40 Years is OLD When it Comes to Housing (and HOAs)!

HOA Detective™ – March 18, 2025: This topic was initially inspired by an article that appeared on the FreddieMac website on June 1, 2021. Whether by coincidence or not, the prescient timing of the report is telling when you consider that only 23 days later the ~40-year-old Champlain Tower South Condominium partially collapsed under its own weight, resulting in the deaths of 98 people and well over $1 billion in economic damages. 

https://sf.freddiemac.com/articles/news/where-is-the-aging-housing-stock-in-the-united-states

Fast forward to December 2024, no less of an august organization than the NAHB releases this report claiming that as of 2022, the median age of owner-occupied homes in the United States reached 40 years, indicating an aging housing stock.

Top Posts – The Age of the U.S. Housing Stock

This trend has significant implications for Homeowners Association (HOAs), many of which are responsible for maintenance of common areas and individual homes which are approaching or surpassing the 40-year median age milestone. Understanding the age distribution of HOAs and their associated properties is crucial for effective management and maintenance.

The Aging U.S. Housing Stock: The aging of the U.S. housing stock is evident from these takeaways from the NAHB article:​ 

• New Construction: From 2020 to 2022, approximately 1.7 million units were added, representing only 2% of the owner-occupied housing stock in 2022. ​

• Older Homes: Around 60% of owner-occupied homes were built before 1980, with approximately 35% constructed before 1970. ​ 

This aging trajectory suggests that many homes under HOA governance are likely several decades old, necessitating proactive maintenance and renovation strategies.​

Prevalence and Types of HOAs: HOAs have become a significant component of residential communities. Consider the following:

• HOA Growth: The number of HOAs has grown from about 10,000 in 1970 to over 377,000 by the end of 2022 – the most recent year for which statistics are available. As of the 2022 year-end:

• ~ 27 million U.S. homes were in HOAs.
• ~ 77 million Americans live in HOAs 

Community Composition: Three primary HOA subsets make up virtually all HOAs in the U.S.: 

• Planned Unit Developments (P.U.D.): 60% – Many older HOAs fall into this category, which could be described as “traditional” residential housing developments in which single family detached homes are located on individually platted lots. ​ (Download PDF: aallnet.org)
• Non-Traditional P.U.D.: No specific percentages are reported regarding the number of non-traditional P.U.D.s, but these developments tend to be newer in age. Often containing attached housing units such as row homes and townhouses.  https://www.nar.realtor/residential-real-estate/planned-unit-developments 
• Condominium Communities: 38%​ – Seemingly growing in popularity with each passing year, condominiums now account for 2 of 5 U.S. housing units. If there is a bright spot in this statistic, it is that “2 out of 5 ain’t all that bad” compared to many industrialized countries!
• Cooperatives: 2%: A generally bad idea for most home ownership demographics except the very wealthy. Most Americans are fortunate to live in a country where only 2% of all housing is part of a housing cooperative. For those who live in places like NYC, were coops are more common, we share in your sorrow.

This distribution highlights the diversity within HOAs, each with unique challenges related to property maintenance and community management.​ 

Estimating the Median Age of HOAs: While specific data on the median age of HOAs is limited, we can infer age ranges based on the development timelines of different community types:​

1. Condominium Developments:
   • The condominium form of ownership gained prominence in the U.S. following the National Housing Act of 1961. Given this timeline, it is only reasonable to assume that most condominium developments were constructed after 1961, with the percentage of condominium units among all housing units growing each year.
2. Planned Unit Developments (PUDs) with Attached Housing Units:
   • PUDs, which may include townhomes or multi-family units, became more common in the latter half of the 20th century. These developments often feature shared amenities and common areas, suggesting that many such HOAs are between 40 to 50 years old.​
3. PUDs without Attached Housing Units:
   • PUDs consisting of single-family homes with shared amenities like roads, parks, and recreational facilities have also grown in popularity over the past few decades. These associations likely have a similar age range of 40 to 50 years.​

Implications for HOAs Managing Aging Properties: As properties within HOAs age, several challenges and considerations emerge:​

• Maintenance and Repairs: Older properties often require significant upkeep, including roof replacements, plumbing updates, and structural repairs. HOAs must plan and budget for these expenses to maintain property values and community standards.​
• Reserve Funds: It’s essential for HOAs to maintain adequate reserve funds to address unforeseen repairs and capital improvements. Regular reserve studies can help assess future financial needs.​
• Regulatory Compliance: Building codes and safety regulations evolve over time. HOAs managing older properties must ensure compliance with current standards, which may necessitate upgrades or modifications.​
• Community Engagement: Transparent communication with homeowners about upcoming projects, financial requirements, and the importance of maintenance fosters trust and cooperation within the community.​

Strategies for Effective Management: To navigate the complexities of aging properties, HOAs can implement several strategies:

1. Conduct Regular Inspections:
   • Routine assessments help identify potential issues before they escalate, allowing for proactive maintenance.​
2. Develop Long-Term Maintenance Plans:
   • Establishing a comprehensive plan that outlines anticipated repairs and replacements over a 10 to 20-year period aids in financial planning and ensures timely upkeep.​
3. Engage Professional Expertise:
   • Consulting with engineers, architects, and property management professionals provides valuable insights into best practices for maintaining and renovating aging structures.​
4. Educate Homeowners:
   • Informing residents about the importance of maintenance, the role of reserve funds, and the processes involved in major projects encourages community support and participation.​
5. Explore Financing Options:
   • For substantial projects, HOAs might consider financing options such as loans or special assessments. It’s crucial to communicate the benefits and implications of these options to homeowners transparently.​

Conclusion: The aging of the U.S. housing stock presents both challenges and opportunities for HOAs. By understanding the age distribution of their properties and implementing proactive management strategies, HOAs can ensure the longevity, safety, and appeal of their communities. Effective planning, transparent communication, and prudent financial management are key components to successfully navigating the complexities associated with aging properties.

Because You’re Buying More Than a Home!

