One of the trickiest – and most hotly contested – parts of running an effective HOA is managing finances. This includes determining HOA fees which are what funds the association. Homeowners are often very opinionated about fees because these costs come directly out of their pocket, yet it can be difficult to see the return. It is a good idea for the HOA to review its budget annually and decide whether HOA fees should increase, decrease, or stay the same.

Boards often strive to keep things relatively stable and put off increasing fees too much because they know that it will cause commotion within the association. However, sometimes raising dues is essential for the well-being of the community. Keep in mind that if dues remain too low for too long, it will create a shortfall in the budget and poorly funded reserves which increases the likelihood of needing to leverage a special assessment to cover costs.

Common Reasons HOA Fees Increase

Even if the board is doing an excellent job of managing the budget and expenses, there are still many reasons why a fee increase may be necessary:

  • Overall expenses are increasing. When electric, gas, or water companies raise their rates, the impact is felt by the HOA. There may not be many other options for major service providers such as these, so the HOA must adjust its budget to accommodate for these price increases.
  • Other service providers such as landscapers, waste management, contractors, or insurance providers may raise their rates as well, especially as many states look to increase minimum wage and companies want remain competitive with paying their employees or face rising expenses themselves. Once again, this is passed onto the HOA in the way of higher bills.
  • Maintenance can no longer be deferred. Certain projects can be put off until a later date, but eventually they need to be addressed. Investing in preventive maintenance can help to reduce overall expenses later on.
  • Reserve funds need to be maintained. Regular reserve studies are essential for ensuring that the HOA is putting enough money aside to cover the repair, replacement, or updating of the community’s major assets. If these costs go up, then HOA fees will have to increase as well to maintain adequate funds.

Taking Steps to Cut Costs

There are several ways that the HOA can work toward reducing expenses to keep fee increases reasonable. For instance, they can:

  • Regularly review contracts, get bids from other providers, and negotiate more competitive rates.
  • Update contracts to eliminate unnecessary or duplicate services.
  • Review insurance coverage to see if there are more cost-effective options (without putting the association at risk).
  • Defer non-essential projects for a few years until more money can be saved, or they can be more effectively worked into the budget.

Partnering with a property management company like Kuester can help HOAs to review expenses and identify opportunities for cost savings. Plus, it can improve communication when it comes to discussing fee changes and the impact on the community. Contact us today to learn more and see how your HOA can benefit.

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