Insurance is getting harder to seek out and dearer in much of the country. Just ask homeowners’ associations.
Mirroring trends within the single-family home market, insurers are boosting premiums or exiting the business of covering HOAs’ common property entirely, citing rising losses from extreme weather and aging buildings. The steep premium hikes normally find yourself passed on to individual owners in the shape of upper monthly dues.
For a lot of insurers, HOA coverage is a comparatively area of interest product, however the 74 million Americans who live in those communities depend on what’s referred to as master policies to insure common property like sidewalks, playgrounds, and within the case of multifamily buildings, roofs and certain interior and exterior features.
These higher insurance costs are one more expense that’s making homeownership a challenge for a growing swath of Americans. Also they are increasingly unavoidable: In lots of parts of the country, HOA communities make up a growing proportion of local housing stock.
“All the catastrophes and the disasters have contributed to rising premiums,” said Dawn Bauman, executive director for the Foundation for Community Association Research. “It’s not only condominium associations or community associations — it’s every bit of the insurance market.”
The 2021 Surfside, Fla., condo collapse was a turning point that made coverage harder to maintain, particularly for condo associations, Bauman said. Insurance issues have also affected HOAs made up of single-family homes, but they’re most profound in communities of apartments, rowhouses and townhomes because those developments have more communal features.
1000’s of miles from Florida, in suburban Minneapolis, insurance broker Eric Skarnes is having increasing trouble finding options for his clients in Minnesota and Colorado. In each states, insurers fear hail damage, which may pummel roofs.
“The times of getting two, three, or 4 options are long gone,” said Skarnes, whose company, Insurance Warehouse, insures around 500 HOAs. “Most associations are only lucky to get a renewal.”
Mark Foster sits on the board for an 84-unit complex in Lakeville, Minn. Since 2021, premiums on his HOA’s master insurance policy have quadrupled to $236,000. Despite being spared from several severe hailstorms which have hit the region in recent times, his association was dropped by their insurer when the overall value of their insured property surpassed $60 million.
“We got booted to the secondary market,” he said. “It’s terribly expensive.”
In the identical timeframe, his HOA’s monthly fees — which cover insurance premiums, reserves, and maintenance — have roughly doubled to almost $700 a month. In an effort to avoid further pain for owners, a lot of whom are retired and survive fixed incomes, the board has opted to defer certain projects like road resurfacing and irrigation system upgrades.
Nationally, 31% of HOAs reported that their insurance premiums rose by between $100 and $500 per homeowner last 12 months, based on the Foundation for Community Association Research. One other 35% saw increases of under $100.
To maintain their coverage and lower premiums, Foster’s board voted to look into a unique kind of insurance policy that would scale back the association’s total insured value but shift the prices of rebuilding interiors after a disaster onto owners, likely requiring them to take out dearer individual policies.
“There’s definitely pros and cons to this, but we’re just shocked at what’s happened to this market,” he said. “We’ve got not had substantial damage.”
Boulder Village townhomes in Lakeville, Minn. Since 2021, the community’s insurance costs have quadrupled. (Photo courtesy of Mark Foster) ·Mark Foster
Going with none insurance, an option for some single-family homeowners who’ve paid off their properties, isn’t realistic for many condo associations. In lots of cases, it’s required by law or in association governing documents. Even when it’s not, being uninsured would likely chill condo sales because having the protection is a requirement to get probably the most commonly used mortgages.
In some parts of the country, HOA fees and associated insurance woes are all but unavoidable. Some 84% of condos on the market last 12 months had associated HOA fees, together with a couple of third of single-family homes, based on Realtor.com. Greater than 75% of listings in metro areas as varied as Houston, Las Vegas, and Orlando are a part of HOAs.
Wilson Leung, an actual estate agent in California’s Bay Area, said the condo market is noticeably slower than single-family sales as prospective buyers balk at fees and better property insurance costs.
“That has definitely impacted general cost of living,” he said.
Nationwide, condo sales are falling and for-sale inventory is piling up. As of July 2024, condos under contract fell 5.5% in comparison with a 12 months earlier, based on Redfin data, while listings were up greater than 27%.
The issue is most acute in disaster-prone parts of Florida and Texas, where insurance premiums and HOA fees have been rising particularly fast. In Houston, the median condo sales price fell 6.5% between mid-2023 and mid-2024. Jacksonville, Fla., saw the same 6.6% decline in that period.
For now, though, condo prices are still holding up on a national level. Whilst more inventory hits the market, average sale prices rose 3.9% through the center of last 12 months.
Foster, in Minnesota, is a believer in lots of facets of condo living. Cost savings will be substantial on services that will be billed in bulk, like web and garbage collection. But insurance expenses in his community now roughly match those on similarly priced single-family homes.
“What they’re paying in insurance, we’re now paying,” he said. “Perhaps even a bit of bit more in some cases.”
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and residential insurance.