HOA Detective™ - March 18, 2025: This

A Reader’s Story: Chasing the American Dream, They Can Have It

HOA Detective™ – March 14, 2025: We don’t allow comments on the HOA Detective™ website for security reasons so this regular reader took the initiative by sending the HOA Detective™ his own real-life version of the “American Dream” housing saga after reading the Feb 25, 2025 post, The Hidden Costs of Homeownership – A Growing Crisis.

https://hoadetective.com/the-hidden-costs-of-homeownership-a-growing-crisis/

Dear HOA Detective, I’ve always believed in the idea of homeownership—the cornerstone of the so-called American Dream. However, after decades of navigating the brutal realities of the housing market, I must wonder: was it ever meant to be a dream at all? To enlighten some of your younger followers, I hope you will allow me to share my American housing journey in this era of tiny homes and the “sharing economy” in which ownership of your own home is being devalued as

I began my professional career in Coos Bay, OR after graduating from the University of Oregon with a degree in architecture almost half a century ago. Within a few years of setting up a local architectural practice, I thought I was ready to pursue the “American Dream.” For the next half-century my pursuit of “The Dream” unraveled into the following nightmare:

Coos Bay, Oregon – My First Home (1975–1979): I bought my first house in Coos Bay back in ’75. I lived in the house for five years, then rented it out for five years after moving to Seattle. When I sold it in 1984, I got what I paid for the house. In other words, no profit, no gain — just a decade of holding onto a house that ultimately gave me nothing in return.

Bothell, Washington – My Second Home (1986): I bought a home in Bothell, WA.  After my separation, my ex stayed in the house while I paid the mortgage. Eventually, she left for an apartment, and I was left holding the bag. The market was terrible, and I couldn’t sell it without taking a hit. In the end, I gave it back to the bank and lost about $10,000. It stung, but I chalked it up to bad timing.

West Salem, Oregon – My Third Home (2006–2015): This one still makes my blood boil. I bought a house in 2006, thinking I was making a sound investment. Then came the housing crash of 2008. After my business, serving the housing industry, took a hit in late 2007, I could not afford to stay in the house, so I rented out the house, bought an RV and lived in it for five years semi-retired.  I had to move back to evict the tenant – who had destroyed the place. The damage was so bad it cost me $18,000 just to make it livable again. The house had once been worth $320,000, but after the crash, it dropped to $240,000. I ended up selling for $235,000, walking away with about $85,000 over what I owed. It should have felt like a win. Instead, it felt like barely escaping with my sanity.

Bellingham, Washington – My Fourth and Current Home (2020-2025): Now I’m here, in a residential park filled with manufactured homes. It’s supposed to be affordable living, but that’s a joke. The park owner just sold the land to a national investment company—the kind that buys these places up, jacks up the rent, and squeezes every dime out of residents before either flipping it or redeveloping it. They’re raising the lot rent by 10% per year – more than 3 times the annual U.S. inflation rate

I’ve been pouring everything I have into fixing deferred maintenance issues, trying to finish repairs before the new owners decide they can’t “make it profitable” and sell to a developer. If that happens, I’ll be out. No home, no options, no clue what comes next.

And that brings me to today.

After 50 years of chasing stability, buying, selling, losing, and starting over, I must ask — was this ever really the American Dream? Because if this is what that that dream looks like, they can have it!

Because You’re Buying More Than a Home!

HOA Detective™ - March 14, 2025: We

Money Laundering & HOAs Amid Trump 2.0 Deregulation Bing 

HOA Detective™ – March 11, 2025: HOA cognoscenti from one end of the spectrum are rejoicing (along with the current administration) after the announcement that the U.S. Treasury Department has agreed to NOT enforce provisions of the Corporate Transparency Act (CTA) that apply to domestic corporations, which includes HOAs that are typically operated as nonprofit corporations.

Before we examine the subject of money laundering and HOAs, the HOA Detective™, and the founders of CIDAnalytics want to go on the record by saying they we too believe the CTA was an egregious example of government overreach in most respects. However, throwing the proverbial baby out with the bath water is equally as irresponsible as having “too much government.” 

Never mind that the owners of CIDA and a sister company (both domestic LLCs), managed to file the required CTA report in advance of the 1/1/2025 deadline WITHOUT having an advanced degree or even the assistance of a paid professional other than our CPA, but that’s another story. 

The Mechanics of Money Laundering:  For those readers who are not of a criminal mind and may be wondering why there is suddenly a big fuss over money laundering, we offer this primer on the mechanics of how ill-gotten money can be laundered. The term “money laundering” refers to the process of disguising the origins of illegally obtained money so it appears to come from legitimate sources. Criminals engage in money laundering to avoid detection by law enforcement and to integrate illicit funds into the legal economy.

The Three Stages of Money Laundering: Money laundering typically follows a three-stage process:

1. Placement – The illegal funds are introduced into the financial system.
2. Layering – Transactions are used to obscure the origins of the money.
3. Integration – The “cleaned” money is reintroduced into the legitimate economy.

Breaking it down in more detail, this is how money laundering works:

1. PLACEMENT: Getting Dirty Money into the System – The first step is the most challenging for criminals. They must deposit large sums of cash without raising suspicion. This is done by:

• Using Cash-Intensive Businesses – Criminals purchase or invest in businesses that handle large amounts of cash, such as bars, nightclubs, casinos, laundromats, or car washes. They mix illicit money with real business revenue.
• Structuring (Smurfing) – Depositing small amounts of cash (under the reporting threshold) into multiple bank accounts to avoid detection.
• Gambling – Buying casino chips with dirty money, gambling a little, then cashing out the chips as “winnings.”
• Real Estate Transactions – Purchasing, developing or renovating properties with illicit funds, then selling them to make the money appear legitimate.

