Request Proposal

Raising Dues: Why Short-Term Gains May Equal Long-Term Pains

Ben Franklin has been credited for saying, “Don’t put off until tomorrow what you can do today.” Sage advice from one of America’s founding fathers but surely he hadn’t meant to apply that to raising community association dues…did he? It’s a common goal for HOA board members to put off raising dues to avoid receiving criticism from community members.

However, this gesture only seems advantageous in the moment. Whereas, in reality, it may create a future financial problem and only delays the inevitable. Because like death and taxes, the need to raise dues is a certainty. It’s a matter of when, not if. Putting off small, incremental increases typically results in a larger sum eventually due in the future.

Though all boards would like to avoid raising dues if they could, eventually, it may create a disservice to community members. So, while on the surface, raising dues annually may not seem like the most popular move, our property association management team shares why it’s valuable for members long term and why it may be less painful than you think.

1. It Keeps Up with Inflation

In 2021, the Consumer Price Index (CPI) jumped from 3% to upwards of 7% year-over-year. When there’s a spike in CPI and member dues have not gone up, this combination can cause an association’s reserve funds to be depleted sooner than anticipated. Inevitably, inflation will force vendors to keep up with the rising price of gas, higher minimum wages, and increased costs of goods and equipment, all of which will contribute to higher costs of goods and services for the association.

For example, when the minimum wage was raised three years ago, it affected landscaping, pest management, and other labor-intensive contracts for nearly every association. In some situations, contracts that were once $5,000 increased to as much as $8,000 because vendors had to adjust pricing to cover higher wages for their employees. Additionally, the job market has become increasingly competitive. Wages have consistently gone up to retain quality employees and accommodate rising demands.

Essentially, HOAs can’t outrun inflation. Incremental assessment adjustments are necessary to keep up with perpetual price increases. When there’s not enough money to offset costs to maintain property value, other problems begin to arise.

2. It Prevents a Hard Hit for Community Members

While board members and their property management company may be well-versed in how inflation affects their community, many people don’t immediately correlate it with a need to increase dues. Therefore, boards that haven’t raised them in accordance with changes to the local economy may be delivering their communities a harder hit down the road.

Generally speaking, what could have been an increase of a few dollars every year, all of sudden is a $50 jump, which can come as an unwelcome surprise, put a strain on people’s pocketbooks, and instantly raises questions about the board’s management. Alternatively, increasing dues incrementally on an annual basis is much easier to digest and more palatable news to deliver.

Regardless, it’s important to be transparent with increases, no matter how big or small the amount. People want to see the reasoning behind the adjustments, whether vendor prices have gone up or there needs to be additional funding for reserves. Keeping the community well-informed makes it easier for everyone.

3. It Upholds a Healthy Reserve

In addition to keeping pace with the cost of contemporary goods and services, building healthy reserves is necessary to prepare for the unexpected. HOAs, especially condominium associations, can get blindsided for repairs or projects they weren’t budgeted for and don’t have the money to complete.

For example, when tackling a standard decking project, unexposed dry rot may be present, which must be taken care of first causing the original estimate to increase significantly. However, when there is a healthy reserve saved for these types of emergencies, it eliminates the need for special assessments, a situation no one enjoys. It also provides “side money” to dedicate to amenities and initiatives that continue to beautify, increase enjoyment, and improve the property value for the community.

Avoid the dreaded special assessment

Unlike a special event or an unexpected, special gift from a loved one, a special assessment will not hold an endearing place in the minds and hearts of community members. Special assessments are lump-sum dues required over and above the community members’ already required, monthly dues to cover unexpected costs.

In many cases, homeowners must contribute an equal amount when the association doesn’t have enough money readily available in reserves. For example, there could be an urgent maintenance project that costs $100K. If there are 100 units, each member is responsible for paying $1K. Plus, numerous challenges can arise during a special assessment which includes complications when selling a home or having to finance loan contributions; all of which can have a domino effect that derails both the individual homeowners and the association as a whole. As one can imagine, passing on this unexpected fee to each community member is not often received well. Nominal increases of assessments that compounds over time can often satisfy many budget shortcomings that associations may face.

Invest in the future of the property

Maintaining a healthy reserve allows the board to set aside money outside of the annual budget for components that weren’t originally accounted for. This includes everything from adding new amenities that will enhance property values and enjoyment of the community such as adding electric vehicle charging stations, bocce ball courts, or updating the park equipment.

It’s likely the needs and costs of today are not the same as what they will be five years from now and reserves make sure there’s enough funding to keep up with the times. Then, any extra money can go into savings accounts or CDs to make money for the association and put risks at bay because they’ve been fiscally responsible in advance.

Take Pride in Taking Action Today

Ultimately, the burden falls to the board when it comes to applying costs for maintaining property value and communicating the process in a way that is reflective of the community as a whole. People are more likely to be receptive when there’s foresight involved, especially when it means saving them money down the road.

Inaction by avoiding an incremental increase of dues won’t accomplish what’s needed to maintain a thriving community. Take pride in creating a solution that benefits all. By turning to the support and expertise of your knowledgeable and experienced property management company, you can feel confident in serving your community well.

Want to know more about how working with our property association management team can help with your goals? Contact us today to get the conversation started.

Do HOA better.

Have a question? Need more info? Just wanna say hi? We’re a friendly crew, always here to help!