How to Reduce HOA Expenses
We know that managing an HOA budget can be challenging–especially when operating costs continue to rise. Here are several strategies to optimize spending while maintaining community standards, and reduce your HOA expense.
Start by comparing quotes from different providers and negotiating premiums or deductibles to review insurance policies. You want coverage that protects the community without paying unnecessary costs.
Next, look at where energy and water are being used.
If possible, installing LED lighting, motion sensors, or smart irrigation systems can make a noticeable difference to control utility costs.
Pro Tip: HOA Simplified has a list of trusted vendors that are ready to help with efficient irrigation and lighting upgrades which reduce your expenses.
What’s next?
If your reserve account is in good shape, consider reducing contributions for a short period to ease operational expenses and adjust reserve contributions temporarily. Be sure to follow your reserve study guidelines, and plan to return to normal funding levels once finances stabilize.
If you’ve done both of those,
Take a close look at services and amenities to spot any overlap or outdated contracts and audit for redundancies. Eliminating or streamlining these expenses ensures that you’re only paying for what truly benefits the community.
Just remember that managing HOA expenses doesn’t always require raising dues!
Key Definitions that might help:
Deficit Budget: When projected expenses exceed projected income (dues and other revenue), forcing the HOA to draw on reserves or impose special assessments unless costs are cut or revenue increased.
Operating Costs: Day-to-day expenses required to run the community, landscaping, utilities, insurance premiums, maintenance contracts, vendor services, and administrative fees.
Insurance Premiums & Deductibles
- Premium: The periodic payment (monthly or annual) for an HOA’s insurance policy (general liability, D&O, property, etc.).
- Deductible: The out-of-pocket amount the HOA must pay before insurance coverage kicks in for a claim.
Utility Costs: Expenses for electricity, water, gas, and other municipal services delivered to common areas (lighting, irrigation, elevators, HVAC in clubhouse, etc.).
Reserve Account: A restricted fund set aside over time to pay for major repairs and replacements, roofs, paving, pools, so that large capital projects aren’t paid from the operating budget.
Reserve Study: An independent analysis that identifies common-area components’ remaining useful life and estimated replacement costs, and recommends annual funding levels to keep the reserve account healthy.
Audit for Redundancies: The process of reviewing all contracts, services, and amenities to find overlaps (e.g., two vendors providing similar landscaping services) or outdated agreements that can be eliminated or consolidated to reduce expenses.
