Hoa Fees Are Soaring — And Retirees Are Feeling The Squeeze

If you live in a condominium or a single-family home with a Homeowners Association and amenities for residents, you may have experienced rising costs in recent years. HOA monthly fees have risen by more than 50% since 2020, according to a recent Forbes article. These fees cover rising insurance costs and funds needed to update aging infrastructure in managed communities.

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Homes managed by HOAs represent one-third of the housing market, according to Forbes, with more than 30 million homes across roughly 373,000 associations nationwide. These homes fulfill the needs of a variety of demographics, from first-time homebuyers to professionals in the workforce and, of course, retired seniors.

Are Managed Communities Getting Too Expensive for Seniors?

The stereotype of older Americans downsizing to move to a condominium or senior community may not be as prevalent as it used to be. As younger boomers and Gen X pay off houses in preparation for retirement, many find it too costly to move.  

“Many boomers aren’t choosing to age in place. They’re trapped there economically,” real estate agent Wnedy Newman told HousingWire.com.

HOA fees contribute to those rising costs. It helps to know what’s covered in your HOA fees and insurance to properly budget, whether you’ve been part of an HOA for a while or choose to move to take advantage of the conveniences a managed community may offer the 50+ crowd.

Exploring Rising HOA Costs

The Community Associations Institute (CAI) recently released a report revealing that 93% of community association leaders reported property and casualty premium increases last year. Meanwhile, nearly half (47%) reported policy cancellations or non-renewals. Seven-in-10 (71%) had to increase regular assessments for homeowners to cover these rising costs, while 31% instituted special assessments.

The CAI attributed these premium rate hikes to factors that include:

• Increased severe weather events
• Rising construction costs due to inflation
• Aging infrastructure within HOAs
• Evolving insurance requirements
• Consolidation and market withdrawals in the insurance industry

These are the same problems plaguing many homeowners in search of home insurance, whether they’re part of an HOA or not. But when HOA assessments rise on top of home insurance rates, it can be more than many homeowners’ budgets can absorb.

HOA Insurance vs. Home Insurance: What’s Covered?

 The HOA insurance you pay may not cover your belongings, damage to the home’s interior, liability, or loss-of-use, according to CAI research.

 “We are hearing from residents about confusion,” said CAI CEO Dawn M Bauman in an infographic. “Education, transparency and proactive planning are essential to the long-term sustainability of community associations.”

What HOA Insurance Covers

HOA insurance, sometimes called a “master policy,” is purchased by the association and covers damage to shared spaces, like community pools, rec centers, fitness centers, offices, and lobbies.

It includes liability coverage for these communal spaces, too. If someone is injured on community property, the insurance protects the HOA. Some policies also cover legal fees if the HOA is sued for personal injury or damages.

HOA insurance may also cover your own home’s exterior, including the roof, siding, framing and exterior walls.  Beyond that, it depends on what type of policy your HOA carries. There are three levels of HOA insurance your association may have chosen.

Bare Walls Coverage

If your HOA has what’s called “bare walls” coverage, it may cover the home’s wiring, insulation and plumbing, apart from individual fixtures like your sink, toilet or bathtub. In other words, if a pipe bursts inside the walls, the HOA will cover the pipe and the bare wall – not any special finishes on the wall, the carpeting in your home, or other surfaces that may have been ruined.

On the other hand, if a pipe bursts under your sink, that wouldn’t be covered by a “bare walls” policy.

Walls-in Coverage

Walls-in coverage provides a bit more financial protection in case of damages to your home. This level of coverage may include:

• Flooring
• Cabinets
• Fixtures
• Wall finishes (like paint or wallpaper)

However, this coverage, sometimes called “single entity” coverage, only pays to replace what was originally in your home when you moved in. So, if you renovated your kitchen with new cabinets and high-end appliances, these upgrades would not be protected under a walls-in policy. You’d only receive money to replace what was originally there before your improvements.

All-in Coverage

All-in coverage isn’t exactly what the name implies, according to an article by LIO Insurance. This type of policy covers all finishes and upgrades to your home, but not your personal belongings.

So, if a pipe bursts and damages your living room carpet as well as your furniture, an HOA all-in master policy may pay to replace the carpeting but not the furniture. It’s easy to see that you’ll need a policy to fill in coverage gaps. That’s where your home insurance comes in.

Home Insurance

Unlike an HOA master policy, home insurance is purchased by the homeowner. Insurance companies offer two main types of policies: HO-6 and HO-3.

HO-6 policies are typically reserved for individual homes in cases where the HOA doesn’t cover any portion of the dwelling.

Condo owners may, instead, rely on an HO-3 policy, which picks up where the HOA’s master policy leaves off. It covers personal belongings, fixtures and finishes, updates to the unit, and also provides liability coverage if someone is injured in your home.

Both HO-3 and HO-6 policies typically cover living expenses if your home is uninhabitable after damage from a covered peril, such as a hurricane or storm.

Ask Before You Buy

Whether you’re relocating to an HOA or your current HOA’s insurance policy has recently changed, you’ll want to know what’s covered and what you, as the homeowner, could be responsible for when it comes to property damage or liability.

Insurance costs, especially in areas prone to natural disasters, can dramatically affect your choice of home if you’re relocating in retirement or before.

This story written for TheStreet by Nifty 50+