4 Cost-Saving Strategies to Keep HOA Assessments Stable

Download white paper

Want to find additional cost savings for your HOA? Start with your insurance. Download our free white paper, 4 Things You May Not Know About Community Insurance.

It’s a universal appeal we all hear from residents: stop raising assessments. This request rings true whether you live in a high-rise building, a condo complex or a master-planned community.
Let’s be honest, while it’s a hot topic, there are often very good reasons to raise your assessments. Even if you’ve determined that you have a solid preventative maintenance program through a maintenance assessment, some unforeseen emergencies can throw a wrench into the best laid plans. If you continue to keep assessments low despite maintenance needs that come up, you run the risk of letting your property values decline or causing your community’s relevance to suffer. Conversely, raising assessments can have a positive impact on your property values and reputation.

But no board wants to be the “bad guy” or consistently raise assessments because they are not able to cope with rising utilities, maintenance or staffing costs – in other words, poor planning or stewardship. So before you raise assessments, take a look at these four strategies for cost-containment (e.g., maintaining or reducing expenses to make the most of your budget):

Cost-Savings Opportunity #1: Energy

Across the country, energy costs are rising. That’s why it’s crucial that you and your board partner with your management company to look for ways to boost energy efficiency. Partner with your community manager and management company to help answer the following questions:

  • Are we still using standard lightbulbs?
  • How much energy does our association really use in common areas?
  • Do we keep lights on when no one is using a space?
  • Is our pool or hot tub too warm?
  • Is our air conditioning too cold?  
  • Are we using the most efficient pool heater for our property type and location?
  • Are there areas that have excessive outdoor or landscape lighting?

By evaluating current energy costs, you may find some easy changes that will create cost savings. For example, you may want to install light switches on motion detectors so that no lights can be left on when the room is unoccupied. Other updates, like changing from traditional to LED lighting, may require a larger upfront investment but will likely pay off in the long term. That’s exactly what one high-rise association did. After recommendations from FirstService Residential and their general manager, the association installed a variable frequency drive, which saved the building 20% in energy costs. After an initial cost of $25,000 to install, the high-rise has recouped all costs.

Cost-Savings Opportunity #2: Reserve Fund Investments

In our 2018 HOA budget survey, 72% of board members admitted that they weren’t fully confident in the returns they are getting on reserve funds and/or operating funds. Are you in the same boat? To find out, partner with your community manager and management company to answer the following questions:

  • Where and how is your reserve fund invested?
  • Do you know which investment vehicles you should choose?
  • Are you working with an HOA-specific financial services firm to maximize returns?
  • Do you review investments regularly?
  • Do you have an HOA Investment Policy? (Learn how to create one by downloading a free guide)

By taking a few simple steps, you can get the most out of your reserve funds and protect your HOA financials for years to come. Learn more about optimizing reserve fund returns here.

Cost-Savings Opportunity #3: HOA Insurance

Association insurance is dynamic and complex. If you haven’t taken a close look at your coverage recently, you may be paying a higher price than needed (either in your premiums or deductibles). It’s crucial to work with a trusted insurance broker or agent that has experience with community associations. Kelly Lee, Vice President of Legal & Risk Management for FirstService Residential said, “It’s always best to choose an insurance agent or broker with a successful track record in community association insurance—they can tailor a cost-effective program that ensures adequate coverage and meets your community’s needs.”
To evaluate whether you are in need of an insurance tune-up, ask these questions:

  • When did you last have your insurance audited?
  • Is your association covered correctly?
  • Do you know what is covered in your property insurance?
  • Do you have workers’ compensation coverage?
  • Do you have building ordinance & law coverage?
  • Are your vendors covered appropriately?

While more coverage may seem contradictory to cost savings, it may save you more in the long run. If your HOA has appropriate coverage (even if that means paying a little more upfront), you will be better covered in the event of a disaster. Additionally, lower premiums often mean higher deductibles, which can also cut into your budget. To learn more about the complexities of HOA insurance, download our complimentary white paper, Four Things You May Not Know About Community Insurance.

Through FS Insurance Brokers, a subsidiary of FirstService Financial, FirstService Residential managed communities have access to unique programs and insurance offerings that can help reduce cost and enhance coverage levels for clients.

Cost-Savings Opportunity #4: Vendor Contracts

In our 2018 Budget Survey, more than 57% of board members said they weren’t sure if their management company asks vendors whether there will be increases in costs in next year’s budget. A regular review of contracts and consistent communication with vendors can help reveal areas where your association can save money. To evaluate your approach to vendor contracts, ask these questions:

  • How often do you sit down with your management company to review vendor contracts?
  • Do you know if there will be anticipated increases in costs in next year’s budget?
  • Do you or your management company consistently communicate with vendors about costs?

It’s critical to partner with a management company that has the size and purchasing power to negotiate better rates and fees with your vendors. They can also work with vendors to plan for potential environment- and economy-related costs (such as increasing energy costs).

Other HOA Cost-Saving Opportunities – Investment Policy

Keep in mind that while these four cost-saving strategies are a good starting place, this is not an exhaustive list. Work with your management company to help you determine what other areas of spending you may be able to cut back on or modify to help you save more in the long-run. One of the ways you can do this is by developing an HOA Investment Policy. An HOA Investment Policy is a guide you can you utilize to help you uncover better returns on your reserve funds and subsequently, save money. To learn more, download the guide, How to Create an HOA Investment Policy.


Download white paper

Learn about additional cost savings by downloading our complimentary white paper, 4 Things You May Not Know About Community Insurance.