HOA Fees Rise As Insurance Costs Soar

If you’re thinking about buying a home, you’re probably already aware of how pricey today’s housing market can be. And if you’re considering properties that are part of a homeowners association, or if you already own one, affordability can become even trickier.

HOAs charge residents fees that cover the cost of shared amenities and overall maintenance. These can cover anything from landscaping and snow removal to upkeep of things like swimming pools and, in high-rise buildings, elevators. But they also cover basics like insurance premiums — and in markets where extreme weather and natural disasters are more common, rates have been skyrocketing. Often, the HOA passes this ever-rising cost on to the homeowners in the form of higher monthly fees or larger one-time fees called special assessments. This jump in homeownership costs can have a big impact on how you manage your budget.

HOAs and home affordability

Condos and co-ops, both of which are typically run by homeowners associations, usually have lower price tags than independent single-family homes. While that is appealing to frugal homebuyers looking for affordable options, the fees that go along with these HOA-run properties vary wildly: HOA fees can range from a relatively nominal $100 per month to many thousands of dollars, depending on the level of services offered. A neighborhood or condo complex with tennis courts, a gym or a pool (or all three), for example, will have much higher fees than one without.

Your HOA fees help cover those nice-to-have features, but they also cover an essential must-have: a “master” insurance policy for the property. While individual owners will have a separate policy to cover the interior of their house or unit, the association needs its own policy for potential issues like roof damage, flooding and other big-ticket items.

And unlike fixed-rate mortgage payments, where you know exactly how much you’ll owe in principal and interest every month and can budget accordingly, HOA fees can increase at anytime. In fact, a Redfin study from August 2024 shows that the median cost of HOA fees in more than 40 of the country’s most populated metro areas jumped by 5.7 percent in the past year.

HOA fees and assessments in high-risk markets

For markets at greater risk for extreme weather and other dangers, though, that percentage is much higher. For example, the same study shows that the cost of HOA fees in Tampa, Florida — recently hard-hit by Hurricane Milton — rose more than 17 percent. That’s triple the median increase, enough to have a serious impact on anyone’s finances, much less those of a retiree living on a fixed income.

Florida’s homeowners insurance crisis (some providers have pulled out of the state altogether) has exacerbated affordability challenges for HOA owners all over the state. Redfin’s data found that HOA fees in Orlando, Fort Lauderdale and West Palm Beach all also increased by double digits.

This is not solely a Florida problem, though: Other markets around the country where HOA fees increased by double digits, the study found, include Ft. Worth, Texas (14.6 percent); Sacramento, California (13.1 percent); and Atlanta (12.2 percent).

Plenty of U.S. homeowners would face financial challenges beyond just increased HOA costs if confronted with a major disaster. In Bankrate’s recent Severe Weather Survey, 29 percent of homeowners in the South region (which includes the areas most heavily impacted by Hurricanes Helene and Milton) said they were unprepared for the potential costs associated with extreme weather events in their area.

Surprise special assessments

The monthly fees that keep HOAs running aren’t the only costs residents have to worry about. One of the key drivers behind rising HOA costs is actually related to special assessments, rather than incremental monthly increases, says Angel Nicolas, a real estate advisor with Compass in Miami. These one-time assessments can be both unexpected and sizable.

In the aftermath of the tragic 2021 collapse of a building in the town of Surfside, Nicolas says, Miami passed a new requirement that buildings at least 40 years old must be recertified for structural and electrical safety every 10 years. That means owners in older buildings may be in for exceptionally big bills: “If you need to redo structural engineering, you might be talking about anywhere from $15,000 to $60,000 per unit,” Nicolas says. “For someone who is not expecting to have to come up with that money, that can really throw them off.”

How rising HOA costs can shake up the housing market

In a city like Miami, which has a large amount of HOA-run condo complexes as well as a high percentage of older, fixed-income retirees, the need to pay more and more money each month can bring the cost of living beyond their means. That can have a domino effect throughout the entire market. The potential for huge one-time payments is fueling a surge in selling activity, Nicolas says: “We are getting lots of listings from people who want to sell their older condos because of special assessments.”

And of course, even those still earning a paycheck don’t want to spend more than they have to. Redfin’s Miami housing market data for August 2024 shows that the number of condos and co-ops sold plunged by more than 26 percent year-over-year, while those that did sell spent a long 106 days on the market before going into contract

However, while HOA home sellers may need to negotiate the terms of a property with a special assessment on the horizon, Nicolas points out that there are positive elements to this situation, too. “A lot of these buildings didn’t have [financial] reserves in the past, which is technically unacceptable now,” he says. “Now, they will be up to code and well-maintained. They’ll have the right reserves in place in case something needs to be done.”

Tips to limit the impact of HOA increases on your budget

• Plan for the inevitable: Just like any other costs, it’s a safe bet that HOA costs will climb over time. It’s smart to stash away some cash so that when it happens, you’ll be ready. “Homeownership tends to incur additional expenses that are not entirely foreseen,” says Mark Hamrick, senior economic analyst at Bankrate. “To that extent, homeowners should make it a priority to fund and maintain sufficient savings for these so-called surprise expenses. If one takes the steps of preparing for the inevitable expenses, then they should not come as a shock.”
• Don’t buy what you don’t want: Buying in a community or building that offers significantly more amenities than you’ll actually use is like throwing money away. You don’t want to have to pay for golf-course maintenance if you’re not a golfer, for example, or for a fancy playground if you don’t have children.
• Do your research: Don’t let a well-staged individual property derail you from focusing on the entire association’s overall financial health. Frances Katzen, a broker with Douglas Elliman in New York City, likes to evaluate more than just the past couple years of a building’s financial documents. “I always ask for four to five [years] because I want to see if there’s been a pattern of increase or a massive trauma to the building’s reserves,” she says.
• Look at the big picture: In New York, Katzen says, some buildings have seen monthly fees increase by several thousand dollars, where others in the same neighborhood may have just nominal increases. “Those buildings that have maintained steady monthlies have an underlying debt that’s low, and they’re well run,” she says. “They’re not drawing upon a reserve or a capital contribution requirement [aka, an assessment].”
• Ask about flexible payment programs: If your income includes irregular earnings or commissions, you may want to inquire about ways to pay HOA fees outside of a monthly cadence. “Some associations offer payment plans or other options for paying fees quarterly or annually,” says Hamrick. “Exploring options to know what works best for one’s own financial situation should provide a path toward more manageable payments — and a more satisfying experience as a homeowner.”