Build Your 2027 HOA Budget From Last Year’s Actuals, Not Last Year’s Budget
Every October, boards across the country sit down to build their 2027 HOA budget. Most of them start in the same place: they pull up last year’s budget, add a percentage across the board, and call it a draft. It is fast, it feels reasonable, and it is almost always wrong.
The problem is not the math. The problem is the starting point. Last year’s budget reflects what you expected to spend. What you actually spent is a different number, and for most communities in 2026, those two numbers are further apart than they have ever been.
Why Building From Actuals Matters
Building a budget from actuals means using what your community actually spent last year as the foundation for next year’s numbers, rather than what you planned to spend. When you build your 2027 HOA budget from last year’s budgeted numbers, you are compounding whatever errors or assumptions were already baked into that budget. If you underbudgeted insurance last year, you are underbudgeting it again. If a vendor contract renewed at a higher rate mid-year, that increase may not be visible in your original budget line at all.
The right starting point for HOA budget planning is your comparative income and expense report from the prior year. This report shows what you actually spent on every line item, compared against what you budgeted, with the variance clearly displayed for both the current month and year to date. As I tell boards consistently: do not start with what you budgeted last year. Start with what you actually spent. Pull the comparative income and expense report and look at every line that ran over. That is your real baseline for 2027.
The Line Items Most Likely to Surprise You in 2027
Not every line item moves the same way. Some are relatively stable year over year. Others have been moving sharply, and boards that do not account for that movement end up mid-year with shortfalls they did not see coming. The four categories worth paying closest attention to for your 2027 HOA budget:
Insurance. This has been the single biggest driver of budget pressure for community associations over the past several years. According to HOA Explore, insurance premiums rose approximately 24% between 2021 and 2024 and are projected to rise another 7 to 10% by the end of 2026. For some communities insurance now accounts for a third of the entire operating budget. The mistake most boards make is budgeting what they paid last year and then getting surprised when the renewal comes in 20% higher. Call your broker in October, not January, and get a renewal estimate before the budget is finalized so the number you put in the budget reflects what you are actually going to pay.
Utilities. Common area electricity, water for irrigation, and gas for shared facilities have all increased significantly in most markets. According to the Foundation for Community Association Research, utility costs are among the fastest-rising expense categories for community associations heading into 2027. If you are building your utility line from your 2026 budgeted number rather than what you actually paid, you are likely starting too low. Pull your actual utility invoices from the past twelve months and use those as your baseline.
Landscaping and vendor contracts. Labor costs and material costs for landscaping, maintenance, and other vendor services have risen consistently. Do not assume the landscaper is going to hold last year’s price. Ask them in writing before the budget is set, not after. If any of your major contracts are up for renewal before 2027, get the new pricing now so the number in your budget reflects reality rather than hope.
Legal fees. This is the line item most boards underestimate because it is hard to predict. Collections actions, disputes, and document amendments all carry legal costs that do not fit neatly into a line item. Look at what you actually spent on legal in 2026 and budget realistically for 2027, including any ongoing matters you know about.
What a Realistic 2027 HOA Budget Actually Does
A budget built from actuals gives the board something to stand behind when homeowners ask why the assessment is going up. The answer is not that the board decided to raise dues. The answer is that insurance went up, utilities went up, and the vendor contract renewed at a higher rate. Those are facts the board can show, not decisions the board has to defend.
A budget built from last year’s budgeted numbers, on the other hand, often leads to a mid-year shortfall that nobody planned for, and that shortfall almost always ends the same way: a special assessment, an emergency assessment increase, or a dip into reserves. None of those conversations are easier than the conversation about a well-documented dues increase in October.
The time to have that conversation is now, before the 2027 HOA budget is finalized, while there is still room to plan.
If your board does not currently receive a comparative income and expense report that shows actual spending against budget, that is the first thing to address before budget season goes any further.
Schedule a consultation or call 833-CONDO-HOA.
Frequently Asked Questions
What does it mean to build an HOA budget from actuals?
Building from actuals means using what your community actually spent last year as the foundation for next year’s budget, rather than what you planned or budgeted to spend. The starting point is the comparative income and expense report, which shows actual spending alongside budgeted amounts and the variance between the two for every line item. Any line item that ran significantly over or under budget in 2026 should be adjusted before setting 2027 numbers, not carried forward at the same level.
Why is last year’s HOA budget the wrong starting point for 2027?
Last year’s budget reflects what the board expected to spend, not what actually happened. If insurance premiums increased mid-year, if a vendor contract renewed at a higher rate, or if an unexpected expense hit a line item, those actual costs may not be reflected in the budgeted number. Building from last year’s budget compounds those inaccuracies. Building from actuals gives you a realistic picture of what the community is actually spending and what it will likely cost to operate in 2027.
Which HOA budget line items are increasing the most heading into 2027?
Insurance has been the most significant driver of HOA budget increases in recent years, with premiums rising approximately 24% between 2021 and 2024 and projected to continue rising. Utilities, landscaping and vendor contracts, and legal fees have also increased meaningfully. Boards building their 2027 budgets should pull actual invoices and renewal quotes for each of these categories rather than carrying forward last year’s budgeted amounts.
How much should an HOA budget increase for 2027?
There is no universal answer because every community’s cost structure is different. The right 2027 HOA budget increase is the one that accurately reflects what the community actually needs to operate, fund reserves appropriately, and absorb the cost increases in insurance, utilities, and vendor contracts that are already known. A budget built from last year’s actuals with current renewal quotes will give the board the most accurate picture of what a realistic increase looks like for their specific community.
What report should a board use to build its HOA budget?
The comparative income and expense report is the most useful tool for HOA budget planning. It shows actual spending alongside budgeted amounts for every line item, with the variance between the two displayed for both the current month and year to date. Any line item with a significant variance in 2026 is a signal that the 2027 budget needs to be adjusted. If your board is not currently receiving this report as part of your monthly financial packet, ask for it before budget season begins.
Important Disclaimer: This post is for educational purposes only and does not constitute legal, tax, or financial advice. Always consult a qualified attorney and CPA for guidance specific to your community.
