The national economy and housing market are improving—however slowly—and that means things are looking up for most associations, which is welcome relief to many communities that weathered some difficult years.

While some associations continue to feel the pinch, almost 90% of community managers and board members say their association’s overall financial health is "excellent" or "good," with 10% saying "fair" and only about 2% indicating "poor" financial health.

The results are based on responses from almost 1,000 community managers and association board members who completed CAI's 2014 State of Community Associations Survey.*

Looking ahead, almost 55% of managers and board members see their association’s financial condition being “much” or "slightly" better in the next five years, while about 42% expect little change. Less than 4% anticipate a turn for the worse in the next five years.

"Like the country as a whole, many associations experienced especially difficult challenges during the downturn," says CAI Chief Executive Officer Thomas Skiba, CAE. "This survey affirms that most associations are better off today, and it’s reassuring to know that most managers and board members express optimism about the next few years. Nobody can predict the future with certainty, but that’s a very positive economic indicator for associations and the professionals who support them."

Assessments and Delinquencies

Almost 40% of associations did not increase assessments during the most recent budgetary cycle. Of those that did raise assessments, 33% of respondents say assessments increased 1 to 3%, while 17% report a 4 to 6% hike, 7% a 7 to 10% increase and 4% an increase of 10% or more. About 13% of associations levied a special assessment during the previous 12 months.

Most managers and board members are confident their homeowners believe they are getting a good value for their assessment dollars, with 26% "overwhelmingly" satisfied, 60% "for the most part" satisfied and 10% "somewhat" satisfied. Almost 5% acknowledge their members are "not really" satisfied with the value they are getting for their assessments.

Understanding that rates of assessment delinquency often reflect the health of a local economy and housing market, respondents were asked the percentage of owners who are behind on their payments to the association. About 81% of respondents say their delinquency rate is 6% or less, with three quarters of those in the 0 to 3% range. About 15% peg the delinquency rate at 7 to 15%, with 4% saying it’s more than 15%.

Asked if their associations pursue delinquencies differently than before the mortgage foreclosure crisis and economic downturn, 44% say they are now "much" or "somewhat" more aggressive, with a near-even split between the two. Almost 55% say their collection policies and approaches have remained largely consistent, while less than 2% say their associations have become less aggressive.

Reserve Funding

Encouragingly, almost 70% of association managers and board members believe their associations are setting aside sufficient funds for future repairs and replacements. The remaining 30% do not believe their communities have sufficient reserves.

"Although 70% is a good number, most community association experts would be concerned that almost three in 10 associations have under-funded reserves," Skiba says. "We strongly encourage associations to budget with a sharp eye toward the future. It’s not easy making choices between immediate and long-term needs, but those bills will become due eventually."

The survey shows that almost 75% of associations base their reserve funding on a formal study or updates conducted by a professional reserve specialist; 25% do not use a reserve specialist.

Leadership Performance

Most community managers and association board members believe their residents are satisfied with the performance of the association leadership team. Almost half of respondents believe 80% or more of their residents are satisfied, while about a third estimate their approval rate at 60 to 80%. About 20% peg their approval rating at less than 60% of residents.

According to a March-April 2014 national survey of community association residents conducted for the Foundation for Community Association Research, 90% of association residents rate their overall experience as positive (64%) or neutral (26%).

Leading Challenges

Community associations face a number of challenges, but resident apathy is rated the "most serious" issue for almost a third of the associations represented in the survey—higher than any other issue.

"While community leaders rightfully seek more volunteers and greater owner participation, I don’t think apathy is necessarily an indication of poor management or owner discontent," Skiba says. "A lack of interest can mean that residents are largely satisfied with how the association is being managed and don’t feel the need to get involved."

The following are the percentages of managers and board members who rated issues as "very" or "somewhat" serious:

• 31%       Resident apathy
• 20%       Renters and rental-related issues
• 18%       Rules enforcement
• 15%       Insufficient money to do what is needed
• 13%       Deteriorating common elements
• 13%       Community appearance and curb appeal
• 12%       Assessment delinquencies
• 12%       Issues related to aging residents
• 5%          Resident discontent