2021 adjustments to consider in order to maintain the financial health of your community
The direct and indirect impacts of the COVID-19 pandemic will be with us for a while. Careers have been interrupted, we’ve actually gotten used to working from home, and travel – business and vacation – has been severely limited. On the bright side, we’re spending more time with family and friends, getting to those home-improvement projects we’ve been meaning to take on, and spending more time outdoors. We’re adjusting to the new normal, and trying not to drive each other crazy.
As discussed in previous Georgia Commons articles, the effects of these business and family adjustments roll up to our community associations, requiring adjustments to 2020 and 2021 plans and budgets. We need to incorporate the ongoing risk of variability in both revenue and expense categories, probably until well after a wide-spread vaccine has returned our lives somewhat to normal. As the medical experts say, we want to stay ahead of the curve.
2021 potential financial management impacts
Here are a few impacts to consider in your 2021 planning, budgeting, and monthly reporting processes:
- Lower collections rates. As the year progresses, we’re already seeing slower assessment payments. Where a 5-7% delinquency rate was typical, it’s probably best to plan for 10% or more. That also impacts cash flow, so you may want to reprioritize discretionary spending, especially early in 2021 when all the committees want to start their new projects.
- Increased insurance fees. If you haven’t already re-evaluated your community and board (directors & officers) insurance needs in 2020, now is a good time to have an HOA insurance expert look at your policies. Fully protecting the community and board in the new normal may require increased coverage, and insurance costs rarely go down. Prepare for rate increases due to current weather-related claims and the potential future insurance impacts of COVID.
- Community maintenance demands. More people staying home translates into increased usage of community facilities and amenities, even with COVID restrictions in place. That increases the need for maintenance and cleaning, including the added burden of additional sanitization. Plan for more of both, and ensure you have vendors available that can meet your stepped-up requirements.
- Vendor expense increases. Your vendors are also experiencing similar challenges as they scramble to maintain full staffing levels, meet safety mandates and best practices, and minimize their internal cost increases. At some point that will have to at least be shared with their HOA clients, whether through contractual fee increases, higher service charges, or added cost recovery charges. If costs increase too much, consider re-bidding those contracts, but remember that we’re all impacted in some way.
Improve community value in the New Normal
While these won’t directly impact your monthly income statement, here are some other things you can do to improve the overall value of your HOA and provide better community support.
- Communicate early and often. Be transparent about the financial health of the community and share monthly updates. Help residents understand the need to make dues payments a priority by showing how they directly benefit.
- Focus on curb appeal. It’s important to maintain, or even step up, vigilance to community architectural standards. The good news is that, with more time being spent at home, residents have the time to invest in making improvements to yards and houses. Take advantage of this opportunity – communicate ideas, quickly approve requests, and highlight results.
- Reprioritize capital improvement projects. While residents are improving their curb appeal, consider how you can accomplish the same goals within the common areas of your community. Some tough decisions may be needed to postpone other expenses, but now is the time for flexibility. Consider communicating ideas to get community feedback.
- Think spring! We will survive the (literal) winter of COVID. Residents will emerge, somewhat grumpy longing for human contact. Start planning and budgeting for at least socially distanced outdoor events to bring residents back together after winter hibernation.
2021 – getting back to (the new) normal
2020 has been a difficult year on so many levels, but let’s all stay optimistic about a strong recovery in 2021. While an economic recovery is important to the ongoing financial health of our communities, we also need a lifestyle recovery – a return to some degree of normalcy. That said, some things may never return to normal – like teleworking vs. daily office commutes – which is not necessarily a bad thing. As property managers and board members, we’ll have to remain flexible and adjust our financial management practices as our residents adjust their lifestyles to the new normal.