Homeowner associations and city cohesion

Homeowner Associations (HOAs) are an increasingly common form of attempts to provide localized public goods to a subset of residents in a city. As HOAs have increased in size and scope, there have been substantial debates about their benefit, and in particular, their impact on citizens who are not HOA members. One argument against HOAs has been a perception that they lessen city cohesion by setting some citizens o⁄ from others. We investigate one channel through which HOAs might improve city cohesion: their ability to dull the desire for wealthy city residents to attempt to leave or secede from a city. We also examine the degree to which poor residents might take the secession option of wealthy residents into account when they form their preferences regarding tax levels for the city. We conduct an economic experiment aimed at eliciting preferences people may have under these different circumstances. We find that HOA-like options can reduce the desire of the wealthy to exit a city and that the presence or absence of an exit option or an HOA option can also impact the tax requests by the poorer residents in a city. Both results suggest a previously unexamined benefit of allowing HOAs.