2. LAYERING: Obscuring the Trail – Once the money is in the system, criminals use complex transactions to make it difficult to trace its origins. This includes:

• Shell Companies – Creating offshore or domestic companies that appear to conduct business, but exist only to process transactions.
• Fake Invoices & Overbilling – Creating fraudulent invoices for services that were never provided, effectively legitimizing the movement of illicit funds.
• International Transfers – Moving money through multiple jurisdictions, especially those with lax banking regulations, to create confusion.
• Cryptocurrency Transactions – Converting money into Bitcoin or other cryptocurrencies, moving it through multiple wallets, and then cashing it out.

3. INTEGRATION: Making the Money Seem Legitimate – The final step is to make the “cleaned” money usable without raising suspicion. Criminals do this by:

• Buying Luxury Assets – Purchasing cars, jewelry, art, or real estate with laundered money.
• Investing in Businesses – Acquiring legitimate businesses and funneling money into their operations.
• Loans and Fake Employment – Providing “loans” to themselves or fake salaries to associates who then return the money through seemingly lawful means.

How Legitimate Businesses Are Used for Money Laundering – Criminals prefer certain types of businesses because they offer a plausible explanation for large cash flows. Common examples include:

1. Cash-Intensive Businesses
   • Restaurants, bars, strip clubs, laundromats, vending machine companies
   • Criminals inflate sales figures and deposit illicit funds along with actual revenue.
2. Real Estate and Property Development
   • Buying property with illicit funds, making minimal improvements, and reselling it for a profit (“flipping”).
   • Using rental properties to generate “clean” rental income from tenants.
3. Financial and Investment Firms
   • Using hedge funds, stocks, and bonds to move money around.
   • Setting up fraudulent investment schemes.
4. Trade-Based Laundering
   • Import/export businesses over- or under-invoicing goods to manipulate transactions.
5. Nonprofits and Charities
   • Creating fake charities to receive and distribute illicit money under the guise of donations.
6. Shell Companies
   • Setting up businesses in offshore tax havens where ownership is anonymous.

​HOAs as Money Laundering Vehicles: Homeowners Associations (HOAs) are established to manage and maintain the common areas and enforce community rules within residential neighborhoods. However, the concentration of financial control within a small group of individuals can make HOAs susceptible to fraudulent activities, including money laundering.​ 

Adding to the problem is that the HOA governance process as well as the community management industry is almost completely UNREGULATED. To say the HOA landscape from one end to the other is underregulated would be a statement of Trumpian proportions. 

How HOAs Can Be Exploited for Money Laundering: Money laundering involves disguising illicitly obtained funds to make them appear legitimate. Within an HOA, this can occur through several methods:​

1. Embezzlement and Misappropriation of Funds: Board members with access to HOA funds may divert money for personal use, creating false records or invoices to conceal their actions.  https://www.aprio.com/is-fraud-occurring-in-your-hoa-community/ 
2. Kickbacks and Bribery: Board members might accept bribes from contractors or vendors in exchange for awarding them contracts at inflated prices, with the excess funds being split between the parties involved.​
3. Shell Companies: Fraudulent board members can establish fictitious companies that bill the HOA for services never rendered, effectively siphoning money from the association.​  https://www.local10.com/news/local/2024/10/24/authorities-announce-additional-arrest-in-hammocks-hoa-fraud-investigation/ 

FOUR CASE STUDIES

#1: West Kendall, FL – Hammocks HOA Fraud – A notable example of HOA exploitation is the case involving the Hammocks Community Association in West Kendall, Florida. In November 2022, several board members, including the former president, were arrested on charges of grand theft, racketeering, fraud, and money laundering. They allegedly diverted association funds to companies they controlled, using the money for personal expenses. The former president reportedly paid nearly $1 million to three companies that would cash the checks, retain a percentage, and return the remainder to her. If convicted on all charges, she faces up to 150 years in prison. ​

https://www.ochhoalaw.com/resources/blog/borrowing-more-than-a-cup-of-sugar

#2: Las Vegas, NV – HOA Fraud 20-Years in the Making – Another significant case dating back more than 20 years occurred in Las Vegas, NV – home to many an erstwhile criminal, current and past – where 26 individuals pleaded guilty to a massive fraud scheme aiming to control condominium homeowners’ associations. Once elected to the boards, these individuals manipulated votes to select certain property managers, contractors, and attorneys, submitting fake bids to ensure co-conspirators were awarded contracts. ​ https://www.justice.gov/criminal/criminal-vns/case/hoa-cases 

https://www.justice.gov/archives/opa/pr/fourteen-defendants-plead-guilty-their-roles-scheme-fraudulently-control-home-owners

#3: Houston, TX – Maria Denise Southall-Shaw – Yet another significant case involves Maria Denise Southall-Shaw, a former manager of Shadow Creek Ranch in Pearland, Texas. Between November 2013 and November 2017, Southall-Shaw approved invoices from a vendor for goods and services she knew had not been provided. In return, the vendor paid her half of the payments they received from these fraudulent invoices, which were allegedly for items such as pool equipment and supplies. The vendor made these payments to Shawdashian Group, a company Southall-Shaw owned. She pleaded guilty to wire fraud and faces up to 20 years in federal prison, as well as a possible $250,000 fine. ​ https://communityassociations.net/manager-scamming-company/ 

#4: Phoenix, AZ – Harlon White, K. Powell, R. Ellerbrock, et al – Last but not least, the case of a Phoenix, AZ father/daughter crime syndicate that was sentenced to federal prison after pleading to crimes including conspiracy to commit money laundering for misusing an estimated $1.2 million in stolen HOA fees. https://communityassociations.net/sentenced-defrauding-associations/ 

Preventive Measures: To safeguard against such fraudulent activities, HOAs can implement several measures:

• Segregation of Duties: Ensure that no single individual has control over all financial processes. 
• Regular Audits: Conduct independent financial audits to detect and deter fraudulent activities.​
• Transparency: Maintain open communication with homeowners regarding financial matters and board decisions.​ 
• Board Training: Provide training for board members on ethical standards and financial management.​
• Strict Compliance: Make it a STRICT policy of your HOA to comply with ALL laws that do exist. In so doing, the BOD is sending a message to all stakeholders that obedience of the law will be the standard for all current and future Boards. 

