From virtual board meetings and events to amenity closures and policy changes, 2020 has been challenging and unpredictable for many community associations and high-rises.
The question is – are these changes affecting association budgets? More importantly, will these changes have an impact on your budget in the year ahead?
In our 2020 HOA Budget Survey, board members from across North America weighed in on budget planning and changes in the wake of COVID-19. By looking at these results, associations can gain insights and best practices to apply to their current and future budgets. Read on to see 7 HOA budget trends that have shaped associations and communities in 2020.
In our 2020 HOA Budget Survey, nearly 60% of board members said they were not delaying or canceling capital improvement projects. Associations continue to invest in important initiatives that will enhance their community and strengthen their reputation in the community at large.
However, some boards are moderating their spending on capital improvements (28% said they are considering delaying or canceling capital improvement projects that aren’t required by law). Your association may need to temporarily adjust spending on non-mandatory projects or be more conservative with capital improvements, and that’s okay. No matter what you decide to do, transparency with your community is key.
Looking ahead: Sit down with your association manager to review current and upcoming capital improvement projects. (To see more best practices on categorizing capital improvement projects, watch the webinar, Post-Crisis Reserve Funds and Cash Management.) Even if you need to temporarily dial back on larger projects (e.g., a full gym remodel or golf course renovation), make sure you build capital improvements into your budget going forward. They are key to sustaining your reputation and property values.
Half of all board members surveyed said they are looking for ways to optimize their budget in the coming year, particularly in the areas of energy and utilities (41%), landscaping (33%), preventive maintenance (32%) and insurance (32%). Proactive boards consistently look for value in their budget, no matter what is occurring externally. In good times and in a crisis, maximizing the value of your budget is key to a healthy association.
A great management company will help you find value in your current budget by assessing line items on a regular basis. For example, one association that transitioned to FirstService Residential had been paying ongoing costs related to plumbing repairs and maintenance. After the management team performed an in-depth cost analysis, the board realized they would continue to bleed money if they didn’t undergo a full re-pipe. The association obtained a loan and took a special assessment to pay for the repairs, which allowed them to increase their reserve fund percentages over the 5 years that followed.
Looking ahead: Whether your association is operating in an economic downturn or in a stable environment, find ways to optimize your budget. For a full list of recommendations on utilities, landscaping, maintenance and more, fill out the form on this page to get the 2020 Budget Survey Results.
Most boards understand that even when an unexpected crisis occurs, the vision and budget goals remain the same. To that end, when asked about their most important budgeting priority, 45% of board members said that they want to make sure assessments support their community’s vision, and 37% said they want to use their budget to stay relevant and plan for unexpected expenses in the future.
While long-term planning was the primary focus of boards, there was one caveat. 47% of board members also said that keeping assessments at the current level was a priority. Some boards want to avoid raising assessments so that they don’t look like the “bad guy,” but incremental increases to assessments can be vital to your HOA’s health. The key is to share the “why” behind assessment increases (e.g., rising utility costs, continued improvements, etc.).
Looking ahead: A highly aligned board will be more adept at pivoting and making changes with the big picture and the best interest of the community in mind. To learn more about the importance of board alignment, read the article, Is HOA Alignment a Unicorn? 3 Boards Share What It Takes.
Does landscaping still make up the biggest portion of association budgets? In most cases, yes. In fact, nearly 50% of all board members surveyed said that taking care of landscape is the biggest cost for them.
However, that percentage can change depending on the type of association. For instance, in a breakout of self-managed association board members versus all association board members, 67% of individuals who are part of self-managed or contracted communities said that staffing costs (including wages and benefits) make up the biggest chunk of their budget (that’s compared with 35% for all surveyed board members). Every HOA is different, but make sure that you’re handling staffing costs appropriately and investing into capital improvements and landscaping, which also help enhance property values.
Looking ahead: As you’re planning your 2021 budget, take the time to review your budget in detail with your manager and management company. This is a great time to see areas you may want to optimize in terms of value (see trend #4) or opportunities for investment.
Most surveyed board members said that their HOA budget knowledge is excellent or good overall. But that number has changed a bit year over year. In 2019, 53% of board members rated their comfort level as excellent, while in 2020, less than 40% said they have an outstanding handle on financials.
The good news is that you don’t need to know everything about their budget and financials or the economy at large to have a healthy association, but it’s important to surround yourself with people that do. In fact, 31% of surveyed board members said they were somewhat concerned about the quality or quantity of information they were getting from their management company.
Looking ahead: Make sure that your manager and management company provides you with timely and accurate information to help you plan your budget for 2021. Work closely with them to ensure that they have access to financial services partners, experienced managers and budget resources to help you build a budget that will position you for success.
Fill out the form on this page to get the full 2020 HOA Budget Survey Results Report, with helpful stats, best practices and industry insights.
Disclaimer: This article is provided for information purposes only and does not constitute legal advice.