The Number That Makes or Breaks Your HOA’s Financial Future
Every board eventually faces the same uncomfortable moment. A reserve study lands on the table, the professional assessment that maps out what the community’s major components, including the roof, pavement and elevators, will cost to repair or replace and when. The numbers are higher than anyone wanted to see, and someone in the room asks the obvious question: Can our residents actually afford this?
It is a fair question. But it is different from the one the reserve study is answering. A reserve study does not tell you what residents can afford. It tells you what the building needs and when. The problem begins when the tension between those two questions becomes a reason not to look at the number at all.
Why Associations Use Reserve Funds
When you own a single-family home, you are responsible for replacing the roof when the time comes. You can save for it, borrow for it or defer it and accept the consequences.
A community association works differently. Owners share responsibility for common assets such as roofs, pavement and elevators. The reserve fund spreads those future costs across all owners over time, with everyone contributing gradually so the money is available when major repairs or replacements are needed.
That model only works when it is followed. And following it starts with knowing the size and timing of the obligation.
Not Knowing Does Not Make It Go Away
Not knowing the number does not make the liability disappear. It delays the moment the board must confront it, and that delay reduces the options available.
Finding out early, while the gap is still manageable, gives the board time to make deliberate choices. Finding out late, when a repair can no longer be deferred, forces the community to react under pressure.
A roof that needed replacing five years ago does not get cheaper because the board postponed the conversation. By the time the work becomes unavoidable, the community may no longer be choosing between gradual increases and a larger adjustment. It may be facing an emergency special assessment and a repair that cannot wait.
According to Association Reserves, approximately 74% of HOAs in the United States are currently underfunded, the highest rate recorded in nearly four decades of reserve studies. That figure reflects what happens when communities repeatedly postpone difficult funding decisions.
What the Legislative Direction Is Telling Us
The 2021 collapse of Champlain Towers South brought national attention to aging buildings, delayed repairs and inadequate long-term planning. According to the Florida DBPR, Florida condominium associations could previously vote to waive or delay reserve contributions, and many regularly did so to keep monthly fees low. That option no longer exists for covered buildings, and as Perez Mayoral PA explains, Florida condominium associations must now fully fund specified structural integrity reserves without waivers.
Surfside is the extreme case, but the legislative response reflects a broader direction worth watching regardless of where a community is located. Regulators are increasingly limiting boards’ ability to waive or underfund reserves for critical components. Engaging with the reserve number is becoming less optional.
Knowing the Number Gives the Board More Options
None of this means every shortfall must be corrected overnight. Once the board understands the amount and timing of the need, it can evaluate several possible approaches:
- Phased increases — spreading assessment increases over several years rather than imposing the full adjustment at once
- Financing against reserves — using reserve-backed financing as a deliberate capital planning tool rather than as a reaction to a shortfall
- Threshold funding versus full funding — targeting an appropriate minimum reserve balance where legally permitted while continuing to build toward long-term adequacy
- Spreading capital projects out — staggering major repairs and replacements based on urgency, condition and professional guidance
These options allow a board to choose a path that is realistic for the community rather than reacting after the problem becomes urgent.
Know the Number Before It Becomes an Emergency
Knowing the reserve requirement may lead to a difficult conversation. Avoiding it almost guarantees a more expensive one later.
A reserve study does not force a board into one funding decision. It gives the board the information needed to compare its choices while there is still time to act. The earlier the board understands the obligation, the more control it has over how the community addresses it.
If your board would like to understand what strong financial oversight looks like in practice, our free webinar on July 29 is a good place to start.
Behind the Numbers: How Monthly Financials Protect Your Board
Wednesday, July 29 | 2:00 PM ET | Free
Or learn more at CommunityFinancials.com or call 833-CONDO-HOA.
Important Disclaimer: This post is for educational purposes only and does not constitute legal, tax or financial advice. State laws governing HOA reserve funds vary significantly. Always consult a qualified attorney and CPA for guidance specific to your community and state.