​ In the absence of​ strong regulatory oversight responsible HOAs should adopt such practices, to reduce the risk of fraud and ensure that association funds are used appropriately for the benefit of the community. 

Other News and Sources

https://www.mcgowanprograms.com/blog/warning-signs-of-hoa-fraud-and-theft/

https://www.the-sun.com/news/13739897/homeowners-hoa-fees-high-expensive-foreclosure-florida

HOA Detective™ - March 11, 2025: HOA

A Perfect Storm is Brewing for HOAs

HOA Detective™ – Mar 7, 2025:  Standing on the precipice of 2025, Homeowner Associations (HOAs) across the United States and Canada find themselves confronting a convergence of challenges that threaten their financial stability and operational viability. This “perfect storm” is characterized by three interrelated issues: escalating insurance premiums coupled with insurers’ growing reluctance to cover certain properties, surging utility costs that HOAs are contractually obligated to pay, and the long-standing problem of underfunded replacement reserves in aging communities.​

Escalating Insurance Costs and Coverage Challenges: The insurance landscape for HOAs has become increasingly precarious. Properties situated in areas prone to natural disasters—such as wildfires, hurricanes, and floods—are experiencing unprecedented hikes in insurance premiums. In some cases, insurers are outright refusing to renew policies. For instance, in California, major insurers like State Farm and Allstate have ceased issuing new homeowner policies due to escalating wildfire risks and rising costs. ​

marketwatch.comen.wikipedia.org

Not Confined to California: In Florida, the condominium market is teetering under the weight of soaring insurance premiums after a decade or more of seemingly nonstop hurricanes, and stringent safety regulations enacted after the tragic Champlain Tower South collapse in 2021. Regulations which now mandate rigorous inspections and timely repairs, which in many cases involves buildings that are approaching the half century mark, all of which combine to further inflate costs for condo owners. sfchronicle.comnypost.com+1apnews.com+1

The implications for HOAs are profound. Most mortgage agreements stipulate that borrowers must maintain adequate property insurance. If an HOA cannot secure sufficient coverage, homeowners with mortgages are at risk of defaulting on their loan terms, potentially leading to foreclosures and a cascading decline in property values.​

Surging Utility Costs: Utility expenses, particularly for water and sewer services, have been on an upward trajectory. Many HOAs are contractually obligated to cover these costs on behalf of their members, making them vulnerable to market fluctuations. The increasing frequency of droughts and other climate-related events has strained water supplies, leading to higher rates imposed by utility providers.​

For example, in parts of Washington state, HOA fees have more than doubled in the past year, driven in part by escalating utility costs. These rising expenses force HOAs to either deplete their reserves or impose special assessments on homeowners, both of which can lead to financial strain and discontent among residents.​

Underfunded Replacement Reserves in Aging Communities: A significant number of HOAs, particularly those established several decades ago, have chronically underfunded their replacement reserves. These reserves are essential for covering major repairs and replacements of common property elements, such as roofs, elevators, and plumbing systems. The median age of U.S. homes now stands at 40 years, indicating that many communities are facing the very tipping point predicted 15-years ago by the founders of CIDAnalytics, where substantial capital expenditures are imminent while many HOAs face the reality that the organization simply doesn’t have the money to pay for these expenses.​

https://www.wikiwand.com/en/articles/Reserve_study

https://cidanalytics.com/2020/03/24/the-tipping-point-i/

The lack of adequate reserves has been spotlighted in Florida, where new legislation requires condominium associations to maintain sufficient funds for major repairs and conduct so-called “Structural Integrity Reserve Studies (SIRS) every decade. This move aims to prevent disasters like the Surfside collapse, but has resulted in significant increases in HOA fees, placing a heavy burden on residents, especially those on fixed incomes.  https://legalclarity.org/florida-condo-reserve-fund-rules-a-comprehensive-guide/ 

https://apnews.com/article/florida-condo-association-cost-increase-62de80fcc5de498309d9fea2b78a2984

Notwithstanding the long overdue good intentions of the Florida Legislature, the fact is that the recent changes in Florida’s reserve funding statutes is one step toward mandatory reserves and mandatory funding of those reserves, a reality that will serve to make homes located in HOAs even less affordable than they already are. 

If this legislative trend were to gain traction in states where housing is more expensive than Florida many would-be homeowners in those states can shut the front door on their dreams of homeownership!   

Role of Industry Policymakers in this Debacle: Over the past half-century, industry policymakers have played a role in this predicament. A lack of stringent regulations and oversight allowed many HOAs to sideline the importance of adequately funding their reserves. This oversight has culminated in the current scenario, where aging infrastructure requires immediate attention, but the financial means are lacking.​

In California, the insurance crisis has led to a situation where communities like Rossmoor, a retirement enclave in Walnut Creek, are facing a “cash-only” real estate market due to the inability to secure adequate insurance coverage. This development not only hampers property sales, but also affects residents’ financial planning, particularly those relying on reverse mortgages. https://www.sfchronicle.com/california-wildfires/article/rossmoor-cash-only-home-sales-20025908.php

“Perfect Storm” – The Impending Collision: The convergence of these three forces—skyrocketing insurance premiums, escalating utility costs, and underfunded reserves—sets the stage for a crisis in many HOAs. Communities may find themselves unable to meet financial obligations, leading to deferred maintenance, reduced property values, and increased homeowner dissatisfaction.​ Mortgage lenders, who are starting to take notice of this impending financial disaster, are all but certain to adjust their underwriting criteria in those instances. The perfect storm is on the horizon.

