[quote=xiv014]Why is it that most new construction in San Diego have HOAs?[/quote]
“The imposition of an HOA accomplishes several benefits for the municipality. First, these amenities may be burdened with property taxes which would not be the case if the amenities were owned by the municipality. Thus the mandated private amenities are cash generators for the municipalities. Second, the municipalities bear no obligation to maintain the amenities given that they are owned by the HOA. On the other hand, HOA communities are exempt from taxes on certain services provided by the municipality, if the HOA is providing them instead.
In The Voluntary City, published by the libertarian Independent Institute, Donald J. Boudreaux and Randall G. Holcombe argue not in universal favor of homeowners associations, opining that they do not necessarily have advantages over traditional governments. These include the fact that the association’s creator, e.g. a developer, has an incentive to set up a government structured in such a way as to maximize profits and thus increasing the selling price of the property. If a certain decision would increase the selling price of certain parcels and decrease the selling price of others, the developer will choose the option with the highest net income to itself. This will sometimes result in suboptimal outcomes for the homeowners. Jim Fedako has argued that homeowners associations are better than other forms of government, because their powers are limited by contract.[15]”
IMHO, HOAs and Mello-Roos serve a similar purpose: to enable developers to shift the burden of new infrastructure costs to the new buyers and increase their profits. By utilizing HOA and Mello-Roos schemes, they can charge a higher price up front, and make the buyers pay for the extra development costs over time (the old “how much a month” vs. “total cost” scam — too many people still don’t get it).
There is an upper limit as to how much a new buyer can/will pay for a house. If the developer pays the entire cost for the infrastructure themselves without charging monthly fees into the future, and if they cannot charge more than $XXX,XXX (maximum amount buyers are willing/able to pay for those properties), their profits will be negatively affected.
If they charge $XXX,XXX (same maximum amount as above), but instead of paying the infrastructure costs themselves, they pass these costs onto the buyers in the form of ongoing HOA/M-R fees, they can earn much higher profits.
