HOA Fees Increasing Due to Inflation

With HOA fees on the rise, it’s understandable that community members and organization leaders would both be concerned. Higher costs can help a community by providing better funding for beneficial initiatives. However, it can cause undue stress for members accustomed to lower expenses. Despite this, increases are periodically necessary as the cost of living increases. These necessary increases are sometimes compounded by inflation, causing HOA fees to increase. To address this phenomenon, HOA leaders should consider the following.

Understand the Issue

When faced with the notice of a fee increase, many community members may wonder how inflation can cause HOA fees to rise? Inflation affects the economy, and the currency increases in value, so it may not initially make sense that it would impact HOA fees. Ultimately, though, inflation increases the cost of the materials, goods, and services necessary to maintain a community. When these expenses increase, HOAs choose to eliminate some of the services provided or increase the membership fees. In many cases, the latter is a better option.

Adjust the Budget

HOAs will often choose to increase membership fees rather than eliminate services. Conversely, they should consider a third option: adjusting the budget. Fee increases are far more likely for HOAs that budget ineffectively. Leadership should consider whether they are allocating too much funding to any single source and take steps to alleviate the problem. Certain expenses, such as HOA insurance, should never be underbudgeted. HOA insurance is essential for protecting an organization’s board and community members.

Cut Down on Costs

When a fee increase is on the table, an HOA board should do everything to avoid this outcome. In addition to the inevitable dissatisfaction of community members, some homeowners may choose to move, which often results in lost revenue for an HOA. Board members must make a concerted effort to cut costs before increasing fees. Look for less expensive landscapers, limit the pool’s operating hours, or outsource community security tasks. Simple steps like this can minimize expenses, thus eliminating the need to raise fees.

Minimize Delinquency Rates

Paradoxically, fee increases can backfire and lead to less funding due to the spike in delinquency that often follows. Homeowners typically won’t see an increase in their wages to accompany the rise in fees. Sometimes, they may be unable to pay. In other cases, community members may withhold their payments to protest the increase. Before passing an increase, an HOA board should carefully consider that it will not result in more revenue — and the opposite may occur.

About Kevin Davis Insurance Services

For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (855)-790-7393 to speak with one of our representatives.