In one example of failing HOA governance, this Sunrise, Florida HOA board, abruptly resigned leaving homeowners with unexpected bills exceeding $20,000 for unpaid insurance, highlighting the potential for financial and operational chaos within associations. https://www.the-sun.com/news/13482599/homeowners-rage-bill-forced-pay-hoa-fee-boards-decision/ 

Moving Forward: To navigate this impending storm, HOAs must adopt proactive measures:

​

• Conduct Regular Reserve Studies: Engage qualified professionals to assess the condition of common elements and determine accurate funding requirements.​ 

• Implement Transparent Financial Practices: Ensure homeowners are informed about financial decisions, fostering trust, and encouraging timely contributions to reserves.​

• Advocate for Legislative Support: Work with policymakers to develop regulations that balance the need for financial preparedness with the economic realities of homeowners.​

• Explore Alternative Funding Mechanisms: Consider options such as phased-in fee increases to bolster reserves without imposing sudden financial burdens on residents. Or a transaction fee paid by a seller when a home changes hand to make up for at least some of the underfunding of the reserves that has occurred during the seller’s 20-year tenure as a HOA “stakeholder.”

• Governance Tune up:  ​Proactive HOAs must develop strategies that lead to more homeowner participation in the governance process. Entrenched Board members, which is almost always a bad thing, is often the result of apathy among the very stakeholders (homeowners) who stand to benefit the most by successful HOA governance. Short of hiring professionals to serve on HOA boards (a dubious proposition already proposed by some industry thought leaders) HOAs MUST find ways to compel owner involvement in the governance process.

• Management Tune up: There is no question the HOA management profession needs a tune-up. The long-standing “portfolio management” business model employed by many of the largest companies in the country may result in lower management fees, but at what cost?  As in all walks of life, when it comes to HOA management you get what you pay for. To justify higher levels of compensation HOA managers must up their game by becoming better educated, more professional, and more responsive to the “clients” who ultimately pay their salaries; the owners of the 27M homes located in HOAs. 

By acknowledging and addressing these challenges head-on, HOAs can mitigate the risks posed by the impending perfect storm, ensuring the sustainability and prosperity of their communities for years to come.​

Because You’re Buying More Than a Home!

HOA Detective™ - Mar 7, 2025:  Standing

Underfunded Replacement Reserves; More of a Concern than Ever

HOA Detective™ – Mar 4, 2025: Underfunded replacement reserves in Homeowners Associations (HOAs) are increasingly impacting property values and marketability, especially in communities over 20 years old where the HOA is responsible for exterior maintenance. This issue is particularly pronounced in developments with attached homes, such as condominiums and townhouses.​

The Importance of Adequate Replacement Reserves: Replacement reserves are funds set aside by HOAs to cover the cost of major repairs and replacements of common elements, such as roofs, siding, and infrastructure. Properly funded reserves ensure that necessary maintenance can be performed without imposing sudden financial burdens on homeowners. However, many associations fail to maintain adequate reserves, leading to deferred maintenance, special assessments, and decreased property values.

en.wikipedia.orgrealmanage.com

reservestudy.com

Impact on Property Values and Marketability: Properties within HOAs with underfunded reserves often experience a decline in value and become less attractive to potential buyers. Deferred maintenance resulting from insufficient reserves can lead to visible deterioration of common areas and building exteriors, reducing curb appeal and signaling potential buyers to anticipate future expenses. This is especially concerning in older developments where major components are nearing the end of their useful life.​

Moreover, inadequate reserves can hinder buyers’ ability to secure financing. Lenders and mortgage insurers often scrutinize an HOA’s financial health, and underfunded reserves may lead to loan denials or unfavorable terms. This further narrows the pool of potential buyers, exerting downward pressure on property values.​allpropertymanagement.com

Industry Leaders’ Warnings: Industry experts have long cautioned about the risks associated with underfunded reserves. For instance, a report by Association Reserves highlighted that approximately 70% of associations have underfunded reserves, threatening the sustainability of the association and damaging the market value of homes. ​

newenglandcondo.com

reservestudy.com

Similarly, the Community Associations Institute emphasizes that well-funded reserves are crucial for avoiding special assessments and maintaining property values. They advocate for regular reserve studies and proactive financial planning to ensure associations can meet their long-term obligations.

belwoodprop.com+4en.wikipedia.org+4en.wikipedia.org+4en.wikipedia.org+2reservestudy.com+2en.wikipedia.org+2

Legislative Responses: In response to the growing concerns over underfunded reserves, some states have enacted legislation to mandate reserve studies and adequate funding. For example, Maryland’s House Bill 107 requires all condominiums and HOAs to conduct regular reserve studies and maintain sufficient funds to cover anticipated repairs and replacements. This law aims to protect homeowners from unexpected financial burdens and preserve property values. ​en.wikipedia.org

The Old Car Analogy: Purchasing a property in an HOA with underfunded reserves is akin to buying an old car with a history of neglected maintenance. Just as a poorly maintained vehicle is prone to breakdowns and costly repairs, a property in an underfunded HOA is susceptible to deferred maintenance and unexpected expenses. Both scenarios lead to diminished value and increased ownership costs.​

Consequences of Underfunded Reserves: The repercussions of underfunded reserves extend beyond individual homeowners to affect the entire community. Deferred maintenance can lead to structural issues, safety hazards, and a decline in the overall aesthetic appeal of the neighborhood. This deterioration can deter potential buyers, leading to longer listing times and lower sale prices. cabuilderservices.com+1youragent.me+1

Worst Possible Scenario: As some contrarian thought-leaders like the founders of CIDAnalytics first pointed out almost 15-years ago, HOAs in the U.S. would face a tipping point in or around 2020 at which time 2/3rds of the HOAs in the U.S. would be at least 20-years old. It was further argued that this tipping point was even more of a concern for condominiums located in aging mid, and high-rise buildings. Especially those located close to ocean shorelines, exposing them to a saltwater-laden, marine environment. https://cidanalytics.com/2020/03/24/the-tipping-point-i/. 

Almost as though it had been scripted, the tipping point arrived amidst a thundering avalanche of concrete and twisted rebar on June 24, 2021when the 41-year-old, 12-story Champlain Tower South Condominium in Surfside, FL partially collapsed, killing 98 people, and causing more than more than $1 billion in liability claims. In the aftermath of this unspeakable tragedy, it has been confirmed by numerous sources that the collapse was largely the result of deferred maintenance which had not been completed due to insufficient reserves to pay for critical repairs.    

