As the new year rolls around, one thing is on everyone’s mind: Will HOA fees increase in 2024? Homeowners are likely gearing up for what’s ahead, planning their finances, and drawing a budget, especially after spending a lot over the holiday season. Similarly, HOA boards are set to prepare an annual budget for their associations, but whether or not a raise in dues is in the cards remains to be seen.
Will HOA Fees Increase in 2024?
Association boards calculate homeowner dues by first preparing a budget. This budget consists of anticipated expenses for the coming year and planned reserve contributions. From there, the board computes how much each homeowner must pay in dues to meet the association’s budgetary needs. The formula depends largely on the association, relying on a percentage per unit or evenly dividing the expenses among all owners.
Due to fluctuating economic factors, it is quite common for regular dues to increase now and then. In 2024, though, an HOA fee increase is likely for several reasons.
Factors Affecting 2024 HOA Fees Increase
The HOA board is responsible for maintaining the community. To achieve this, boards must use association funds to pay for various expenses, such as maintenance, management fees, and landscaping. Boards generally have the authority to raise dues necessary to meet the association’s needs. However, certain economic factors influence these needs and the consequent decision to raise dues.
Here are the factors that contribute to a 2024 HOA fees increase.
1. Growing Costs of Maintenance, Repairs, and Utilities
Inflation is the primary factor that causes overarching price increases. Due to changes in the cost of labor and materials, vendors raise their rates in response, leaving HOAs no choice but to adjust their budget. The price increase then falls on the homeowners who pay regular dues.
Utilities, such as gas, electricity, and water, are also vulnerable to the effects of inflation. These are essential services, so HOAs must allocate additional funds to maintain them.
How HOAs Can Cope
Here are some strategies HOA boards can adopt to cope with the effects of rising maintenance, repairs, and utility costs:
- Get Multiple Quotes. Boards should obtain multiple quotes from vendors for projects or services. This will allow the board to compare and contrast prices before choosing the best provider for the job.
- Anticipate Repairs. Unforeseen repairs are one of the chief contributors to rising maintenance costs. To combat this, boards should anticipate repairs, conduct frequent inspections, and ensure their reserves are properly funded.
- Set Up a Contingency Fund. Allocating money to a contingency fund will help the association shoulder any unexpected costs, eliminating the need for a large increase or a special assessment.
- Invest in Energy-Efficient Alternatives. Boards should explore energy-efficient solutions to decrease utility expenses.
- Consider Bulk Purchasing. Bulk purchasing typically costs less per unit, saving associations hundreds or thousands of dollars. Of course, boards should use this strategy on goods that are needed in the long term and remain in good quality even after a while.
2. Rising Insurance Rates
Insurance rates are on the rise everywhere in the United States. As extreme weather conditions become more frequent, insurance providers consider it risky to offer low rates. However, it is not like HOAs can skip insurance altogether. Several states require HOA insurance by law, and most governing documents contain similar provisions.
How HOAs Can Cope
Here are some strategies HOA boards can adopt to cope with the effects of rising insurance premiums:
- Obtain Multiple Quotes. As with vendor quotes, it is necessary to secure multiple quotes from insurance providers. This will allow boards to compare rates and premiums before deciding on a provider that suits the association’s needs the best.
- Manage Risk Carefully. HOA boards should look for ways to minimize risk, which may help lower insurance costs. These ways include implementing safety protocols, performing regular inspections, and attending to potential hazards.
- Review Insurance Policies. Boards should conduct an annual review of their insurance policies. This will ensure all policies are up-to-date and provide sufficient coverage.
3. Upgrades and New Amenities
Now and again, HOAs will want to implement upgrades to common areas and introduce new amenities to the community. Most of the time, associations do this to keep up with the competition and to attract new homeowners. However, these projects can be very expensive, leading to a significant increase in HOA dues.
How HOAs Can Cope
Here are some strategies HOA boards can adopt to cope with the need for upgrades and new amenities:
- Prioritize. If the association’s budget gets too inflated, boards should see if they can defer non-essential upgrades. Learn to prioritize urgent matters and shelve trivial ones.
- Explore Inexpensive Options. Upgrades don’t need to be expensive. There are ways to beautify or refresh spaces for little to no added cost. These include applying a new coat of paint, rearranging furniture, adding plants, or changing the lighting design.
4. Adequate Reserve Funding
Reserve funds are crucial to preserving the financial health of any association. Unfortunately, far too many HOAs have severely underfunded reserves. When an emergency occurs, or the need for major repairs arises, these HOAs have nowhere to pull funds from, resulting in a hefty increase in regular dues or a significant special assessment.
