Your HOA Budget Is Going Up. Here’s What Your Board Should Be Asking Before Raising Assessments.

For most HOA and condominium board members, budget season comes with an uncomfortable reality: almost everything seems to cost more than it did a few years ago. 

Insurance premiums rise. Landscaping contracts increase. Snow removal gets more expensive. Utility rates change. Aging roofs, roads, fences, mechanical systems and other common elements still need to be maintained. 

Eventually, many boards arrive at the same question: 

Do we need to raise assessments? 

Often, the answer is yes. Keeping assessments artificially low can create much bigger financial problems for a community later. 

But before approving an increase, your board should understand exactly why the budget is going up, what can reasonably be challenged, and which expenses may actually be protecting the community from larger costs down the road. 

Here are some questions worth asking. 

1. What changed from last year?

Start simple. 

Instead of looking only at the total proposed budget, compare it line by line against the current year. 

Ask: 

• Which expenses increased the most? 

• Which increases were expected? 

• Are there any new expenses? 

• Did actual spending last year come in significantly above or below budget? 

• Are we budgeting based on real historical costs or simply adding a percentage to last year’s numbers? 

A $50 increase across several smaller categories may not deserve much attention. A $40,000 jump in insurance, landscaping or repairs probably does. 

Your management company should be able to help the board find the largest year-over-year changes and explain what is driving them. A board shouldn’t have to decipher a spreadsheet on its own to understand where homeowners’ money is going. 

2. Has the insurance market changed—or should we be shopping the policy? 

Insurance has become one of the biggest budget pressures for community associations. 

If your premium increased significantly, don’t automatically assume there is a less expensive carrier waiting around the corner. Market conditions, claims history, property age, construction type and coverage requirements can all affect pricing. 

But your board should still ask questions. 

Was the policy marketed to multiple carriers? Have deductibles changed? Has coverage changed? Are there risk issues the association could address that may make it more attractive to insurers in the future? 

The goal isn’t simply to find the cheapest policy. It’s to understand whether the association is receiving competitive pricing for proper coverage. 

It’s important that your management partner has a dedicated insurance division focused specifically on reviewing community association coverage, marketing policies to carriers, and helping boards evaluate both premium and coverage options so your board can make a well-informed decision every single year. 

3. Are vendor increases reasonable? 

Your landscaper, snow contractor, janitorial company, pool vendor and other service providers have rising costs too. Labor, fuel, materials and insurance affect them just as they affect homeowners. 

That doesn’t mean every increase should automatically be accepted. 

If a major contract is increasing, ask: 

• When was it last competitively bid? 

• Has the scope of service changed? 

• Is the vendor meeting expectations? 

• How does the new pricing compare with the current market? 

• Could adjusting the scope reduce costs without noticeably reducing service? 

Boards also need to be careful about chasing savings simply for the sake of showing a lower number. 

Replacing a reliable vendor with the lowest bidder can become expensive quickly if service deteriorates, work falls outside the new contract, or the board spends the next year managing complaints. 

A good management partner should help the board understand both price and value. 

4. Are utility costs being treated as uncontrollable?

Water, electricity, gas and other utilities can feel like expenses a board simply has to accept. 

The rate itself may be outside the association’s control. Consumption isn’t always. 

Look for unusual changes in usage. Ask whether irrigation systems have been reviewed for leaks, common-area lighting is efficient, thermostats or mechanical systems are working properly, or equipment is consuming more energy as it ages. 

For larger communities, small operational changes can sometimes create meaningful savings. 

The right question isn’t just, “Did the rate go up?”  It’s also, “Are we using more?” 

5. Are we properly funding reserves—or balancing the budget by underfunding the future?

This is one of the most important conversations a board can have. 

Reserve funds exist to help pay for major future repairs and replacements. Depending on the community, which might include roofs, siding, pavement, elevators, fencing, mechanical equipment, clubhouse components or other common property. 

When a budget is tight, reducing the reserve contribution can make the numbers look better today. 

