HOAs in the Red Have Homeowners Singing the Blues

HOAs in the Red Have Homeowners Singing the Blues
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Nearly 76 million people in the U.S. live in communities with a homeowner's association. Rising HOA dues are crushing some of them.

As if high home prices and stubbornly high mortgage rates weren’t bad enough, rising property taxes and increasing homeowner association dues are digging buyers and homeowners into a deeper hole.

HOA dues and condo association dues vary widely, but a survey by Redfin found that condo associations were up 6% on average in August 2024 compared to August 2023. In several major metro areas, particularly in Florida, monthly fees were up 15%.

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If you buy a new home, chances are high that you’ll be in an HOA: 81% of newly built homes sold in 2023 were in an HOA, according to the Census Bureau.

The fees you’ll pay vary according to whether you own property in a homeowners association or a condo association, along with your location and what services or amenities are included. One thing is certain: the trend for HOA fees is heading up.

In 2024, 9% of homeowners are paying more than $500 per month, compared to 6% in 2020, according to the Foundation for Community Association Research. The percentage of homeowners paying between $101 and $300 has remained consistent at around 26%.

Why HOA Dues are Rising

Numerous factors influence HOA dues, including inflation for labor, goods and services that are part of the ongoing maintenance and operations budget of any HOA.

“Insurance premiums that HOAs need to pay are rising faster than inflation due to extreme weather and very high awards forcing insurance companies to collect more in premiums from clients in order to stay in business,” says Robert Nordlund, founder and CEO of Association Reserves, an organization that provides professional reserve studies for HOAs.

Individuals face higher insurance premiums, particularly in areas prone to natural disasters, and so do HOAs. In addition, many HOAs and condos have buildings with aging infrastructure and are adjusting their budgets to keep higher reserves on hand in case of more natural disasters or major repair requirements.

“Many associations are finally appreciating that Mother Nature and Father Time are winning,” Nordlund says. “They are trying to somewhat rapidly collect funds from homeowners in order to try to prevent or minimize upcoming special assessments that would have been necessary to pay for the cost of repairing their deteriorated facilities.”

Nordlund points out that many HOA boards have been pretending the ongoing cost of deterioration isn’t real.

“The Champlain Towers South tragedy in 2021 [when a condo building in Surfside Florida collapsed and killed nearly 100 people] caused many boards to sit up straight and take notice,” Nordlund says. “Deterioration is real, and many associations have let deterioration get ahead of their dollars.”

How to Evaluate an HOA’s Finances

While you can’t prevent HOA dues from rising, you can take steps before you buy to check on the financial health of a community. An HOA that’s in good shape is less likely to have rapid fee increases or special assessments.

When you’re shopping for a home in an HOA, it pays to add a financial review of the HOA to your checklist before you make an offer. Look around the community, too, to see if it looks well-maintained or if there are signs that projects have been deferred, which could generate expenses in the future.

In addition, the Community Associations Institute (CAI) recommends that buyers review the following documents:

  • Reserve study: This outlines the association’s long-term repair and replacement needs and funding levels. The reserve study is different from operational budgets. 
  • Review financial documents: These include the community's budget, financial statements and reserve study. This will provide insight into the association's ability to handle future maintenance and repairs without relying on special assessments. 
  • Board meeting minutes and strategic planning documents: These can provide insights into planned projects, financial challenges or potential assessments. 
  • Understand the rules around assessments: Be aware of the potential for special assessments, which are typically used for unexpected or large expenses. Understanding the community's approach to reserve funding and regular assessments can help assess the likelihood of future increases or unexpected special assessments. 

A real estate agent with knowledge of HOAs in your area can also provide some insights. Nordlund also has a list of tips for condo shoppers, including the recommendation to ask about how often HOA dues have been increased. While no one wants to pay too much in fees, a well-managed association is likely to have raised fees incrementally three times in the previous five years.

I Spy a Special Assessment

It’s tempting to look at an HOA with low fees and grab it, but if dues are never increased this could be an indication that a community is not keeping up with routine maintenance or prepared for future issues caused by age or a climate disaster.

“Inflation is real,” Nordlund says. “Every homeowner should expect their monthly assessments to increase at least with inflation. Assessment increases are likely to be even higher due to reserves ‘catch up’ and higher than inflation increases to insurance premiums.”

Besides regular dues increases, homeowners should anticipate potential special assessments.

“Special assessments occur because Mother Nature and Father Time laugh at boards who fail to set funds aside sufficient to offset ongoing deterioration because “their budgets are tight’,” Nordlund says. “Roofs don’t care if a board budgeted ongoing funding towards reserves or not... they will fail on schedule. Boards that fail to offset ongoing deterioration with adequate reserve transfers doom their members to future special assessments. Whether by ongoing budgeted funding or special assessments, the deterioration bill needs to be paid.”

Homebuyers can ask about recent special assessments or planned capital improvements before they buy, according to the CAI. When you review a reserve study—which should be from within the past three years—Nordlund says that if the report shows that reserves are zero to 30% funded, you should expect a special assessment soon.

If the reserves are 30% to 70% funded, there’s a moderate expectation for a special assessment in the near future. Reserves that are 70% funded should be adequate, so a special assessment is less likely.

Sustainability and Savings for HOAs

HOAs use energy and water to maintain the common areas of their communities, which means they have opportunities for increasing efficiency just as homeowners do. HOA boards can evaluate installing energy efficient equipment and solar panels for ongoing cost savings that can help keep dues low.

The EPA includes tools to help homeowners – and potentially HOAs – find financial incentives to make energy improvements.

In addition, the EPA offers water saving tips for HOAs to help boards choose contractors and plan for their community. WaterSense offers a template for HOAs to evaluate and discuss outdoor water use that includes tips on how to improve swimming pool efficiency.

Proactive Homeowners and HOAs

If you live in an HOA, the CAI recommends attending HOA meetings, asking questions about budgeting and reserves, and advocating for reserve studies and funding. Homeowners and HOA boards can also explore cost-saving measures such as energy-efficient upgrades or competitive bidding for services. 

Keep in mind that HOAs that are on solid financial ground tend to have higher home values.

“Condo associations that have a strong reserve fund enjoy, on average, 12.7% higher home values than those without adequate reserves,” Nordlund says. “That increase in home value dwarfs the money set aside towards reserves, making reserve funding one of the wisest budget line items a board member can set for their association.”


Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsors: Whirlpool Corporation. Whirlpool Corporation takes sustainability seriously, in both their products and their operations. Learn more about building and buying homes that are more affordable and less resource intensive.