According to the Foundation for Community Association Research, housing projections show that the number of homeowners associations (HOAs) in the United States will grow to as many as 373,000 in 2025. However, to reap the benefits of living in an HOA, homeowners must pay regular dues.
What do HOA dues cover, and how do they impact your community living experience? Read on to learn everything you need to know about HOA dues.
Understanding What a Homeowners’ Association Is
As a member of a managed community, it’s vital to understand what a homeowners’ association is. An HOA is a non-profit organization set up to manage and maintain a community. The homeowners, who make up the HOA membership, agree to association rules, such as:
· Caring for yards and homes
· Property-use restrictions
· Following guidelines for amenities
· Paying regular HOA dues
HOA rules are meant to keep the neighborhood looking its best, protect home values, and enhance the resident experience.
What Are HOA Dues?
HOA dues, also called HOA fees or assessments, are monies paid regularly by residents to support the association’s operations. When someone buys a property in an HOA, they’re responsible for paying this set amount monthly, quarterly, or annually to help maintain and improve the community.
What Do HOA Dues Cover?
HOA residents often ask how their funds are being used. All managed communities operate differently and incur different costs, so HOA dues for one community may cover expenses that another community doesn’t have or isn’t subject to. Generally, HOA dues cover:
Maintenance
A big part of what makes HOAs attractive is their amenities. As association members, residents can access features and services like swimming pools, fitness centers, tennis courts, and playgrounds within their communities.
However, HOA amenities are shared property owned by the association—not a public municipality. A portion of your HOA dues may go towards cleaning, maintaining, and repairing these community amenities.
Landscaping
Your HOA fees can also contribute to preserving the aesthetic appeal and harmony of the community with professional landscaping services. This may include service for common areas, such as:
· Parks
· Gardens
· Entryways
· Walking paths
Reserve Funds
The association must plan for community improvements, large-scale repairs, and unexpected expenses. To budget for these projects, the board typically deposits a percentage of funds from HOA dues into an HOA reserve fund or savings account. HOA fees should include the amount needed to adequately fund the reserve account.
Insurance
HOA insurance is a necessity paid for by your homeowners’ association. A portion of HOA fees usually goes towards the association’s insurance premiums to ensure financial protection if an injury, property damage, or crime occurs on shared community grounds.
Proper insurance coverage means the HOA and homeowners will not have to carry the financial burden of expenses if something goes wrong.
Security
Depending on their size and resident needs, some HOAs offer security features that promote safety in the community, including:
· Gate attendants
· Surveillance systems
· Patrolling guards
· Enhanced security lighting
Check your governing documents for details on the security services included in your association membership. If your HOA provides community security, your dues will likely pay for it.
Utilities
HOA fees may also cover utilities in shared spaces or amenities, such as community clubhouses, pools, and fitness centers. The dues help fund electricity, water, sewage, trash, and other essential utilities in these common areas. For condo associations, they may also cover these services in shared lobbies, hallways, and stairwells.
How Are HOA Dues Calculated?
Typically, the HOA board of directors sets the fee amount by considering all association expenses, including:
· Operating or administrative expenses
· Maintenance costs for the year
· HOA insurance premiums
· Cost of utilities
· Vendor payments
· How much is needed to fund the reserve account
Common Misconceptions About HOA Dues
Many homeowners have misconceptions about HOA dues and what they cover. To help you understand HOA fees better, here are common myths and why they’re untrue.
· Dues are used to pay board members. While HOA board members are voted into their roles to act on the community’s behalf, they’re volunteer homeowners who aren’t compensated for their work. Dues are used to fund community operations, maintenance, and expenses.
· Homeowners are locked into a fee amount. Just as annual HOA budgets change, so can HOA dues. If the community’s financial needs fluctuate, HOA fees may need to be recalculated. However, your governing documents or state laws may set limits on fee increases.
· You don’t have to pay fees if you don’t use the amenities. If you purchase a home within an HOA, you become a member and are required to pay dues even if you don’t use common areas. Carefully consider potential responsibilities and if they align with your needs when looking at homes in a community association.
· HOA dues are tax deductible. A common question is, “Are HOA dues deductible?” Although HOA fees may be deductible if you use your home as a rental property, they’re generally not tax deductible.
The Benefits of Paying HOA Dues
Paying HOA dues has several advantages for you and your fellow homeowners. The most significant benefits include:
· High curb appeal from well-maintained community grounds
· Cleaner and safer neighborhoods
· Amenities kept in good working order
· Planned community upgrades can move forward
· The association is prepared for emergency expenses
· Stable property values
· Increased community pride
· A more enjoyable living experience
What Happens If You Don’t Pay HOA Dues?
If you don’t pay your HOA fees, you can face consequences. Most likely, you’ll receive a violation notice and have to pay a fine. In some cases, you may be called into a hearing, lose your amenity rights, or even have a lien placed on your home.
Failing to pay your HOA dues is unfair to the community and puts unnecessary financial hardships on the association. If you have issues making payments, contact your HOA board to discuss your situation and possible solutions.
Annual Budget Best Practices for HOA Boards
HOA dues are essential for any community to thrive. They ensure association expenses are covered, and homeowners can enjoy the perks of living in an HOA. However, the board must create a sound budget to balance the community’s funds responsibly.
Check out our ebook, “Annual Budget Best Practices for HOA Boards,” to help you secure a strong financial future for your community!
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Housz, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Housz, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
Housz, Inc
2235 Sepulveda Blvd.
Torrance, CA 90501
310.808.8714
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