Studies in Fiscal Federalism and State–local Finance series
Edited by Dick Netzer
Chapter 9: The rise of private neighborhood associations: revolution or evolution?
William A. Fischel In the previous chapter, Robert Nelson suggests that states should replace municipalities with private community associations. As his data show, his goal seems to be well under way to fruition. Developer-designed community associations have grown astoundingly since 1970. They were led ﬁrst by the condominium boom, which required a collective body to govern common areas and regulate neighborhood property, but they changed in the 1980s into an enormous and continuing growth in private governance of conventional single-family subdivisions. Nelson suggests that state governments realize that neighborhood associations are replacing municipalities. Municipalities, at least those smaller than counties, should face the music and go out of business, yielding their authority to provide local services and land use regulation to private neighborhood associations. There is a very diﬀerent way of looking at private community associations. Positively, neighborhood associations have not displaced any municipality or induced it to give up its regulatory powers. It appears that community associations are not substitutes for municipal governance, but complements to it. The rise of neighborhood associations seems to be a response to an increasing demand for protection of home values. Homeowners appear to want both more zoning and more private regulation. They do not seem to want to substitute private for public regulation. Normatively, it probably would be a bad idea entirely to replace municipal governance with private governance. This is not because private governance is undesirable, but because municipalities provide an important function in our federal system of governance that neighborhood...
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