4 Ways to Cut Costs and Keep HOA Assessments Stable

Stop raising assessments. It’s a universal request, whether you’re part of a high-rise association in Los Angeles or an active adult HOA in Palm Springs. And while there are many good reasons to raise assessments (let’s face it, keeping assessments low at all costs can actually hurt your community’s relevance and cause property values to suffer), no board wants to be the “bad guy.” So before you raise assessments, take a look at these four cost-savings methods.

To get an in-depth look at these cost savings, read the full article.

1. Energy

In California (and everywhere else), it’s clear that energy costs are on the rise. And making changes to boost energy efficiency is a reliable way to save money in the long run. Partner with your professional community management company to find ways to boost energy efficiency. For instance, you may install light switches on motion detectors so that no lights can be left on when the room is unoccupied. A long-term solution (like replacing all traditional lighting with LED lighting) may require a bigger investment upfront, but will likely save money in the long run.

2. Reserve Fund Investments

Are you getting the most out of your reserve fund investments? Most board members aren’t sure. In fact, In our 2018 HOA budget survey, 72% of board members said that they weren’t completely confident in their returns on reserve funds and/or operating funds (download the full survey results). Partner with your association management company and review your current investment plan to see if there are opportunities to increase your returns. To learn more, read the article, “Reserve Funds: Six Tips to Improve Your HOA’s Returns.”

One single-family home community association in Dana Point partnered with FirstService Financial and increased their annual interest earned by more than $27,000.

3. HOA Insurance

If you haven’t reviewed your HOA’s insurance coverage recently, you may be paying more than you need to in premiums or deductibles. It’s important to work with a trusted insurance broker or agent that has experience with homeowners associations and can work with yours to get the best rate. To learn more about the intricacies of HOA insurance, download the white paper: 4 Things You May Not Know About Community Insurance.

4. Vendor Contracts

In our 2018 Budget Survey, over 57% of surveyed board members said they weren’t sure if their property management company asks vendors whether there will be cost increases in in the following year’s budget. In fact, by reviewing contracts regularly and communicating with vendors consistently, you may be able to uncover cost savings.

Other HOA Cost-Saving Opportunities – Investment Policy

While these four areas of cost savings are a good starting place, it’s important to note that this is not an exhaustive list. A good way to evaluate potential cost savings in your investments particularly is by creating an HOA Investment Policy. An HOA Investment Policy is a guide you can use to help you uncover better returns on your reserve funds and potentially save money in the long run. To learn more, download the guide, How to Create an HOA Investment Policy.

Why You Shouldn’t Get Your Hopes up About an El Niño This Winter

El Nino generated storm waves crash onto seaside houses at Mondos Beach, California on January 12, 2016.  (MARK RALSTON/AFP/Getty Images)

An El Niño is forecast for the winter ahead, and we all know what that means. Or do we?

El Niño – that cyclical warming of the equatorial Pacific Ocean – has long been associated with wet winters across much of the West. Which is always welcome news across the chronically water-short region. But in reality, whether El Niño actually delivers greater-than-normal precipitation is strictly a toss-up, says Jan Null, owner of Golden Gate Weather Services, a consultancy based in Saratoga, California.

The National Weather Service Climate Prediction Center tells us, in its most recent forecast of the El Niño Southern Oscillation (ENSO), that there is as much as a 70 percent chance of El Niño conditions forming during the winter ahead. And it’s likely to be a “weak” El Niño. But what does that mean? Elementally, it means the equatorial Pacific is expected to be warmer than normal, and this may alter weather events around the globe.

But it doesn’t mean you should get your hopes up for a wet winter. Null has taken it upon himself to try to bring a dose of reality to the situation, via an exhaustive breakdown of precipitation results from past El Niño events. In an interview with Water Deeply, he explains why our expectations about this weather phenomenon are often wrong.

Water Deeply: What does an El Niño prediction mean for precipitation in California and elsewhere in the West?

Jan Null: With any El Niño, and especially weak events, there is no strong correlation with either above- or below-normal precipitation in California. For example, in the very important Sacramento Basin, of the 10 weak El Niño events since 1950, five have been above normal and five below normal. And the range of these solutions is from 43 percent of normal in 1976–77 to 135 percent of normal in 1977–78.

Likewise, rainfall in the California portion of the Colorado ranges from 30 percent of normal in 2006–07 to 214 percent in 2004–05 – both weak El Niños.

Water Deeply: Why is forecasting El Niño so difficult?

Null: The accuracy for seasonal forecasts is not nearly as absolute as our weather forecasts in the short term. So with forecasting El Niño, you’re going to run into all the same issues you have with any seasonal forecast. Also, we’re finding out more and more that ENSO events are not happening in a vacuum. It’s not the only thing that’s going on. You also have the Pacific Decadal Oscillation, the Madden-Julian Oscillation, the Arctic Oscillation. I call it an alphabet soup of different things we have going on in the oceans and atmosphere.