As the investigation into the Champlain Tower collapse has confirmed, the burden of enormous unplanned special assessments which may be required when major repairs are needed, can be an enormous financial burden for some homeowners, leading to dissatisfaction and potential defaults. Loans, on the other hand, incur interest and extend the financial obligation, impacting the association’s budget for years to come.

Preventative Measures: To mitigate these risks, associations should:

1. Conduct Regular Reserve Studies: Engage professionals to assess the condition of common elements and estimate the remaining useful life and replacement costs.
2. Implement Adequate Funding Plans: Develop and adhere to funding plans that ensure reserves are built up over time to meet future obligations.​
3. Maintain Transparency: Keep homeowners informed about the association’s financial health and involve them in decision-making processes.​
4. Seek Professional Guidance: Consult with financial and legal experts to ensure compliance with state laws and best practices.​

Conclusion: Underfunded replacement reserves pose a significant threat to the value and marketability of properties within HOAs, particularly in older developments with attached homes. By heeding the advice of industry leaders and implementing proactive financial planning, associations can safeguard their communities’ financial health and preserve property values for their members.​

Recent HOA Financial Challenges Impacting Homeowners

https://www.the-sun.com/news/13555141/neighbors-losing-homes-hoa-fees

https://www.newsbreak.com/news/3796243227825-homeowners-rage-over-20k-bill-as-they-re-forced-to-pay-hoa-fee-twice-it-was-all-due-to-board-s-abrupt-decision

Because You’re Buying More than a Home!

HOA Detective™ – Mar 4, 2025: Underfunded

The Private Metropolis and the Eclipse of Democratic Governance

HOA Detective™ – Feb 28, 2025: In recent decades, metropolitan regions across the United States have experienced a significant transformation in local governance structures. Traditional municipal authorities are increasingly supplemented—or even supplanted—by a complex network of quasi-public and privatized institutions. These entities, often termed “shadow governments,” encompass special authorities, public–private partnerships, special districts, privatized gated communities, and empowered neighborhood organizations. They manage a wide array of public services, from essential utilities like water and waste management to large-scale economic development and infrastructure projects.

“Private Metropolis: The Eclipse of Local Democratic Governance,” edited by Dennis R. Judd, Evan McKenzie, and Alba Alexander, delves into this intricate ecosystem of modern urban governance. The book posits that while these quasi-public institutions can enhance efficiency and responsiveness, their operations often occur outside the purview of traditional democratic oversight. This shift raises critical concerns about accountability and the potential erosion of public participation in decision-making processes.

Book Details

The editors and contributors of “Private Metropolis” explore several pressing questions: 

• What are the implications of the proliferation of special authorities and privatized governments? Is the trade-off between increased efficiency and reduced democratic accountability justified? 
• Has the public sector relinquished too much control to these new entities, thereby diminishing the role of traditional checks and balances? 
• The much-needed discourse on the future of urban governance and the preservation of democratic principles in an era of privatization and corporatization.

Through a series of essays, this scholarly work examines how these shadow governments often operate beyond the constraints imposed on traditional local governments, such as budgetary limitations and electoral accountability. 

While this autonomy can lead to more agile and effective service delivery, it also means that many significant policy decisions are made without direct public input or scrutiny. Consequently, citizens may find themselves engaging in debates over symbolic issues, with limited influence over the actual distribution of resources that impact their daily lives.

This shift toward privatization is particularly evident in the rise of privatized residential developments, such as homeowner associations (HOAs) and condominiums, over the past fifty years.

These residential entities often function as private governments, exercising control over community regulations, maintenance, and services. While they can offer enhanced amenities and localized decision-making, they frequently operate in an unregulated statutory environment with limited transparency and minimal democratic oversight.

This autonomy can lead to concerns about accountability and resident participation in governance. As noted in “Private Metropolis,” such quasi-public institutions “compromise and even eclipse democratic processes by moving important policy decisions out of public sight” 

The evolution of these privatized residential communities can trace conceptual roots to Ebenezer Howard’s Garden City movement of the late 19th and early 20th centuries, as we have explored in previous posts by the HOA Detective™. https://hoadetective.com/ebenezer-howards-utopia-from-garden-cities-of-to-morrow-to-privatopia-and-beyond/ 

Howard’s Garden Cities were designed to be self-governing entities, with profits from communal enterprises reinvested into the community for the public good:

The foundations of the Garden City Movement

However, modern privatized residential developments diverge from Howard’s ideal. While they adopt the physical planning aspects of the Garden City—such as organized layouts and shared green spaces—they often lack the communal ownership and democratic governance structures that Howard championed. Instead, decision-making authority in many HOAs and condominium associations rests with a select group or external management, potentially sidelining broader resident input.

The privatization of municipal services has been significantly influenced by companies like Severn Trent and its former North American subsidiary, Inframark. These entities have played pivotal roles in transferring the management of essential public utilities, particularly water and wastewater services, from public to private hands, thereby reshaping urban governance structures.

Severn Trent’s Role in Privatization

Severn Trent Plc, established during the 1989 privatization of the UK’s water industry, transitioned from a public water authority to a private entity listed on the London Stock Exchange. This move was part of a broader governmental strategy to enhance efficiency and investment in water services through private sector involvement. Over time, Severn Trent expanded its operations beyond the UK, acquiring various international assets, including those in North America. In 2017, Severn Trent decided to divest its North American operations, deeming them non-core to its strategic focus. This divestment led to the emergence of Inframark as an independent American company. 

https://www.severntrent.com

In future posts, we will explore the emergence and impact of Inframark, and similar companies on the changing landscape of the Privatized Metropolis

In summary, the thesis of “Private Metropolis” highlights a significant shift in local governance, where privatized residential developments operate as quasi-public entities with substantial autonomy. Although inspired by the communal aspirations of the Garden City movement, these modern communities often fall short of its democratic ideals, raising important questions about accountability and resident participation in contemporary urban governance.

