Insurance is getting harder to find and more expensive in much of the country. Just ask homeowners’ associations.
Mirroring trends in 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 usually end up passed on to individual owners in the form of higher monthly dues.
For many insurers, HOA coverage is a relatively niche product, but the 74 million Americans who live in those communities rely on what’s known as master policies to insure common property like sidewalks, playgrounds, and in the case of multifamily buildings, roofs and certain interior and exterior features.
These higher insurance costs are yet another expense that’s making homeownership a challenge for a growing swath of Americans. They are also increasingly unavoidable: In many parts of the country, HOA communities make up a growing proportion of local housing stock.
“All of 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 just condominium associations or community associations — it’s every piece of the insurance market.”
Read more: Should you buy a home with a homeowners’ association?
The 2021 Surfside, Fla., condo collapse was a turning point that made coverage harder to keep, 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.
Thousands 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 both states, insurers fear hail damage, which can pummel roofs.
“The days of having two, three, or four options are long gone,” said Skarnes, whose company, Insurance Warehouse, insures around 500 HOAs. “Most associations are just 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 that have hit the region in recent years, his association was dropped by their insurer when the total value of their insured property surpassed $60 million.
“We got booted to the secondary market,” he said. “It’s terribly expensive.”
In the same timeframe, his HOA’s monthly fees — which cover insurance premiums, reserves, and maintenance — have roughly doubled to nearly $700 a month. In an effort to avoid further pain for owners, many of whom are retired and live on 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 year, according to the Foundation for Community Association Research. Another 35% saw increases of under $100.
To keep their coverage and lower premiums, Foster’s board voted to look into a different type of insurance policy that would reduce the association’s total insured value but shift the costs of rebuilding interiors after a disaster onto owners, likely requiring them to take out more expensive 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 have not had substantial damage.”
Read more: How to decide between a condo versus a house
Boulder Village townhomes in Lakeville, Minn. Since 2021, the community’s insurance costs have quadrupled. (Photo courtesy of Mark Foster) ·Mark Foster
Going without any insurance, an option for some single-family homeowners who have paid off their properties, isn’t realistic for most condo associations. In many cases, it’s required by law or in association governing documents. Even if it’s not, being uninsured would likely chill condo sales because having the protection is a requirement to get 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 for sale last year had associated HOA fees, along with about a third of single-family homes, according to Realtor.com. More than 75% of listings in metro areas as varied as Houston, Las Vegas, and Orlando are part of HOAs.
Wilson Leung, a real 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 higher 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% compared to a year earlier, according to Redfin data, while listings were up more than 27%.
The problem 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 a similar 6.6% decline in that period.
For now, though, condo prices are still holding up on a national level. Even as more inventory hits the market, average sale prices rose 3.9% through the middle of last year.
Foster, in Minnesota, is a believer in many aspects of condo living. Cost savings can be substantial on services that can be billed in bulk, like internet 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. “Maybe even a little bit more in some cases.”
Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.
Click here for real estate and housing market news, reports, and analysis to inform your investing decisions
Read the latest financial and business news from Yahoo Finance