But, of these, the strongest single events are ENSO events, which I think is one of the reasons they get so much attention. But they don’t happen in that vacuum. So sometimes these other things make the ENSO events stronger, or they might subtract from the impacts.

So not only do we have to forecast what the ocean temperatures are going to be along this fairly narrow swathe of the equatorial Pacific. You really have to consider what’s going on in all these other places – looking at pressure patterns in the Arctic or what’s going on in the North Pacific. It’s a complex puzzle. If you forecast one piece out of place, all the other ones aren’t going to fit right together.

Then we also have to discuss the fact that you have climate change DNA in everything that’s going on. The atmosphere and the oceans are warmer, so that’s going to add into the complexity of what’s going on.

Water Deeply: Much of the West is grappling with long-term water shortages. How should we manage our expectations around El Niño and avoid any ‘hype’?

Null: I don’t think it necessarily is El Niño hype. There is always the hope that the next winter is going to be wet. People fixate on the idea that “This is an El Niño storm.” Well, you also have big storms in years that are not El Niño.

Historically, the way we get our “normal” precipitation is typically by having a lot of years that are a little bit less than normal. And that’s really what the drought in 2011–15 was. So that means you have a deficit over those four years. So to make up that deficit, you not only have to have a normal year. You almost have to have a year that would be twice as wet as normal. But something we have learned is that we can recover without making up all the deficit. And I think we saw that with the water supply after what happened in 2016–17, which was a wet year.

It’s really important that water managers, the media and the public get out of the old mindset from 1982–83 and 1997–98 that El Niño means a wet winter for California. I think the attention is appropriate. You just have to put it in context.

I’ve often used, over the years, the analogy of a baseball team. You may have this one player who’s a superstar who helps you get more wins than any other player. But on any given day, somebody else might have a hot day and be the one who’s going to be the star. El Niño is not the only player on the team.

This article originally appeared on Water Deeply, and you can find it here. For important news about the California drought, you can sign up to the Water Deeply email list.

The Sand is Shifting in the Housing Market: Understand the “New” Boundary Lines

 

Anyone who has been in the real estate industry for more than a few years has seen some dramatic changes in the market. Over time, the average square footage of single-family and apartment homes shrinks and expands to accommodate economic and family unit size fluctuates. Area property values rise and fall based on regional expansion and net migration. Federally-controlled interest rates often define the winners and losers in the investor pool. Through all of these changes, city planners have delineated locations within greater metropolitan areas as cities and suburbs. Today, there is a new dynamic that shouldn’t be ignored, the gradually disappearing line between city and suburban property lines.

Redefining the City vs. Suburbia Boundaries

Since the late 1940s, when William J. Levitt built the first planned community just outside New York City for WWII veterans and their families, we have thought of suburbs as mostly an area detached from the business district. In the early decades, when most women stayed home, and the husband commuted into the city, there were few businesses beyond a grocery, drugstore, gas station and a few shops in these primarily residential areas. When we hear the word “suburbia,” a picture of the white picket fence surrounding a single-family home with flowers lining the path to the front door pops into our head. This quintessential image is pleasant, but no longer the norm.

The twenty-first-century reality, where millions of people work from home – about 43 percent of all working adults work remotely today – means that fewer people feel pressure to live close to the office. That doesn’t mean multifamily housing is losing market share in the city. Hundreds of US cities report more than 50% of residents rent. However, the face of suburban living is changing; suburbia is no longer primarily furnished with cookie-cutter single-family homes. You’ll find sprawling malls, hospitals, commercial tenants, and both detached single-family and apartment homes all within the same area.

Demarking where the city ends and the suburbs begin is very complex today. Market analysts suggest it’s time to cease using geography as the basis for defining markets and embrace density as a more reliable housing intelligence driver. Using this alternative framework provides a more nuanced method of understanding what modern renters need and expect from multifamily housing providers.

Viewing the Changing Landscape Through a New Lens

Rather than continuing to use city limit boundaries to establish metropolitan statistical areas, it’s time to view housing stock with a fresh lens. By defining areas based on density, market analysts get a clearer picture of the true market share of multifamily housing versus detached single-family dwellings. Urban and suburban areas tend to share many common characteristics today, including a growing multifamily housing presence in areas traditionally viewed as suburban. City planners and developers armed with this “new” information can create more realistic development and expansion plans.

Not every renter is looking for a nest in the center of the city, although that will always be an attractive location for some. Likewise, everyone who wants to escape the city, isn’t looking for the white-picket-fence American dream of the 1950s. Some want a well-managed apartment home in a community close enough to visit the city if they chose, with convenient access to everything they need from entertainment and shopping to medical care and work opportunities.

The sands are shifting in the housing market. It’s time for real estate professionals to embrace a new way of studying it. Arbitrary lines on a zoning map are no longer delivering the data we need to respond to the changing multifamily landscape.