More than half the nation's estimated 310,000 community associations are struggling with financial issues associated with the foreclosure crisis, according to the Community Associations Institute. About 62 million people reside in properties that have an owner association of one type or another.
A September survey of 1,500 community managers who belong to the Alexandria, Va.-based CAI found that 54% were feeling the effects of foreclosures in their properties. Forty-five percent said their client associations face "serious" issues, while 9% said their problems were "severe." The rest said the foreclosure epidemic was only a nuisance issue or nonexistent.
A quarter of community managers said more than 5% of their units are vacant, largely because of foreclosures, the inability of non-resident owners to sell or rent their properties or owners simply walking away from their mortgages and their homes. Twenty-nine percent more reported vacancy rates of 3-5%.
These issues have negative impact on the ability of associations to collect assessments, placing a financial strain on residents who still live in the communities. Associations rely on homeowner assessments to fund services such as utilities, trash pickup, snow removal, road and building maintenance and landscaping. Assessments also fund a wide variety of amenities like swimming pools and playgrounds.
Assessment delinquency rates have more than doubled since 2005. Today, 65% of associations have delinquency rates exceeding 5%, up from just 19% five years ago, CAI says. More than 30% have delinquency rates exceeding 10%, and for one in ten, the late rate is above 20%.
"High delinquency rates put a lot of pressure on associations to meet their obligations to the homeowners who are paying their fair share," says CAI Chief Executive Officer Thomas M. Skiba. "When some owners, including banks that have foreclosed on homes and now own them, don't pay their share, other homeowners often must make up the difference in higher regular assessments or special assessments."
According to a separate CAI survey, more than 70% of the bank-owned properties are not making timely assessment payments to associations.
