More than half of the estimated 310,000 homeowner and condominium associations in the United States continue to struggle with financial issues associated with the mortgage foreclosure crisis and related economic downturn, according to a national survey of community managers.
Forty-five percent of community managers say their associations face “serious” financial issues as a result of the housing and economic downturn, while 9 percent describe the impact as “severe.”
More than 60 million Americans live in homeowners associations, condominium communities and residential cooperatives.
More than half of community managers say at least 3 percent of the homes in their communities are vacant, with 25 percent reporting vacancy rates above 5 percent. When homes are vacant, whether due to foreclosure or the inability of non-resident owners to sell or rent their properties, associations are often unable to collect fees, or assessments, that are used to fund services such as utilities, trash pickup, snow removal, road and building maintenance and landscaping.
The survey shows that assessment delinquency rates in associations have more than doubled since 2005. 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. A second survey shows that associations are not receiving timely assessment payments on 70 percent of the bank-owned properties in their communities.
“This can put an enormous strain on both associations and the homeowners who are paying their fair share,” says Thomas M. Skiba, chief executive officer of Community Associations Institute (CAI).
Associations are responding by borrowing, reducing the money that needs to be set aside for major maintenance and repairs, postponing capital improvement projects and levying special assessments.
Many associations, Skiba says, are also forced to curtail services, which can further depress property values.
Skiba points out that the mortgage foreclosure crisis adds urgency to CAI’s efforts to convince the Federal Housing Finance Agency (FHFA) to nix its recent proposal to ban community association transfer fees—dollars that have been used for years to help many associations fund reserve accounts and community improvement projects. CAI estimates that as many as 11 million homeowners would find it difficult to sell their homes if the government moves forward with plans to ban these fees.
“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,” Skiba adds. “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.”
More than 1,500 community managers responded to the survey. Complete survey data can be reviewed at www.caionline.org/data.
CAI is a 30,000-member, national association dedicated to fostering successful community associations. Working in partnership with almost 60 state and regional chapters, CAI provides information, education and resources to associations and the professionals who support them. Our 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.
Filed under: Real Estate
Like this post? Subscribe to my RSS feed and get loads more!