Monthly condominium HOA fees (homeowner association) are skyrocketing in the U.S. along with inflation, the higher cost of more people staying home, and the newfound attention to safety standards brought on by the deadly Surfside condo collapse, which claimed the lives of 98 people.
The monthly median fee set by condominium homeowners associations increased 19 percent to about $451 in August, compared to a year earlier according to data compiled by Zillow Group Inc, Bloomberg reported. That’s an additional $900 per year out of residents’ pockets.
The increased homeowners’ fees are due in part to inflation and to labor shortages, which have driven up the price of everything from electricity and lawn care to salaries for front-desk staff. Repairs and maintenance are also costing more because more people and their children have been staying home and working from home.
About 25 percent of the U.S. population lives and works in homes managed by community associations, according to the Foundation for Community Association Research. Homeowners associations account for about 58-to-63 percent of the total, and condominium communities for 35-to-40 percent.
Community associations collected $96 billion in assessments from homeowners for 2019-2020, according to a U.S. national and state statistical review of community association data.
Association assessments fund obligations that can include utilities, security, insurance, common area maintenance, landscaping, capital improvement projects, amenities such as pools and clubhouses and professional management services.
Condo fee median rates vary widely across the U.S. depending on amenities and the age of the building. For example, New York City has lots of older, less energy-efficient buildings and the median monthly fee is higher than the rest of the U.S. — up 22 percent to $948, Bloomberg reported.
By contrast, condo fees fell in San Francisco, where many residents left during the pandemic. Median monthly condo fees went down 6.3 percent to $454 in August compared to a year earlier.
Here’s more on why condo HOA fees are skyrocketing in the U.S.
Collapse of the Surfside condo building shines a spotlight on safety standards
The June 24 collapse of the 40-year-old Champlain Towers South condominium left at least 95 people dead. The building had multiple points of strain exacerbated by salt corrosion and other forces. Close to 40 percent of the Miami housing is condos, the highest of any major metro area in the U.S., according to Zillow. The Champlain basement had eroded concrete in it and failed waterproofing, according to a 2018 engineering report. Thousands of other condo buildings are due for multimillion-dollar repairs and someone has to pay for them, Wall Street Journal reported.
Two-thirds of Miami area condo properties 30 years old or older, and requiring higher levels of maintenance. Many are built on the barrier island and dozens are due for the required 40-year inspection.
Reports of the infighting among the Champlain Towers South condo board over the cost of urgent repairs have led to new inspections requirements for older condos in Miami-Dade County and Boca Raton, Florida Politics reported. A Broward County task force has come up with 17 suggestions for rewriting Florida law that hit legislators’ inboxes this past week.
These include instituting a statewide building inspection for all condo buildings 30 years old or older and less wiggle room for funding and monitoring reserves. Currently, a simple majority of a condo association’s members can agree to skip funding the reserves that state law requires for condo buildings. The committee proposes requiring that 75 percent of the membership must agree to waive reserve funding.
Inflation and labor shortages affect HOA fees
Most homeowners association annual budgets require annual increases because costs are constantly rising due to inflation. Historic inflation in the U.S. (CPI) was 2.29 percent in 2019, 1.91 percent in 2018 and 2.11 percent in 2017. However, overall inflation is up 5.3 percent as of August 2021 compared with a year ago.
As a result, most HOAs need to collect more from the owners in dues. Sometimes, circumstances demand that the HOA increase dues more than the amount required for general cost increases, or levy high assessments. This might happen, for example, if the HOA does not have sufficient funds in reserve to pay for a common area repair.
As the number of new housing developments and community associations continues to grow, job openings for managers are outpacing job candidates. Many community associations turn to expensive community association management companies or association-hired managers for this expertise, passing the cost on to condo owners.
Maintenance and repairs have increased
Overall building material prices have increased 19.4 percent during the past 12 months and 13 percent year to date, according to the Producer Price Index (PPI) report released by the Bureau of Labor Statistics.
During covid lockdowns, people stopped spending on dining out and travel and began to buy appliances, furniture and recreational vehicles. Home Depot and Lowes reported record earnings in 2020. This created a shortage of material supplies not experienced in decades and a run on lumber, leaving the supply from the mills and other manufacturing behind the demand. Transportation and shipping added to the delay of deliveries.
Consumer spending increased 6.4 percent in 2020 but production of goods decreased 8.4 percent, leading to shortages and higher prices. All these costs have been passed on to HOAs, leaving them to cope with underfunded projects, according to the Community Associations Institute. This is known as the bullwhip effect and is affecting material availability and costs across the country.
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