In an ideal community, homeowners associations charge less in dues but maintain the same high standard of facilities and common areas. However, that is not how it always works. Although it’s understandable for an association to want to maintain low HOA fees, it’s simply not an option in the long run. Some may be skeptical, but there is sound reasoning behind it.
Are Low HOA Fees Good?
Common sense dictates that cheaper is not always better. A pair of shoes that are initially more expensive can save money in the long run by requiring replacement less often. This concept is easy to grasp with physical products but is unintuitive when it comes to HOA fees.
At first, the idea of low HOA fees can entice potential and current homeowners. Unfortunately, not having to pay staggering dues while still enjoying community perks is downright unrealistic. On the outside, cheap HOA fees can seem like a positive thing. However, there is more to it underneath. Here are the pros and cons of low HOA fees:
Cons of Low HOA Fees
How HOA fees are spent remains unclear to most association members, which often results in them prioritizing low prices above all else. This can be an unfortunate misstep as associations with too low HOA fees frequently encounter a number of interconnected problems. While some may rejoice at the idea of paying low prices, it’s not always a good thing. These are the five reasons to be wary of low HOA fees:
1. Inadequate Maintenance
Community maintenance holds many traps for those who seek to cut costs. When it comes to the choice between proactive repairs and cutting fees for the year, many organizations will choose the cheaper choice a decision often praised by the community.
However, upkeep needs to happen eventually. And upkeep, before a serious problem occurs, is likely to be more cost-effective than waiting until the last possible minute. In this way, spending money can save more.
Proactive maintenance has the added benefit of making the community a consistently enjoyable place to live. It is far better to live in a community making constant minor updates than it is to live in one where infrastructure is decrepit and problems are only addressed when absolutely necessary.
2. Surprise Costs
When repairs are needed, one way or another, the community will be paying for them. Low HOA fees can be a sign that the HOA doesn’t have much of a fund saved up for emergencies.
When emergencies inevitably arise, residents can be charged with emergency special assessments to attain funding for the resolution of the issue.
By nature, these costs are not included in the advertised HOA fee structure. When comparing two similar HOA price structures, the lower one could very well be hiding costs in the form of special assessments. In the end, consistent costs are better than surprise costs.
3. Decreases Property Values
Inadequate maintenance can lead to bigger issues than out-of-pocket costs or personal comfort. Over time, communities that become dilapidated experience lowered property values. After all, nobody wants to live in a community where the amenities are embarrassingly undermaintained.
If an HOA does not have the ability to increase curb appeal due to low funds (as a result of low HOA fees), the number of potential homeowners will dwindle. And, soon enough, current residents will suffer and be unable to sell their own homes in the future. The upkeep of the community is essential for anyone viewing their homes as an investment.
4. Adherence to the Law
There are both state and federal regulations dictating that infrastructure must be kept to a minimum standard. Not meeting these standards can cause more trouble than they are worth.
It is the legal duty of the HOA to maintain the property it governs. While resources should be used responsibly and not frivolously, it should be the foremost concern of the HOA to fulfill that duty.
When it comes to raising HOA fees, though, some states also have laws in place limiting the increase. Additionally, most associations have provisions concerning hiking up HOA fees in the governing documents, particularly the CC&Rs.
5. Prices Always Rise
When judging HOA fee structures, a red flag one can look for is if the fees have not been rising over time. Even the most well-built structures cost more to maintain as they age and are not immune to outside forces. The economy can be volatile, and an ever-changing economic landscape means associations must learn to adapt.
Inflation, for one, is a small but persistent constant. Worker wages also go up as time goes by. As the prices of goods and services rise, an HOA cannot keep up if fees remain stagnant.
Pro/s of Low HOA Fees: Happy Homeowners (For Now)
With all the cons of low HOA fees laid out, one may wonder if there are any benefits. Well, there is one: momentarily happy homeowners.
Property owners already have a lot on their plates, from utility bills and mortgages to daily living expenses. Adding an expensive HOA assessment fee can sometimes make them feel more burdened.
With so many financial responsibilities, homeowners may take pleasure in low HOA fees. They may even make the HOA board more popular within the community. However, these blissful effects will fade in due time.
When the association fails to collect enough fees, operating and reserve funds decrease. Without any money, repairs and maintenance become impossible. As a result, property values will decrease (or special assessments will increase) and the standard of living will suffer. Soon enough, homeowners will turn on the board for neglecting the community.
Stay Away Low HOA Fees
Fees aren’t fun, but they are necessary. Skimping on maintenance is only avoiding problems, which will spawn bigger problems down the road. When considering HOAs, make certain not to focus too much on cutting costs — or you could pay the price.
All things considered, low HOA fees are an association’s enemy. Keeping fees low may seem like a good idea at first, but the decision will certainly backfire on the association. HOA fees should see marginal increases each year. If they do not, then the HOA is likely not planning adequately for future expenses.
RELATED ARTICLES:
- What Are HOA Assessments And What Is It Used For?
- How Can An HOA Accountant Help Your Association?
- How To Prepare An HOA Budget