Because You’re Buying More Than a Home! 

HOA Detective™ – Feb 28, 2025: In

The Hidden Costs of Homeownership – A Growing Crisis

The Hidden Costs of Homeownership – A Growing Crisis

HOA Detective™ – Feb 25, 2025: The esteemed Ivy League institution of higher learning Harvard University, has chimed in on the growing crisis of homeownership in a Feb 24 2025 research brief published by the university’s Joint Center for Housing Studies (JCHS).

https://www.jchs.harvard.edu/research-areas/research-briefs/rising-costs-homeownership-are-growing-burden

Readers of this blog should be aware by now where the HOA Detective™ stands on the topic of the U.S. housing crisis which has undermined the most basic, core values of American society. As this brief by JCHS researchers Daniel McCue, Whitney Airgood-Obrycki, and Peyton Whitney points out, homeownership has long been considered a pillar of financial stability, but a new report from the Center paints a stark picture of rising affordability challenges. 

While much of the public conversation has focused on the struggles of first-time buyers navigating high interest rates and soaring home prices, this report highlights an often-overlooked group: longtime homeowners grappling with escalating costs that threaten their ability to remain in their homes.

The Rising Burden of Homeownership

According to JCHS, the number of cost-burdened homeowners—those spending more than 30% of their income on housing—rose to 20.3 million in 2023. That represents nearly 24% of all homeowner households, an increase of 3.6 million since 2019. Even more concerning, 9.4 million of these homeowners are now classified as severely cost-burdened, meaning they spend more than 50% of their income on housing expenses.

The problem is not limited to homeowners who recently entered the market at high mortgage rates. The largest growth in cost burdens has come from older homeowners who have been in their homes for years, but now face surging costs in property taxes, insurance, utilities, and maintenance. In fact, the number of cost-burdened homeowners aged 65 and older has risen by 1.7 million since 2019, accounting for nearly half of the total increase.

Low-Income Homeowners Hit the Hardest

Not surprisingly, the lowest-income homeowners are bearing the brunt of this crisis. A staggering 74.2% of homeowners earning less than $30,000 per year are cost-burdened, and more than half (55.0%) of them are severely burdened. This is an all-time high, surpassing even the peak levels seen during the mortgage crisis of 2010. Even homeowners without mortgages are struggling. Non-mortgage housing costs, such as property taxes, homeowners’ insurance, and utilities, have been rising at a pace far exceeding income growth. 

The report points out that insurance premiums have increased by as much as 35% in some states, while property tax payments rose by 24% between 2019 and 2023. Even homeowners who have paid off their mortgages are not shielded from these cost increases.

Geography of Housing Affordability: The affordability crisis is most severe in high-cost metropolitan areas. Miami, for example, leads the country with 35% of homeowners being cost-burdened, followed closely by New York (32%), Los Angeles (32%), and San Diego (34%). In contrast, more affordable metro areas in the Midwest and South, such as Little Rock and Dayton, have burden rates below 18%. 

If you are contemplating a move to lower cost city to afford a home, it is worth noting the JCHS found the housing affordability gap is closing even in the sleepy Midwest. Cities traditionally known for their lower cost of living, such as Milwaukee, Scranton, and Oklahoma City, saw their cost-burden rates rise more than twice as fast as the national average between 2019 and 2023. The JCHS report further notes numerous metro regions where the housing cost burden is well above the national median. 

Why Housing Costs Continue to Soaring: JCHS identifies several key drivers behind the rising cost burdens:

• Property Taxes: Up 17% nationally, with low-income homeowners seeing a 24% increase.
• Homeowners Insurance: Premiums surged, with some states seeing 35% annual increases.
• Utility Costs: Water, electricity, and heating expenses climbed 19% for all homeowners and even higher for lower-income households.
• Maintenance and Repairs: The cost of home repairs has spiked 34% since 2019, forcing many low-income homeowners to defer maintenance, which may lead to larger, more expensive problems down the road.

A House-Rich, Cash-Poor Dilemma: Despite these financial pressures, homeowners have seen their home values rise dramatically, with the average homeowner gaining nearly $200,000 in home equity since 2019. However, this creates a dilemma for older and lower-income homeowners who are house-rich, but cash-poor. While their home is worth more on paper, they lack the disposable income to keep up with rising costs.

Unlocking this equity through selling, refinancing, or reverse mortgages remains a difficult choice. Selling may not be desirable for seniors looking to age in place while refinancing at today’s high interest rates could be cost-prohibitive. Reverse mortgages, though an option for some, come with complex terms and high fees that may not make financial sense.

Policy Implications and Possible Solutions: The JCHS report underscores the need for targeted policy interventions to help struggling homeowners. Some proposed solutions include:

• Property Tax Relief Programs: Many states offer exemptions or circuit-breaker programs to cap tax burdens for low-income or elderly homeowners.
• Expanded Home Repair Assistance: Federal and state programs, such as the Weatherization Assistance Program, can help homeowners make energy-efficient upgrades to reduce long-term costs.
• Affordable Home Insurance Initiatives: Some states provide FAIR (Fair Access to Insurance Requirements) plans for homeowners who cannot secure traditional policies, though these tend to be more expensive.
• Equity-Tapping Strategies: Innovative financial products, such as shared equity programs or state-backed reverse mortgage alternatives, could help homeowners access their wealth without facing foreclosure risks.

A Growing Crisis with No Easy Fix: In conclusion, the rising cost burden on U.S. homeowners represents a slow-moving crisis that demands urgent attention. While the public debate often centers on the challenges of first-time buyers, millions of existing homeowners—especially seniors and low-income households—are at risk of losing their homes due to financial strain.

For those living in HOAs, these affordability challenges are further compounded by rising assessments and special levies for deferred maintenance. As more communities reach the “HOA Tipping Point,” where aging infrastructure demands significant capital investment, the financial strain on homeowners is only expected to grow.

