Community Associations at Middle Age

A New Bankruptcy Law and Other Proposals

With over 300,000 community associations in America, developers and policy makers need to address the appropriate lifetime of a community association. Should failing associations go out of business?

The first condominium in the United States, the Greystoke development in Salt Lake City, was built only 50 years ago, in 1962. Homeowner associations and cooperatives have been around much longer, but these three forms of American collective housing ownership as recently as 1970 represented only about 1 percent of U.S. housing. By 2010, however, there were more than 300,000 community associations housing more than 60 million Americans, 20 percent of the U.S. population.

Between 1980 and 2000, half the new housing in the United States was built and organized under the private governance of a community association. The rise of community associations has been perhaps the leading development for American housing and local governance of the past half century. As community associations move into middle age, however, new issues are demanding attention. Developers (in the writing of the founding documents) and policy makers now need to address more fully the question of the appropriate lifetime of a community association and how the middle and, potentially ending, stages might be handled.

Should some failing community associations now go out of business altogether? How might this be accomplished? Should other community associations with major operating problems be reorganized? And, again, what is the best mechanism for accomplishing this?