Recent changes in legislation also have an impact on reserve funding requirements. In Florida, for instance, the collapse of the Champlain Towers South led to the enactment of Senate Bill 4D, which requires condominiums to conduct inspections and maintain adequate reserves. Many condominiums have yet to meet these requirements and are undoubtedly catching up in 2024.
How HOAs Can Cope
Here are some strategies HOA boards can adopt to cope with the effects of reserve funding requirements:
- Include Contributions in the Budget. Consistency is key when it comes to reserve funding. Boards should ensure that homeowners make regular contributions to the reserves by including them in the annual budget.
- Perform a Reserve Study. Boards should have a professional conduct a reserve study to examine which items are essential or urgent and determine how much their HOA needs in its reserve funds at any time. A reserve study will help boards allocate funds more efficiently and effectively. Additionally, reserve studies should be updated every few years to keep up with legislative, economic, and physical changes.
- Turn to Professionals. Boards shouldn’t be afraid to seek advice from financial advisors, engineers, and HOA management companies. Most board members don’t have adequate experience when it comes to reserve management, and these professionals can provide valuable insight and guidance.
- Maintain Transparency. Boards should practice transparency when it comes to reserve funding and management. Provide reports and documentation to let homeowners know what the reserves are being used for. This will earn the trust of homeowners and make them more willing to contribute.
5. Legal Disputes and Compliance Issues
Homeowners associations can face legal disputes arising from conflicts, misinterpretations, noncompliance, etc. Lawsuits are common, with many homeowners taking legal action against their HOA or HOA board. While HOAs should have adequate insurance for such things, lawsuits can still result in expensive legal fees and damages that associations must answer for.
Moreover, when homeowners fail to comply with their obligations, particularly the obligation to pay dues, HOAs must begin a lengthy enforcement process. Typically, this includes attaching liens to homes and even initiating foreclosure proceedings. These take time and can be quite expensive, too.
While these are just part of an HOA’s normal operations, they can cost much money. As with everything else on this list, the financial burden and strain will fall on the shoulders of homeowners.
How HOAs Can Cope
Here are some strategies HOA boards can adopt to cope with the effects of legal disputes and compliance issues:
- Ensure Compliance. Associations should ensure that their governing documents comply with federal and state laws. This limits misinterpretations and reduces liability for the HOA.
- Consult a Lawyer. When it comes to legal issues, boards should always seek help from a lawyer. Most of the time, board members don’t have a background in law, particularly HOA law, to expertly navigate the intricacies of legal issues.
- Utilize Dispute Resolution. If a homeowner conflicts with the HOA, it is best to enter dispute resolution. Some associations have internal dispute resolution procedures that help to resolve conflicts. However, HOAs can also utilize alternative dispute resolution, such as mediation and arbitration. In some states, HOAs must enter ADR before pursuing litigation. ADR does cost money, but it is much cheaper than a lawsuit.
Frequently Asked Questions
Why are HOA dues increases necessary?
Boards raise HOA dues to keep up with expenses, which are influenced by economic factors in addition to an HOA’s internal needs. A board cutting too many corners can reduce curb appeal and lower property values. In the end, the homeowners and their investments will suffer.
Will HOA dues increase in 2024 in Florida?
According to economic trends and predictions, HOA dues are set to increase in Florida in 2024. Inflation, rising labor costs, rising cost of materials, soaring insurance rates, and legislative changes all impact HOA dues.
Will HOA dues increase in 2024 in California?
According to economic trends and predictions, HOA dues are set to increase in California in 2024. Inflation, rising labor costs, rising cost of materials, soaring insurance rates, and legislative changes all impact HOA dues.
How can I determine if my HOA dues will increase in 2024?
Homeowners should turn to their HOA board or community manager for information on their dues and any planned increases. Their HOA board or community manager can also explain the reasons for the increases.
Can I resist an increase in HOA dues in 2024?
Homeowners have a contractual obligation to pay their dues to the HOA. This means they cannot refuse to pay or negotiate for lower dues. It is also ill-advised for homeowners to stop paying their dues to protest dues increases. These actions can result in penalties, such as late fees, legal action, liens, and foreclosure. Homeowners, though, can express their concerns and provide input on dues increases by attending meetings.
Is there a limit to how much HOA dues can increase?
In some states, such as Arizona, the law prohibits dues increase up to a certain amount or percentage without a vote from the membership. An HOA’s governing documents may also impose similar limitations. However, in general, an HOA board may raise dues as they see fit to meet the needs of the association.
Predictions for HOA Fees Increase in 2024
This 2024, it is highly likely that homeowners associations will raise dues to keep up with economic and legislative changes. Delivering such news to homeowners is always a pain point for HOA boards. However, boards can soften the blow and make it more bearable by explaining the reasons behind the increase.
Clark Simson Miller provides expert management services to HOAs and condominiums. Call us today at 865.315.7505 or contact us online to request a proposal!
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