But the repair didn’t disappear.  Instead, you may have shifted the bill to a future board and future homeowners. 

Illinois law also places specific responsibilities on many condominium and common-interest community boards regarding annual budgets, reserves and the information provided to owners. For example, Illinois common-interest communities generally must find portions of the proposed annual budget intended for reserves, capital expenditures and repairs. Requirements can differ depending on the type of association and its governing documents. 

Your board should know: 

• When was our most recent reserve study or long-term capital plan? 

• Are our planned reserve contributions keeping pace with that plan? 

• Have project costs changed since the study was prepared? 

• Are major repairs occurring sooner than originally anticipated? 

• What happens if we reduce reserve funding this year? 

An assessment increase that properly funds future repairs may be a much healthier decision than keeping assessments flat and facing a large special assessment later. 

6. Are we spending more because maintenance was deferred?

Sometimes today’s budget increase isn’t really about today’s costs. It’s about yesterday’s decisions. 

A roof repair that was postponed, pavement that wasn’t maintained, aging equipment that wasn’t replaced or recurring water intrusion that was temporarily patched can eventually become a larger project. 

Boards should look closely at repair and maintenance trends. 

Are the same problems appearing repeatedly? Are we continuing to repair something that should be replaced? Is a maintenance item being postponed simply because the board doesn’t want to increase assessments? 

There are legitimate reasons to delay a project. But the board should understand the financial consequences of doing so. 

“Not this year” is still a financial decision. 

7. What can we challenge, and what should we accept?

Not every increase deserves a battle. 

A useful way to approach the budget is to separate expenses into three groups. 

Challenge it:
Large unexplained increases, outdated contracts, duplicated services, unusual utility consumption, recurring repair costs, or expenses that no longer match how the community operates. 

Verify it:
Insurance renewals, vendor increases, professional services and other items affected by market conditions. Make sure pricing and scope are reasonable before accepting them. 

Plan for it:
Reserve contributions, known capital projects, regulatory requirements and necessary maintenance. Cutting these expenses may create a prettier budget today while making the community financially weaker tomorrow. 

The goal of budgeting isn’t to produce the lowest possible assessment, it’s to responsibly fund the community. 

8. What does the increase actually mean for each homeowner?

Boards sometimes spend hours discussing a $25,000 or $50,000 budget variance without translating it into what homeowners will actually experience. 

Do the math. 

If additional funding is necessary, what does that equal per home, per month? 

Then ask the opposite question: If we don’t collect that amount, what are we choosing not to fund? 

That framing can change the conversation. 

A homeowner may understandably dislike a $12 monthly increase. But the discussion becomes different if that $12 helps properly fund roof replacement, maintain adequate reserves or avoid postponing a necessary repair. 

Your management company should be doing more than preparing the spreadsheet. 

Volunteer board members shouldn’t be expected to become insurance brokers, accountants, contractors, reserve specialists and procurement professionals every fall. 

Your management team should help your board understand what’s behind the numbers. 

That means identifying significant variances, reviewing contracts, helping solicit competitive proposals when appropriate, coordinating with insurance and financial professionals, tracking reserve needs, providing historical spending information and helping the board understand the consequences of different choices. 

The final decisions belong to the board. 

But those decisions should be made with good information. 

Before approving your next budget, ask one final question: 

Are we creating the least expensive budget or the right budget for our community? 

Those are not always the same thing. 

Responsible budgeting means challenging costs when appropriate, protecting the association’s financial health and making sure today’s homeowners are contributing fairly toward the services and assets they’re using. 

Assessment increases are rarely popular. 

But a well-informed board should be able to clearly explain what changed, what was reviewed, what alternatives were considered and why the final budget is in the community’s best interest. 

That is a much stronger conversation than simply telling homeowners, “Everything costs more.” 

 Need another set of eyes on your HOA budget? 

RowCal works with community association boards to make budgeting more understandable, identify opportunities worth exploring and build a financial plan that supports the community today and in the years ahead.