Friday, September 30, 2005

Private communities

Private communities with homeowners associations as local governments account for one of the most important migrations in the U.S. today (the others being [often concurrent moves] to the outer suburbs and to the sunbelt).

Yet, there are critics. Some claim that residents are getting a bad deal; the intrusiveness of HOA governance negates any benefits. Others worry about negative externalities. Robert Nelson deals with both criticisms in his latest book on the subject.

The hardest criticism to accept is the one that large numbers of people continue to move into arrangements that are actually harmful to them. In the Fall 2005 issue of Regulation Amanda Agan and Alex Tabarrok ("What Are Private Governments Worth?") report on their empirical work that estimates a $14,000 premium for for HOA governance, holding other effects constant.

Large-scale migrations are usually a signal worth taking seriously.