Inefficiencies Lead To Increasing HOA Assessments – Decreasing Home Values
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.
Summation
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.