3: and like, you know, everything economically has been so expensive
Speaker 3: that it was like, how are we going to do this?
Speaker 1: The family is currently challenging their foreclosure in court, and
Speaker 1: Bloomberg's Sarah Holder says she spoke to several other families
Speaker 1: in a similar position.
Speaker 2: One of the things that I learned in this reporting
Speaker 2: is that not everyone knows what they're getting into, and
Speaker 2: they felt that they had a cheat one part of
Speaker 2: the American dream, which for years has been home ownership.
Speaker 2: You know, they had settled in this community, they had
Speaker 2: bought a house that was affordable to them at the
Speaker 2: time they were paying their mortgage, and the HOA rules
Speaker 2: and the punitiveness of this HOA was threatening to destroy that.
Speaker 1: While there's no national data on HOA foreclosures, reporting from
Speaker 1: the Colorado Sun found that since twenty eighteen, hoas have
Speaker 1: filed about three thousand foreclosures in the state. About eight
Speaker 1: percent of those homes have been sold at auction. Bloomberg
Speaker 1: News reached out to the Community Association's Institute, a lobbying
Speaker 1: group representing hoas. Their spokesperson Don Bawman told us that
Speaker 1: while communities should allow time for due process, having the
Speaker 1: power of foreclosure is a matter of fairness. That way,
Speaker 1: she said, community members don't have to make up the
Speaker 1: extra costs if they're neighbors aren't paying their share. Bauman
Speaker 1: also emphasized that hoas offer potential home buyers an affordable
Speaker 1: and worthwhile investment opportunity. But stories like that of Naomi's
Speaker 1: family are getting attention, and lawmakers in some states have
Speaker 1: started to take action. In California, Governor Gavin Newsom signed
Speaker 1: a law to cap HOA fee increases. In North Carolina,
Speaker 1: a bill to make it harder to move to foreclosure
Speaker 1: is working its way through the state Senate, and in
Speaker 1: Naomi Mendoza Aleya's home state of Colorado, a new law
Speaker 1: took effect in the summer of twenty twenty two. Among
Speaker 1: other things, it capped the interest rate on unpaid HOA
Speaker 1: fines and barred foreclosures triggered by minor violations. It now
Speaker 1: requires hoas to repeatedly communicate violations to homeowners. For Naomi
Speaker 1: and her family, it was too late. A lawyer filed
Speaker 1: the paperwork that set off the foreclosure process just two
Speaker 1: days before the new law went into effect. But some
Speaker 1: people believe that there is more that needs to be
Speaker 1: done on a national scale to protect homeowners like them.
Speaker 1: Michael Neil is a researcher at the Urban Institute focusing
Speaker 1: on housing finance policy. Neil used to work at Fannie May,
Speaker 1: a federal mortgage lender. He pointed out that higher prices
Speaker 1: don't just limit a person's ability to buy a home.
Speaker 1: There's also the issue of sustainability.
Speaker 4: That is, if I'm not able to pay my mortgage
Speaker 4: because I've got a high payment with higher interest rates,
Speaker 4: plus I've got the high HOA fee. In times of
Speaker 4: stress where i might lose my job, i might be
Speaker 4: less likely to actually make all of those payments.
Speaker 1: Which isn't just a risk to individual homeowners. Too many
Speaker 1: people defaulting on their mortgages can tank an economy. That's
Speaker 1: a lesson we learned the hard way. In two thousand
Speaker 1: and eight, I asked Neil about what the HOA spokesperson
Speaker 1: said that hoas offer potential home buyers an affordable investment opportunity.
Speaker 1: He told me that the data doesn't necessarily back that up.
Speaker 4: Generally, the research suggests that the presence of an HOA
Speaker 4: so not the level of the faith, but the presence
Speaker 4: of an HOA typically coincides with higher house prices.
Speaker 1: Will Some state and local lawmakers seem to be tracking
Speaker 1: the complications that come with hoas. So far, the federal
Speaker 1: government hasn't said anything. I reached out to the Department
Speaker 1: of Housing and Urban Development and they told me that
Speaker 1: they had no comment on hoas. I also tried tracking
Speaker 1: down a number of former federal government officials, anyone who
Speaker 1: could give me a window into the conversations around hoas
Speaker 1: from the inside, and no one would talk. As for
Speaker 1: Naomi and her family, they're stuck waiting for their day
Speaker 1: in court. Their case was recently delayed until March, which
Speaker 1: Naomi says is a relief because it gives them a
Speaker 1: few more months in their home, but it's uncomfortable to
Speaker 1: live in a place that could be taken away from
Speaker 1: them at any moment. If they have to move, Naomi says,
Speaker 1: it won't be to another hoa.
Speaker 3: This used to be somewhere we felt safe, We felt like,
Speaker 3: you know, like home sweet home, and now it doesn't
Speaker 3: feel that way. So whether we win the house back
Speaker 3: or not, I think we still kind of want to
Speaker 3: move from there, just because we don't feel like it's
Speaker 3: our home no more.
Speaker 1: Thanks for listening to the Big Take from Bloomberg News.
Speaker 1: I'm Seleiah Moson. This episode was produced by Julia Press,
Speaker 1: Anna Masarakis, and Naomi Shaven. It's part of a special
Speaker 1: series from our DC newsroom. Blake Maples is our mix engineer.
Speaker 1: Our story editors are Wendy Benjaminson, Mike Shepard, and Caitlin Kenny.
Speaker 1: Sage Bauman is our executive producer and head of Podcasts.
Speaker 1: Thanks for tuning in. I'll be back next week.