Why and Where Do Homeowners Associations Form? DRAFT – PLEASE DO NOT CITE WITHOUT PERMISSION OF AUTHORS February 8, 2014

Homeowners associations (HOAs) have proliferated in recent decades as an important provider of local public services, particularly in fast growing states such as Florida. What explains their popularity, and specifically, their formation? We argue that the location and the timing of HOA formation are driven by demand-side, supply-side and institutional factors. Our data comes from the most comprehensive, statewide database of HOAs constructed to date. We use a duration analysis framework to explore which factors predict when an HOA first enters a census tract. We find that predominantly white and higher-income census tracts obtain HOAs sooner, as do tracts farther from the city center and with higher vacancy rates. When we incorporate local public finance variables into our analysis, we find that tracts in cities that spend more on public services are less likely to have HOAs locate within them, suggesting that public expenditures and HOA services may be regarded as substitutable. *The order of the authors alternates across a series of papers and reflects equal contributions. Meltzer: 72 Fifth Avenue, Room 616, New York, NY 10011; Phone: 212-229-5400 x2738; Email: [email protected] Cheung: Rice Hall 233, 10 North Professor Street, Oberlin, OH 44074; Phone: 440-775-8971; Email: [email protected]