Posted on Friday, November 19, 2010
More than half of the estimated 310,000 homeowner and condominium associations in the United States are struggling with financial issues stemming from the nation’s mortgage foreclosure crisis and related economic downturn, according to the Community Associations Institute (CAI).
The organization released the results of its national survey this week and found that 45 percent of community managers describe these financial issues as “serious,” while 9 percent say the impact is “severe.”
“Association boards strive to maintain the nature and character of their communities and meet the established expectations of all homeowners, but that’s a daunting task in this kind of environment,” said Thomas M. Skiba, CAI’s CEO. “They are making difficult choices because they have few alternatives. But they are managing the equivalent of a business, and businesses must pay their bills.”
Because associations are often unable to collect fees from empty homes to fund services such as utilities, trash pickup, snow removal, road and building maintenance, and landscaping, vacancy rates can have a significant impact on homeowner associations.
According to the survey, at least 3 percent of the homes in more than half of the responding communities are vacant, and 25 percent report that vacancy rates are above 5 percent.
In addition, assessment delinquency rates have more than doubled since 2005, according to survey data. Today, 65 percent of associations have delinquency rates exceeding 5 percent with more than 30 percent reporting rates of more than 10 percent. For one in 10 associations-or close to 30,000 associations-the delinquency rate is more than 20 percent.
“This can put an enormous strain on both associations and the homeowners who are paying their fair share,” said Skiba.
To stay afloat, associations are borrowing, reducing the money that needs to be set aside for major maintenance and repairs, postponing capital improvement projects, and levying special assessments, according to the CAI.
Many associations, Skiba says, are also restricting services, which can further depress property values.
Based in Alexandria, Virginia, CAI is a national association that supports homeowner volunteer leaders and professionals who govern and manage community associations, condominiums, and cooperatives. More than 60 million Americans live in homeowners associations, condominium communities, and residential cooperatives.
By: Heather Hill Cernoch