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Finding the Missing Premium: An Explanation of Home Values within Residential Community Associations

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  • Jeremy R. Groves

Abstract

Supporters of Residential Community Associations (RCA) argue that one of the advantages of living in an RCA is an increase in property values. Using a unique dataset comprised of 124,878 home sales spanning ten years, this paper, in one of the first empirical studies of RCAs, finds that the higher home values believed to exist, while present in a comparison of means, disappear when characteristics are controlled for. The explanation of this unexpected result is that the gain from living within an RCA is hidden by the homogeneity of the homes within RCAs.

Suggested Citation

  • Jeremy R. Groves, 2008. "Finding the Missing Premium: An Explanation of Home Values within Residential Community Associations," Land Economics, University of Wisconsin Press, vol. 84(2), pages 188-208.
    • Handle: RePEc:uwp:landec:v:84:y:2008:i:2:p:188-208
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    References listed on IDEAS

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    1. Kelejian, Harry H & Prucha, Ingmar R, 1998. "A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 99-121, July.
    2. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    3. Laura Langbein & Kim Spotswood‐Bright, 2004. "Efficiency, Accountability, and Private Government: The Impact of Residential Community Associations on Residential Property Values," Social Science Quarterly, Southwestern Social Science Association, vol. 85(3), pages 640-659, September.
    4. Pace, R Kelley & Barry, Ronald & Clapp, John M. & Rodriquez, Mauricio, 1998. "Spatiotemporal Autoregressive Models of Neighborhood Effects," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 15-33, July.
    5. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-675, November.
    6. Fred E. Foldvary, 1994. "Public Goods And Private Communities," Books, Edward Elgar Publishing, number 167.
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    Cited by:

    1. Jeremy R. Groves & William H. Rogers, 2011. "Effectiveness of RCA Institutions to Limit Local Externalities: Using Foreclosure Data to Test Covenant Effectiveness," Land Economics, University of Wisconsin Press, vol. 87(4), pages 559-581.
    2. William Rogers, 2010. "The Housing Price Impact of Covenant Restrictions and Other Subdivision Characteristics," The Journal of Real Estate Finance and Economics, Springer, vol. 40(2), pages 203-220, February.
    3. Meltzer, Rachel & Cheung, Ron, 2014. "How are homeowners associations capitalized into property values?," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 93-102.

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    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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