Fairhope was founded in November, 1894 as a utopian single tax colony by the "Fairhope Industrial Association," a group of 28 followers of economist Henry George who had incorporated earlier that year in Des Moines, Iowa. Their corporate constitution explained their purpose in founding a new colony:
"to establish and conduct a model community or colony, free from all forms of private monopoly, and to secure to its members therein equality of opportunity, the full reward of individual efforts, and the benefits of co-operation in matters of general concern."
In forming their demonstration project they pooled their funds to purchase land at "Stapleton's pasture" on the eastern shore of Mobile Bay and then divided it into a number of long-term leaseholds. The corporation payed all governmental taxes from rents paid by the lessees, thus simulating a single-tax, the purpose of which was to eliminate disincentives for productive use of land and thereby retain the value of land for the community.

"Fairhope Street" was one of the properties on the earliest versions of the board game "Monopoly".

In 1907 educator Marietta Johnson founded the School for Organic Education in Fairhope. The school was praised in John Dewey's influential 1915 book Schools of Tomorrow. Dewey and Johnson were founding members of the Progressive Education Association.

The Fairhope Single-Tax Corporation still operates, with 1800 leasholds covering more than 4000 acres in and around the current city of Fairhope. Despite the ideals of the corporation, however, the process of land speculation has propelled the transformation of Fairhope from utopian experiment to artist's and intellectual's colony, to boutique resort and affluent suburb of Mobile.