Are HOAs Businesses, Governments, or Something Else?

Homeowners associations are often viewed through one of two lenses. Some see them as businesses responsible for protecting property values and managing assets. Others compare them to local governments because they create rules, collect assessments, and make decisions that affect residents.

In Episode 96 of The Uncommon Area, Matthew Holbrook sits down with attorney David Graf, partner at Moeller Graf, to explore why neither comparison tells the whole story. Their conversation examines what makes community associations unique and why the future of HOA leadership depends on balancing governance with genuine care for the people who call these communities home.

Are HOAs Businesses, Governments, or Something Else?

David explains that HOAs share characteristics with both businesses and governments, but they don't fit neatly into either category.

Like a business, an association is responsible for managing finances, maintaining common areas, funding reserve accounts, and making decisions that protect the community's long-term financial health. These responsibilities require boards to think strategically and act as good stewards of homeowners' investments.

At the same time, HOAs also function similarly to a local government. Boards adopt and enforce rules, conduct meetings, and make decisions that affect an entire community. Unlike a city or county government, however, HOA boards are made up of volunteer homeowners who are directly invested in the neighborhoods they serve.

Because associations combine elements of both business and government, David argues that they should not rely exclusively on either model. Instead, the most effective boards recognize that their ultimate purpose is to build and maintain healthy communities. Financial decisions and governing documents are important tools, but they should support that broader mission rather than become the mission itself.

From Leadership to Stewardship

One of the central themes of the episode is the distinction between leadership and stewardship.

David suggests that stewardship better reflects the responsibility of serving on an HOA board. While leadership often focuses on directing others, stewardship emphasizes caring for something entrusted to you. Board members are temporary caretakers of a community that belongs to all homeowners, making decisions that should benefit both current residents and future generations.

This perspective encourages boards to think beyond policies and procedures. Stewardship asks board members to consider how their decisions affect neighbors, relationships, and the overall health of the community. It also reinforces the idea that authority should be exercised thoughtfully, recognizing that every decision has a human impact.

Throughout the conversation, Matthew notes that this mindset aligns closely with the way successful community managers approach their work. Great management is about more than maintaining property. It is about serving people and helping communities function well together.

Why Relationships Matter Alongside Financial Responsibility

Boards have a fiduciary duty to protect the association's finances, but Matthew and David discuss why financial decisions should not be viewed in isolation.

A decision that appears to save money in the short term may ultimately cost the community if it damages relationships, reduces trust, or creates unnecessary conflict. Likewise, investing in communication, transparency, and homeowner engagement can strengthen a community in ways that are difficult to measure on a balance sheet.

Rather than viewing financial responsibility and relationships as competing priorities, the discussion suggests that successful associations recognize they are interconnected. Communities with strong relationships often experience better cooperation, more productive board meetings, and greater homeowner satisfaction, all of which contribute to the long-term success of the association.