Why Don't They Set Up an HOA? The Case of Three Communities in Chongqing, China

Abstract

Many studies have emphasized the importance of homeowners association (HOA) in local governance in Chinese cities. But a contradictory phenomenon is that many private communities haven’t set up an HOA yet. This paper examines this problem both theoretically and empirically. Our main argument is that many homeowners are satisfied with what an efficient market of private communities provides. This helps to resolve the paradox between the absence of HOA and some homeowners’ activism. The empirical study on three communities in Chongqing supports our theoretical argument that the market is efficient from the transaction cost perspective. It also finds that high-income homeowners who own cars are less likely to set up HOA and more likely to have property management company (PMC).