Addressing this issue will require a multi-pronged approach, balancing immediate relief for struggling homeowners with long-term solutions that enhance financial stability. Whether through tax relief, financial assistance programs, or innovative equity-sharing models, proactive intervention is essential to prevent a wave of homeowner displacement in the coming years.

The affordability crisis isn’t just a problem for individual homeowners—it’s a systemic issue that threatens community stability and the broader housing market. If policymakers, HOAs, and financial institutions fail to act, the dream of homeownership could become an enduring financial nightmare for millions of Americans.

Because You’re Buying More Than a Home!

The Hidden Costs of Homeownership - A

Another Florida Condo Confronts the Tipping Point

HOA Detective™ – Feb 21, 2025: In April 2023, the residents of the Majestic Isle Condominium in North Bay Village, Florida, faced an unexpected and urgent crisis: their home was declared structurally unsafe, necessitating immediate evacuation. This event not only disrupted the lives of approximately 55 residents, but also highlighted broader issues related to building safety, aging infrastructure, and the complexities of urban redevelopment. Below is a timeline of events since this story was first reported.

https://www.nbcmiami.com/news/local/residents-ordered-to-evacuate-north-bay-village-condo-building-deemed-unsafe/3019100

April 14, 2023: Initial Inspection and Discovery – The sequence of events began on April 14, 2023, when a building engineer conducted a 60-year recertification inspection of the Majestic Isle Condominium, located at 7946 East Drive. This routine inspection was intended to assess the building’s structural integrity, as mandated by local regulations for aging structures. During the assessment, the engineer identified significant concerns, including sagging floors and extensive termite damage. These issues raised immediate red flags about the building’s safety and habitability.

https://northbayvillage-fl.gov/majestic-isle-residents/

Mid-April 2023: Partial Ceiling Collapse – Compounding these structural concerns, a leak from a roof drain led to a partial ceiling collapse in several units during the same week. This incident prompted the evacuation of residents from five units, reducing the number of occupied units to 31 out of the total 36. The combination of the engineer’s findings and the ceiling collapse underscored the severity of the building’s deterioration. 

April 19, 2023: Official Notification – On the night of April 19, 2023, North Bay Village officials received a detailed report from the building engineer outlining the critical structural issues. The report’s alarming conclusions prompted immediate action from the village authorities to safeguard the well-being of the residents. 

April 20, 2023: Evacuation Order Issued – The following day, April 20, 2023, village officials went door-to-door informing residents that the Majestic Isle Condominium had been deemed structurally unsafe. An evacuation order was issued, requiring all residents to vacate the premises by 10 a.m. on April 25, 2023. This five-day window was provided to allow residents time to arrange alternative accommodations and begin the process of relocating their belongings. 

April 20, 2023: Emergency Meeting and Support Initiatives – On the evening of April 20, 2023, an emergency meeting was convened in the parking lot of the condominium. Village officials, alongside representatives from agencies such as the Miami-Dade County Office of Housing Advocacy and the Homeless Trust, were present to address residents’ concerns and provide assistance to the displaced unit owners. Discussions focused on immediate housing solutions, financial aid, and the logistics of the evacuation process. The village also established a fund to accept donations for displaced families and compiled a list of available rental units in the area to facilitate swift relocation. 

April 25, 2023: Deadline for Evacuation – By the morning of April 25, 2023, the evacuation was completed. Residents had spent the intervening days packing essential belongings and securing temporary housing. The North Bay Village Police Department oversaw the move-out process, implementing a staggered schedule to ensure safety and order. While residents were permitted to take essential items, arrangements were made for them to return later to retrieve remaining possessions once the building’s status was further assessed. 

May 2023: Initial Discussions on Building’s Future – In the weeks following the evacuation, discussions emerged regarding the future of the Majestic Isle Condominium. Given the building’s significant structural issues and the financial implications of necessary repairs, stakeholders, including the condominium association and potential developers, began exploring options. These discussions were in the preliminary stages, with no definitive plans announced.

May 2024: Acquisition by Developers – A year later, in May 2024, significant developments occurred concerning the property. The Related Group, in partnership with New York-based Macklowe Properties, acquired 14 units within the Majestic Isle Condominium for approximately $7.9 million. This purchase brought their total ownership to 20 out of the 36 units. The developers also owned the adjacent Biscayne Sea Club property, which they had purchased for $47.7 million in 2023. These acquisitions were part of a strategic plan to amass a substantial waterfront assemblage for a proposed luxury residential development. 

December 2024: Legislative Changes Impacting Condominiums – By December 2024, broader legislative changes in Florida began to impact condominium associations statewide. In response to incidents like the Surfside collapse and the evacuation of buildings such as the Majestic Isle, Florida lawmakers enacted regulations requiring more rigorous structural inspections and mandating that associations maintain adequate reserve funds for repairs. These laws aimed to prevent future crises, but also placed financial pressures on older condominium communities, potentially accelerating trends toward redevelopment. 

February 2025: Current Status – As of February 2025, the Majestic Isle Condominium remains uninhabited. The developers, having acquired most of the units, are in the process of finalizing plans for the new luxury residential project that will encompass both the Majestic Isle and Biscayne Sea Club properties. Former residents have largely resettled, though some continue to navigate the complexities of relocation and compensation. The situation underscores the challenges faced by aging infrastructures in coastal regions and the delicate balance between ensuring public safety and addressing the housing needs of long-standing communities.

The Majestic Isle incident serves as a poignant example of the multifaceted issues surrounding building maintenance, resident displacement, and urban redevelopment. It highlights the necessity for proactive infrastructure assessments, the importance of supportive measures for displaced individuals, and the ongoing dialogue required between communities and developers to navigate the future of urban living spaces.

Fortunately for the unit owners at Majestic Isle Condominium, there was a White Knight in the form of The Related Group et al, who were willing and able to purchase the dilapidated units. Not all condominiums will be so lucky in the future. 

Because You’re Buying More Than a Home!

HOA Detective™ – Feb 21, 2025: In