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Is it better for your HOA to cover more or less of your monthly expenses?

Updated: May 1, 2022

The fewer expenses the HOA covers the better. Here’s why…

  1. Your HOA pays more for services than you would on your own Most Boards do not aggressively price shop. They don’t have the time as unpaid volunteers and any cost savings are split equally across all members of the HOA. Would you spend 8 hours contacting multiple vendors to potentially save your 100 member HOA a $1,000 a month? Essentially, you’re spending a whole day trying to save yourself $10 a month. As such, your board usually selects from the property manager’s list of preferred vendors. These are rarely the cheapest, nor are they the best, and in some cases your property manager and a vendor have a “special” relationship that most states consider illegal. There are rare cases where the HOA can get a better price than you. For example, cable/internet providers will give your HOA a discount if everyone in the HOA is forced to use their services. In this particular case it may save money but it creates other problems that we’ll cover below.

  2. Any expenses covered by the HOA will be used more wastefully If your HOA covers trash, more will be thrown away. If your HOA covers water, people will take longer showers. If your HOA covers electricity in your gym, the lights will be left on. Why does this happen? There’s an economic theory that helps explain it: The “Tragedy of the Commons” is a situation in which individual users, who have open access to a resource unhampered by shared social structures or formal rules that govern access and use, act independently according to their own self interest and, contrary to the common good of all users, cause depletion of the resource through their uncoordinated action. (Wikipedia). Let’s return to the shower example to make it more clear. If the HOA covers the water bill and everyone in the HOA pays an equal amount regardless of individual usage, what incentive do you have to take a shorter shower? Any savings from your shorter shower will be shared by everyone.

  3. The more expenses covered by the HOA, the higher risk of losing your home If you’re unable to pay your trash bill, the garbage company can’t put a lien on your home. If you’re unable to pay your water bill, the water company can’t force you to sell. If you’re unable to pay your cable/internet bill (remember above), the cable company can’t foreclose on you. If you’re unable to pay your monthly HOA bill, the HOA can put a lien on your home, force you to sell, or foreclose on you.

If your HOA ever proposes including a new expense as part of your monthly HOA bill, keep in mind that it will likely cost you more, cause more waste, and increase the risk of losing your home.

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