Background

High monthly fees and special assessments cause various problems for owners. They can cause  financial strain (especially for retired and lower-income owners) and account delinquency, including interest and late fees on unpaid assessments. These can lead to foreclosure, loss of home, and homelessness. In Florida, where high-rises were built in the 1950s and 1960s, they have had special assessments of $100,000 each!  In California, an association failed to maintain/repair piping on schedule which led to slab leaks in the foundations of buildings. Their HOA reserves were nearly depleted at about $90,000 per repair. Repairs were made unit by unit instead of proactively addressing the entire plumbing system for the foundation of the four-plex. Dues rose $150/month (or 33%) in three years, and the slab leaks continue.

How do HOAs find themselves in this predicament? Often, no portion of earlier owners’ assessments were set aside for infrastructure that would need replacement in 30-50 years; their dues were kept low. Current owners get saddled with paying for prior and future owners’ share of infrastructure costs.  If HOAs can obtain 30-year loans with favorable terms, the cost of infrastructure replacement could be spread across current and future owners. Furthermore, the monthly dues increase would be smaller than if the total cost were imposed on just the  current owners.

However, there are barriers to obtaining loans. HOA board members may need to be made aware that borrowing is possible or may have an unrealistic bias against borrowing.  Currently, loan terms are generally unfavorable, and boards often need more expertise to find and negotiate good loan terms.  However, if these infrastructure loans made to homeowner associations were backed by the Fannie Mae and Freddie Mac government agencies, HOAs could obtain favorable financing that individual Americans have enjoyed.  In some cases, grants could also be made available where gross financial malfeasance has occurred.

Objective

The objective of the Funding Initiative is to obtain funding through grants and government insured loans for infrastructure improvements in HOAs.

Five Key Steps for this Initiative

1. Research the issue. We are currently in the research stage. Solutions will only be proposed after all of the components of the problem are understood.
2. Propose a solution. 
3. Engage stakeholders. 
4. Implement the solution.
5. Verify the solution.