HOA fees: What are they and how do they work?

If you’re searching for a home, you may come across HOA fees. They’re regular payments that people make if they live in a condo or housing development that’s governed by a homeowners association (HOA). HOAs collect these fees to pay for services, such as maintenance and upkeep of the shared amenities. 

About 40 million housing units are part of communities with an HOA. So it can be helpful to understand these fees and what they cover. And if you’re buying a home, it’s a good idea to include HOA fees in the questions you ask. 

Key takeaways

• An HOA is a governing body for a specific community. Members typically pay HOA fees on a regular basis. 
• HOA fees go toward maintaining common areas and paying for shared amenities and services.
• Census data reveals HOA fees average about $191 a month, but they vary with each community.
• HOA fees are generally not tax deductible for a primary residence, but they might be claimed as a business expense if you own a rental property or rent out part of your home.

HOA stands for homeowners association, which is a governing body for a subdivision of houses or a condo complex. An HOA often provides services, maintains shared areas and enforces rules for what homeowners can—or can’t—do.

When you buy a home in a community governed by an HOA, you automatically become a member. As a member, you’re generally required to follow the association’s rules and pay HOA fees on a monthly, quarterly or annual basis. 

Most HOAs are classified as nonprofits. While HOAs charge fees, special assessments and fines, the money typically goes toward maintaining and governing the community.

HOA fees are required payments that members make regularly if they live in a community governed by an HOA. They often cover any maintenance needed for the common areas of a community, such as the pool, clubhouse and parking lots. The fees are in addition to mortgage, property tax and homeowners insurance payments. 

HOA members are typically governed by covenants, conditions and restrictions, or CC&Rs. These outline the community rules and include information about the HOA fees and when they’re due. 

An HOA generally uses the money it collects to maintain shared buildings, services and amenities within the community. Some of these may include:

• Landscaping 
• General repairs and maintenance
• Capital improvements, like repaving the roads
• Reserve funds
• Pool maintenance
• Snow removal
• Garbage and recycling removal
• Water and sewer services
• Utilities for common areas
• Fitness center equipment and maintenance
• Fire alarm systems
• Security expenses
• Pest control for common areas
• Insurance coverage
• Community events and social activities
• Staffing for a property manager or property management company

HOA fees can vary widely, depending on the property location and what the fees cover. But the average HOA fees across the U.S. are about $191 per month, according to census reporting from 2021. The HOA board sets the fees and may update them regularly. Generally, the more services the HOA provides, the higher the HOA fees will be. HOA fees are also typically higher in high-cost metro areas. 

Are HOA fees tax deductible?

HOA fees are generally not tax deductible for a primary residence, according to the IRS. But if you own a rental property or rent out part of your home, then you may be able to claim HOA fees as a business expense. These business expenses are deductible and can lower your tax burden.

HOA fees can be beneficial, but there may be some things you also want to consider before buying a home that’s governed by an HOA.

HOA pros

• Shared amenities and services: Depending on the community, your HOA fees may pay for perks like swimming pools, tennis courts, a fitness center, playgrounds or a golf course. Some HOAs also host social gatherings and organize other community activities. 
• Exterior upkeep: An HOA often hires professionals to handle some of the tasks commonly associated with homeownership, such as lawn care and pest control. And if you live in a condo or townhome, your HOA typically insures the shared buildings and handles roof maintenance.  
• Conflict resolution: The HOA may also act as a mediator when problems arise between neighbors; for instance, if your neighbor plays loud music at all hours.
• Potentially higher property value: A single-family home within an HOA community sells for an average of 4% more than a similar home outside of an HOA, according to a University of California at Irvine study. 

HOA cons

• HOA fees are mandatory. HOA members must regularly pay fees to maintain the common areas. These fees could add up and increase over time. 
• Risk of lien or foreclosure. If you don’t pay the fees, assessments or fines charged by the HOA, the association may be able to place a lien on your property, with the ability to enforce foreclosure. These rules vary by state.
• Rules and regulations. HOAs can set rules regarding the type of pet you can have, vehicles you park in the driveway and even the appearance of your home. Violating the community’s rules and regulations could result in a fine.

If you buy a home within an HOA community, you’ll be responsible for paying HOA fees on a regular basis. What you pay depends on where you live and the services you receive. Generally, having access to more amenities and services means higher HOA fees. 

While HOA fees can come with benefits, when you’re buying a home, one of the questions you may want to ask is whether there are HOA fees.