Back off, HOAs: There’s a new sheriff in town. That appears to be the message from Georgia lawmakers who have just passed new legislation that limits HOAs’ ability to tack on costly fees and fines to homeowners with impunity.
SB 406 creates an administrative process to settle disputes between homeowners and homeowners associations and, in doing so, could save landlords in the state thousands of dollars, boosting cash flow. Should other states follow the same playbook, it could be a game-changer for investors tired of seeing profits slashed by escalating, unexpected HOA costs.
While most investors focus solely on cap rates based on standard cash flow metrics—rents minus expenses such as mortgage payments, taxes, insurance, utilities, and repairs—they often overlook HOA fees. These have been rising quickly across the country, particularly in Florida, in the wake of the Surfside condo collapse.
What Georgia’s New HOA Bill Does
Branded the “Georgia Property Owners’ Bill of Rights Act,” Bill 406 creates a formal state oversight of homeowners associations for the first time in the state’s history, according to Realtor.com. Prior to the bill, HOAs operated under their own rules, generally in an ad hoc manner.
Under the bill, every HOA must register annually with the Secretary of State, pay a fee, and disclose key governance and financial information or risk losing the ability to levy fines, place liens, or foreclose on homes in communities. The bill, which garnered support from both parties, comes in the wake of property owner complaints about HOAs’ “aggressive” tactics, including the threat of fines and legal action over relatively minor disputes.
Sen. Donzella James, a co-sponsor of the bill, was reported as saying by Realtor.com:
“For years, I have been a strong advocate for homeowners, and I have heard countless cases of people being taken advantage of by predatory associations. This legislation represents a meaningful step forward in protecting homeowners by promoting transparency and fairness. It helps ensure that no Georgian is subjected to unjust fees, fines, or the threat of foreclosure without proper oversight and due process.”
If an HOA fails to register with the state, it will be barred from collecting fines, issuing liens, or initiating foreclosure actions, giving owners state-level recourse instead of having to spend money on a private attorney.
“This bill will create regulation, oversight, and enforcement and also requires that HOA boards have members who live in the communities, making sure that boards are not just run by one or two people,” South Fulton City Councilwoman Linda Pritchett told WAGA-TV.
HOA Fees: A Cash Flow Killer
Noted investor and real estate guru Ken McElroy brought up the issue of HOA fees and their impact on landlords’ cash flow in a December newsletter, writing:
“Every dollar that goes into HOA dues is a dollar that does not reach your bottom line. In many markets, rents are flattening, but HOA dues are still rising. That mismatch shrinks margins. A $5,000 or $10,000 special assessment can wipe out a full year of profits. Buyers avoid properties with unstable or rapidly rising HOA dues. High fees push down resale value. This is why analyzing an HOA is almost as important as analyzing the property itself.”
One component of Bill 406 is that HOAs must meet higher minimums for unpaid dues and provide better notice before pursuing legal action, reducing the risk that a landlord’s rental property ends up in default over a contested fine or short-term hardship, making it easier to underwrite HOA-related risks in their proformas rather than treating association enforcement as a wild card, wiping out months of cash flow or years of equity gains.
Adopting an HOA Oversight Policy Nationwide Could be an Investment Game Changer
HOA fees apply to many condos, townhomes, and single-family homes. Their relevance to the American housing landscape has been growing. According to the Wall Street Journal, citing the U.S. Census Bureau, 81% of new single-family homes sold in 2023 were in an HOA, compared to 73% a decade earlier.
A Realtor.com Homeowners Associations report finds that 1 in 3 single-family homes (33.4%) have HOAs, and more than 4 out of 5 (84.8%) of condos and townhomes do.
Georgia did not act in isolation. Across the country, there is a growing national backlash against HOAs. An industry review of 2026 legislative activity notes that 46 states will meet in session this year, and many are considering bills that either curb HOA powers, increase transparency, or create pathways to dissolve HOAs altogether, which would dramatically alter the investment feasibility of many buildings.
Tapping Into the National Affordability Zeitgeist
With housing affordability a central topic in the national cost-of-living debate, particularly for single-family homes, it’s hardly surprising that exorbitant, unregulated HOA fees have come under the microscope as property owners try to hold on to their homes.
The same issue applies to landlords, who supply essential accommodation to tenants while often struggling to eke out any profit amid rising expenses. Landlords, not tenants, are responsible for HOA fees, and higher fees translate into higher rents and further put pressure on cost-burdened renters.
The only respite for landlords is that HOA fees are tax-deductible and can be itemized on IRS Schedule E, along with other rental-related expenses.
“When you’re paying $500 or more a month, that’s a really big deal, especially when you consider how tight many Americans’ budgets are,” LendingTree chief consumer finance analyst Matt Schul told Realtor.com. “That’s money that can’t go to other financial priorities, such as building an emergency fund, paying down high-interest debt, or saving for retirement.”
Final Thoughts
For investors, HOAs can be a gift and a curse. By taking care of landscaping, snow removal, and other essential duties, they can maintain the aesthetic charm of a housing community and make it an attractive proposition for renters, while helping landlords maintain a passive involvement.
However, that concept only works when the fees are modest and not much higher than what a landlord would pay if they had to outsource upkeep to private companies. When costs are unpredictable and egregious, seriously handicapping cash flow, checks and balances need to be in place, as is happening in Georgia. Hopefully, other states will follow.
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