While many home owners understand the benefits a HOA brings to a community, I for one keep wondering; at what point does the costs start out-weighing the benefits?
Before I moved into my first HOA home, I did a quick market scan and determined the HOA assessments to be on the high side. I later found this article to be in line with my thinking and started looking for ways to allow the HOA to operate more efficiently.
Since I am in IT, I immediately went to my wheelhouse and started looking at areas where technology can help the cause (both process and cost savings-wise) and shortly found numerous areas. However, what I found out through this process is much more important. Sound financial management.
With a decent housing market as well as expected increases in infrastructure growth / spending, I feel that high monthly assessments are adversely affecting the value of homes now more than ever before. In my case, I posit that by addressing the following two (2) points, monthly assessments decrease by 8-10% in the short to mid-term without any negative impact to operations or quality. This would make homes more attractive to buyers as well as homeowners saving on their monthly bill(s).
Point 1 – Budgeting
Using last period’s actuals is a very basic business accounting fundamental, however this basic fundamental has not been followed in well over ten (10) years in my case. Do a quick 3-4 year analysis, the trends pop quickly.
Areas to look for inaccurate budgeting are usually located in Administrative Expenses (i.e. Collections, Copy/Mail/Print, Violations). These tend to be areas that rely heavily on 90’s technology, paper; and are extremely inefficient.
This poses a very important question: How can one propose an assessment increase or decrease when a proper budget is not in effect? The answer is one cannot.
Point 2 – Administrative Expenses
For a non-profit, I believe that 18.5% of annual assessments going towards administrative expenses is far too high. Especially for a mature HOA. As a HOA matures, upkeep/maintenance costs should go up, not administrative.
In addition, if these expenses have not been budgeted properly (see: Point – 1), it is extremely easy for these expenses to get out of hand, which they do, frequently.
In my case, if you look at the document linked below, you can see that every 2 years up to 2015 (there were discussions in 2015 for increasing), there were assessment increases. However, the reasons for these increases never actually materialized, and/or were based on inaccurate budgeting data.
Lesson Learned: Even though Information Technology often provides efficiency, the solution with the biggest impact could very well be basic budgeting and expense control.