Insurance companies are increasingly pulling back from offering coverage to homeowners’ associations (HOAs), leading to significant challenges in the condo market across the United States. According to YF’s Claire Boston, this shift is largely due to the rising costs and risks associated with insuring common properties amidst increased frequency of extreme weather events and the aging infrastructure of many HOA-managed buildings.
The withdrawal of insurers from this sector has resulted in a sharp increase in insurance premiums for HOAs, which in turn, are passed down to individual homeowners in the form of higher HOA fees. This trend is not confined to any single region but is a nationwide issue, with particular severity in areas prone to natural disasters such as Florida and Texas. In these locales, both insurance premiums and HOA fees have escalated dramatically, putting additional financial strain on residents.
Dawn Bauman, executive director for the Foundation for Community Association Research, told Boston that the insurance market’s challenges affect not only condos but the broader spectrum of property insurance. The Surfside, Florida, condo collapse, a tragic structural failure that occurred on June 24, 2021, when the Champlain Towers South, a 12-story beachfront condominium in Miami, partially collapsed, has notably tightened the insurance market for condo associations. Moreover, in states like Minnesota and Colorado, where hail damage is a significant concern, finding insurers willing to offer coverage has become increasingly difficult. Insurance broker Eric Skarnes, who works with HOAs in these states, notes that the days of having multiple insurance options are over, with associations now considering themselves fortunate just to secure a renewal.
In Lakeville, Minnesota, Mark Foster, a board member of an HOA, shared that their master insurance policy premiums have quadrupled since 2021, jumping from a manageable sum to $236,000 annually. This hike came despite the community not experiencing significant damage, illustrating how insurers are preemptively increasing rates based on potential risks. The financial burden has forced the HOA to double monthly fees – in the case of Foster, to nearly $700 a month – affecting residents, particularly those on fixed incomes.
Nationally, the surge in insurance premiums has become a widespread issue. According to Boston, citing the Foundation for Community Association Research, 31% of HOAs reported increases of between $100 and $500 per homeowner last year, while another 35% saw more modest hikes of under $100.
To manage these soaring costs, some HOAs are exploring alternative insurance policies that decrease overall coverage, shifting more responsibility onto individual unit owners. This approach, while potentially reducing premiums, requires owners to secure more extensive personal insurance, which can be both complex and costly.
The impact on the housing market is palpable. With 84% of condos for sale in 2024 having associated HOA fees, and a significant portion of single-family homes also part of HOAs, the affordability of homeownership is becoming a critical issue. In places like Houston and Jacksonville, condo sales prices have seen declines, suggesting that higher insurance and HOA costs are deterring potential buyers, leading to a slower condo market compared to single-family homes.
Despite these challenges, condo prices nationally have maintained an upward trend, with a 3.9% increase in average sale prices through mid-2024. However, the ongoing rise in insurance costs could potentially reverse this trend if not addressed.
For many, like Foster, the benefits of condo living, including cost efficiencies on shared services, are now overshadowed by the ballooning insurance expenses, which have reached parity or even exceeded costs for similar single-family homes. The situation underscores a broader discussion on how communities can adapt to these new realities of insurance in an era increasingly marked by climate-related risks and economic pressures.
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