Home values are up, and, in many homeowners associations, units are selling at their highest prices ever. That’s good news, but there’s also a downside. The price of homes has risen, but the price of everything else is up as well.
How Inflation Affects Your HOA
Almost every line item in your budget is subject to inflationary pressure. Gas and electric bills are rising. Landscaping, repairs, and general maintenance are higher because of underlying labor and materials costs.
The biggest inflationary headache for many HOAs is insurance. Premiums were rising even before the recent round of inflation, and they show no signs of slowing down. For many community associations, insurance is the biggest factor in dues increases.
The problems go beyond today’s bills. They also involve reserve funds. Maintenance and improvements that were estimated years ago may cost considerably more when it comes time to pay for them. Current reserve funding rates may be inadequate.
Also, HOA boards may see more delinquencies. Many homeowners are struggling to keep up even without an increased HOA bill.
How Can HOA Boards Combat Inflation?
There aren’t easy answers, but there are several steps every HOA board should be taking.
Not many HOAs have non-essential expenses, but if yours does, it’s time to get rid of them. For other expenses, ensure you’re not paying for more than you need, and make a renewed effort to get the best price possible from your vendors. If you have an experienced property management company, they have local contacts that may offer a better price than what you’re now paying.
Take a look at all your reserve funds and see if they’re adequate. You’ll probably need to re-estimate future jobs and establish larger reserve targets. On the other hand, higher rates may give you a better return on invested reserve funds.
Some boards will be tempted to scale back reserve funding to minimize dues increases, but that’s a policy that can hurt you in the long run.
For almost all HOAs, fees will have to rise. Homeowners won’t like it, but most understand why it’s necessary. Give your owners as much information as possible.
They’ll appreciate it if you provide a detailed written summary of exactly how much each budget item caused their fee to increase.
Some state laws and some HOA bylaws limit how much fees can rise. Familiarize yourself with any restrictions that apply to you.
Now is the time to review these policies. While board members want to be sympathetic, it’s vital to publish and enforce clear policies that treat every homeowner the same.
Your Property Manager Can Help
The best property managers have experience working with boards in navigating difficult financial waters. In Massachusetts, Maine, and New Hampshire, North Point Property Management specializes in residential HOA communities of condominiums, townhouses, and detached units. We tailor our services in a way that’s mindful of the budgetary pressures you face today.
To learn more, we invite you to reach out to us at North Point Property Management.