Tens of thousands of community associations continue to struggle with financial issues associated with the mortgage foreclosure crisis and economic downturn, according to a national survey conducted in late 2011 by Community Associations Institute (CAI).
Forty-six percent of community managers say their client associations face “serious” problems as a result of the housing and economic downturn, while 10 percent describe the impact as severe.
These results are similar to those of an identical survey conducted in Sept. 2010.
About a quarter of community managers say more than 5 percent of their units are vacant. This is largely due to foreclosures, the inability of nonresident owners to sell or rent their properties or owners simply walking away from their mortgages—and homes. Another 30 percent of managers report vacancy rates of 3 to 5 percent.
Associations rarely collect assessments on vacant homes, placing an added financial strain on the communities and their homeowners. Associations rely on homeowner assessments to fund services such as utilities, trash pickup, snow removal, landscaping and road and building maintenance. Assessments also fund a wide variety of amenities like swimming pools and playgrounds.
Assessment delinquency rates have almost tripled since 2005. Today, 63 percent of associations have delinquency rates exceeding 5 percent, up from 22 percent of associations in 2005. One in three associations has a delinquency rate exceeding 10 percent, and for almost one in 10—or close to 30,000 associations nationally—the rate is more than 20 percent.
“High delinquency rates place tremendous pressure on associations to meet their obligations to the homeowners who are paying their fair share,” says CAI Chief Executive Officer Thomas M. Skiba, CAE. “When some owners—including lenders that have foreclosed on homes and now own them—don’t pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments. Associations must still pay their bills.”
According to a separate CAI survey, more than 70 percent of the bank-owned properties are not making timely assessment payments to their associations. That’s tens of thousands of homes nationally.
“These findings affirm what we’ve known anecdotally for several years—that many associations face severe financial hardships,” says Skiba. “Association boards, community managers and other professional service providers are being put to the quintessential test: how to sustain communities and meet homeowner expectations with far fewer resources."
These difficult times are when association leaders really deserve not only the support and cooperation of their homeowners, but also recognition and appreciation for their efforts, Skiba says. “Anyone who doubts the challenges and commitment of association boards and community managers should try to govern and manage in today’s environment.”
Unfortunately, only 7 percent of managers say their owners are “strongly” sympathetic to the issues faced by association leaders, while 71 percent say their owners are either “somewhat” or “slightly” sympathetic and 22 percent say “not at all.”
There is positive news: 88 percent of managers say their board member clients accept “a lot” or “some” of their advice before taking specific actions.
The survey showed that associations are taking a variety of steps to address budgetary shortfalls:
- 50 percent have increased homeowner assessments
- 40 percent have reduced contributions to reserve accounts that are set aside for major maintenance and repairs
- 39 percent have reduced landscaping services
- 38 percent have deferred maintenance of common elements
- 38 percent have postponed planned capital improvement projects
- 28 percent have reduced professional costs or management fees
- 22 percent have borrowed from their reserve accounts
- 20 percent have levied special assessments
Financial issues facing many associations add urgency to CAI’s persistent efforts to modify Federal Housing Administration (FHA) policies that are causing frustration and confusion in the home mortgage marketplace.
“Many owners need to sell their condominiums, and there are buyers. But recent FHA actions are getting in the way,” Skiba says. “We can’t afford FHA policies that prevent many potential buyers from obtaining FHA-backed loans. This just worsens an already-depressed housing market. Not only does it affect potential buyers and sellers, it has an adverse impact on many struggling communities.” Read more at Mortgage Matters.
Nationally, more than 60 million Americans live in an estimated 315,000 homeowners associations, condominium communities and residential cooperatives.
Almost 600 CAI member community managers responded to the survey. See the full results.
CAI is a 31,000-member, international association dedicated to building better communities. Working in partnership with 60 chapters, CAI provides information, education and resources to associations and the professionals who support them. CAI’s mission is to inspire professionalism, effective leadership and responsible citizenship, ideals reflected in communities that are preferred places to call home. Visit www.caionline.org or call (888) 224-4321.