Scott Brady is co-owner and principal of Progressive Association Management, a CACM-member HOA management company serving 228 communities and nearly 15,000 homeowners throughout Southern California. Since founding the association management division in 2020, Scott has grown the company into the fastest organically growing association management firm in California by limiting manager workloads, providing full back-office support, and holding every team member accountable to documented daily service standards. |
Once upon a time, perhaps 5 to 10 years ago, it was common for dues to stay the same year after year. Unless the board was anticipating a major expense, the dues did not budge. That started changing during COVID, when inflation climbed over 7%, and the aftermath of the Surfside condo collapse sent insurance premiums skyrocketing. Add in rampant wildfires and the balcony inspection bill, and boards across California have been facing mounting financial pressure ever since.
We expect 70% of our associations, and we manage over 230, to increase their monthly assessments moderately in 2026, and 30% to increase them to the maximum of 20% above the prior year. We also expect 10% of our communities to vote on special assessments this year.
Here is a closer look at what is driving these increases and what boards can do about them.
What Is Driving HOA Dues Up
Insurance
Communities are aging, and for those with shared walls and plumbing built 30 to 40 years ago, pipe leaks are becoming increasingly common. These systems were not built to last this long, and when a pipe bursts or develops even a pinhole leak, the resulting water damage can be significant. If the governing documents state that the association is responsible for repairing that damage, the board must act. Although fire damage typically causes greater destruction per incident, the sheer volume of water claims means they account for 54% of all money spent by insurance companies.
Inflation
The rate of inflation, which peaked at nearly 8% a few years ago, is still sitting around 3%. Inflation rises quickly but comes down slowly. That means the cost of doing business for every association vendor increases as well, including fuel, leases, vehicles, insurance, and most significantly for the service industry, payroll. Those increased costs get passed on to associations.
Passed Legislation
The balcony inspection law passed in 2019 required associations to be in compliance by January 1, 2025. Few associations had budgeted for the cost of inspections, and none had reserves set aside for potential repairs. Now the legislature is also requiring that ornamental and “non-functional” landscaping be replaced with drought-tolerant alternatives. Again, no one had anticipated this, and most associations have not budgeted for it.
Potential Legislation
Because many boards have consciously decided to “keep the dues low” rather than fund reserves for future repairs and replacements, the legislature is now considering mandating minimum reserve levels. In California, boards are currently required to pay for an annual reserve study, but there is no requirement to actually fund it. Only Hawaii mandates minimum reserves, set at 50%. With so many underfunded associations in California, there is growing talk of imposing the same 50% minimum here. Associations would likely be given time to reach that level, perhaps 10 years, but those substantially below 50% would need to start raising dues or risk losing access to conventional financing.
What Boards Can Do to Mitigate Increases
Get Quotes for Services
For the biggest expenses, boards should obtain additional quotes. This typically applies to insurance, landscaping, and potentially management services. If a new quote comes in lower than your current provider and you are happy with the work, try to have the current vendor match it. If you are not satisfied with the work, the lower quote gives you another reason to make a change.
Use Quotes in the Reserve Study
You may have big-ticket items in your reserve study that will need to be repaired or replaced down the road, such as roofing, paving, painting, or siding. The reserve study specialist will have estimated both the cost and the timeline for each item, and those figures determine your percent of fully funded. If a licensed contractor provides a lower cost estimate or a longer timeline than the specialist used, most specialists will update their figures accordingly.
For example, if the reserve study assumes the roof has five years of economic life remaining and will cost $1,000,000 to replace, and your current reserve balance for that line item is $800,000, you need to contribute $40,000 per year. But if a roofer determines the roof can last another ten years and will cost $900,000 to replace, that annual contribution drops to $10,000.
Bifurcate Insurance
It was once standard practice to carry a single deductible for both fire and water damage, typically between $1,000 and $10,000. To keep premiums more manageable, some associations now carry split deductibles, one for water damage and a separate, lower one for fire. That might look like $50,000 for water and $10,000 for fire. Under that structure, if water damage totals $50,000, the insurance company has no payment obligation. It is critical that owners obtain secondary coverage such as an HO-6 policy so they are not left responsible for the full deductible out of pocket.
Investigate “All-Included” Management
Some management companies charge a reasonable base fee but then add numerous line items for other “services,” including paper, printing, postage, software access, meeting minutes, travel, and even phone calls with vendors. This makes it difficult for boards to accurately budget their total management expense. We have chosen to offer only “all-included” pricing to our clients, charging a flat fee per owner per month that covers all services rendered. Our boards can budget with confidence.
“Drag Your Feet” on Some Things
Instead of painting every five years, consider stretching it to seven. Instead of repaving every fifteen years, use filler and delay the more expensive project. The key is to be selective. Do not allow visible deferred maintenance that makes the community look worn down or neglected, as that will impact property values. Focus on delaying items that will not affect the overall appearance or appeal of the community, allowing dues to rise more gradually over time.
The Bottom Line
Boards have little choice but to raise dues given the current environment, but there are smart ways to slow the pace of those increases. If you have questions about how your association is managing costs or want to explore whether a different management approach could help, we are here to help.
