Cohousing-L Mailing List: Re: HOA Dues Increase

[Sharon Villines (sharon]

> On Jul 5, 2019, at 12:58 AM, G/P Looney-Burman <burloon [at] 
> fresnocohousing.org> wrote:
> 
> Our almost-11 year old community of 28 homes has never had an HOA dues
> increase, and we are now, obviously belatedly, going to have one.

I can’t imagine how you have done this. Perhaps you could share more about how 
you budget and what homeowners pay for vs the Association.

> We’re asking for input regarding methods of dues increase: how do you 
> determine
> how much of an increase is needed?

The admin team looks at increases in things like utility rates, tax increases, 
income (we have solar panels and sell some of it), etc. and calculates how much 
that increase is. They also calculate deposits in the various reserve funds — 
capital replacement, maintenance, emergency.

Teams all prepare budgets asking for increases or lowering what they need for 
various reasons.

Then the budget is presented with those amounts. If it is an increase more than 
people want/can pay, the budget is discussed and teams asked if they can lower 
their requests. The Admin Team also plays with numbers to see if some requests 
can properly be funded with one of the reserve funds instead of the operating 
budget.

A new draft is produced and circulated. In the early years this could happen 
3-4 times because we needed/wanted more than we could afford. We also had more 
unplanned expenses so we used reserve funds more frequently and had to pay that 
back.

(Cautionary note: It is not true that new construction is less expensive to 
maintain than old construction. New construction has to be corrected, 
particularly if you are trying to use new green materials and installation 
techniques that may or may not work. Or you won’t be able to find service 
people who know how to maintain them.)

> How do you reach consensus or agreement about having an increase?  

We work it out. Proposals for major projects or new services, etc., are not 
done during the operating budget process. Those usually come out of reserves 
and we are well funded on that respect. Those decisions are separate from the 
operating budget process.

The consent problems we’ve had were in the early years when we were 
inexperienced and had no idea what we really needed, and when we were building 
up reserves. And most of us were also dealing with a larger mortgage than we 
planned, arrival of long delayed births and adoptions, adapting to new jobs, 
etc. The life changes that come with a move.

(Ask me about the pile of cardboard boxes beside the recycling bin from 43 
households that are all unpacking at the same time.)

> Are your dues based on the size of each home?

We have a formula that distributes the fees 50% equally, and 50% based on 
percentage interest. The percentage interest is a flawed number but is sort of 
related to the size of the unit and other amenities.

> Have you had annual increases?  Increases as needed?  

We only have increases as needed, but I think last year was the only budget in 
19 that we didn’t have an increase. Our initial projected fees were woefully 
underestimated so we had large increases in the early years — one being 6% as I 
remember. We are also blessed with experienced budget people who have worked in 
government agencies and non-profit organizations so they are familiar with this 
process. For example, they were fully aware of how important reserves are. We 
didn’t have to raise fees later just because we hadn’t prepared for major 
expenses. After capital replacement and maintenance reserve studies, we have 
slowly raised reserve deposits.

One way to consider the necessity of raising fees is to talk to members of the 
boards of other condos in the area or building managers about what is “normal.” 
In one way or another, you will have the same costs they do. The labor that 
residents volunteer will be offset by larger expenses in social programs.

The “standard” in the industry is to expect a 3% increase every year.

Sharon
----
Sharon Villines
Takoma Village Cohousing, Washington DC
http://www.takomavillage.org