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The Value of Residential Community Associations: Evidence from South Carolina

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Abstract

This empirical study uses a hedonic pricing model and a dataset of Spartanburg, South Carolina homes from 2002 to 2005 to evaluate the effect of Residential Community Associations (RCAs). Spartanburg is focused on due to data availability. The number of RCAs have exploded in the United States in recent decades. Given that RCAs both supplement and complement local government provision of goods and services, it is an important policy question to ascertain whether they create value for their residents. While the literature on RCAs has generally shown that they increase property values, the lack of comprehensive data has led scholars to primarily focus on Virginia and Florida. Given the heterogeneity of state laws governing RCAs and the diversity of local government amenities, the external validity of these results is in question. This study used data on a mid-sized city in South Carolina to provide further evidence on RCAs. The findings suggest that RCAs increase property values by 2.2%. These results are much smaller than estimates from other locations, suggesting that for many people in Spartanburg, local governments are a good substitute. The findings also highlight how failure to properly control for structure age can lead to incorrect inferences about the impact of RCAs on home prices.

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Notes

  1. Other scholars focused on other outcomes, such as consumer satisfaction or residential sorting. For example, Ignacio and Fuego (2017) looked at satisfaction among HOA residents in the Philippines while Scheller (2017) discussed neighborhood racial composition.

  2. While they discussed issues with omitted variables, Langbein and Spotswood-Bright (2004) did not mention condo age as one of the important missing variables.

  3. Clarke (2017, 2018) discussed a newly-created, nearly complete data set of all HOAs in the United States.

  4. By efficiency, we mean the costs of coming to a decision as well as being closer to the median voter’s ideal point.

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Authors and Affiliations

  1. Department of Accounting, Business, and Finance, Wofford College, Spartanburg, SC, 23903, USA

    Kathleen Grace

  2. College of Business and Economics, West Virginia University, PO Box 6025, Morgantown, WV, 26506-6025, USA

    Joshua C. Hall

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  1. Kathleen Grace
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  2. Joshua C. Hall
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Correspondence to Joshua C. Hall.

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Grace, K., Hall, J.C. The Value of Residential Community Associations: Evidence from South Carolina. Int Adv Econ Res 25, 121–129 (2019). https://doi.org/10.1007/s11294-019-09723-w

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