Rapidly increasing insurance premiums are putting pressure on community associations and their members. In a 2023 survey of condo associations, 91% said that their insurance premiums increased at the last renewal. The increase in insurance premiums is a major factor behind rising condo association fees. Condo dues rose 20% between 2022 and 2024, according to an analysis of 1,800 associations in 44 states by real-estate tech company Rexera.
The rise in these costs is squeezing homeowners when home-buying affordability already hovers around its lowest level since the 1980s. Property taxes and home-maintenance costs are also climbing in much of the country.
Many condo associations have responded by passing the increase in insurance costs on to homeowners through increased dues or special assessments. This financial strain is leading some homeowners to consider moving rather than absorb the higher fees, which is understandable given the added financial burden.
For associations, the options mentioned—such as raising dues, using operating funds, or even taking out a line of credit—show the lengths they are going to manage these increased costs. However, the increased fees are not easily absorbed by individual homeowners. When too many homeowners fall behind in their condo fee payments, the condo association may have to consider foreclosure in order to recoup the lost fees. At a minimum it may put a lien on the condo in order to ensure that the fees will be repaid if the owner sells the property. For individual homeowners, especially those already struggling with payments, the prospect of foreclosure due to unpaid fees adds another layer of concern.
The challenges facing condo and townhome owners, as outlined, highlight several significant issues impacting affordability in these communities:
Rising Monthly Fees: Increased insurance premiums and other operational costs are leading to higher monthly fees for condo and townhome owners. This can make these properties less attractive or affordable, especially for first-time buyers and retirees on fixed incomes who are often drawn to these housing options due to lower initial purchase prices.
Rapidly Increasing Home Prices: The sharp rise in home prices, nearly 50% since the end of 2019, further exacerbates affordability concerns. This trend not only affects prospective buyers but also puts recent homeowners under financial strain, potentially limiting their ability to absorb additional costs like higher monthly fees.
Impact of Mortgage Rates: Mortgage rates around 7% add another layer of financial pressure, making borrowing more expensive and potentially deterring buyers who rely on financing to purchase homes.
State Regulations and Compliance Costs: Specific state laws, such as those in California and Florida requiring older buildings to meet new structural safety standards, are imposing additional expenses on condo owners. Compliance with these regulations can lead to significant costs that are passed down to homeowners through increased fees or assessments.
Given these challenges, it's understandable that some condo owners may consider selling and moving to more affordable housing options or locations. For those looking to stay, it could be beneficial to explore options such as renegotiating insurance policies, advocating for more flexible payment plans from associations, or seeking out financial assistance programs if available.
Navigating these financial pressures requires careful consideration of individual circumstances and proactive communication with community associations and financial advisors. Are you or someone you know currently dealing with these issues firsthand, or are you seeking more information on how to manage these challenges effectively? If you are having problems with your condo association in the DC Metro area, I would love to talk with you. I can be reached at 240-401-5577 or by email at lise@lisehowe.com.
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