The Value of Residential Community Associations: Evidence from South Carolina
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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.
KeywordsResidential community associations Homeowners associations Hedonic
JEL ClassificationR30 R52 R58
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