Pressure points

High HOA fees are a challenge for affordable homeowners

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In the seven years Adam Perry has owned his affordable unit at Iris Hollow, there have been times when his monthly homeowner association (HOA) fees have exceeded his monthly mortgage payments. First the outdoor stairs needed repair. Then the roof needed replacing, and instead of paying the special assessment all at once to cover his portion of it, he paid it over 18 months. Even without the special assessments, his HOA dues have increased steadily since he bought the house, he says. Over time, his HOA fees make his home feel increasingly unaffordable, despite the fact it’s part of the City of Boulder’s Permanently Affordable Homes Program.

“The thing I come back to over and over and over is that it’s not called the permanently affordable mortgage program. They call it the permanently affordable homeownership program,” Perry says. “But the home is not affordable; the mortgage is.”

As cities and local governments increasingly focus on affordable housing around the state (and country), homeownership units are often a part of neighborhoods and developments within Common Interest Communities, or HOAs. Within associations, there are often competing priorities between market-rate owners, affordable homeowners and, in mixed-use developments, commercial owners, which can lead to disagreements about how the HOA is run. What’s more, with very little regulatory oversight from the state, homeowners don’t have much recourse when issues do arise.

Throughout reporting this story, BW heard from several affordable homeowners in Boulder who were frustrated by what they say are unaffordable HOA fees and assessments. Some said their HOA fees and interactions with associations have caused them to question their participation in the affordable homeownership program. A few others also have sold their homes in the program expressly over their concerns and frustrations with rising HOA costs. Most requested anonymity given the personal nature of participation in the City’s program. 

John R. Ford Housing developments, like Holiday, Dakota Ridge, Iris Hollow and Steel Yards often include permanently affordable units. But rising HOA costs call into question just how affordable these homes are.

A problem for all kinds of homeowners

Although inclusionary housing programs can put restrictions on resale values to keep the homes permanently affordable in the years to come, there’s very little local jurisdictions can do about rising HOA costs, as the associations themselves are private, nonprofit corporations often run by volunteer boards of homeowners.

“Under most inclusionary housing programs, I don’t think they address [HOA costs] as an issue,” says Kathy Fedler, Housing and Community Investment division manager for Longmont. “It’s always something we’re concerned about because we have no control over it.”

In 2019, Longmont conducted a community survey and found that, on average, HOA fees were $216 for condos, $125 for single-family homes and $196 for townhomes. Since the current iteration of Longmont’s affordable housing program is relatively new (approved by City Council in 2018), Fedler says there aren’t many units currently under an HOA where rising costs have been an issue. But it’s something Longmont is keeping its eye on. 

The City of Boulder, however, has long heard about the issue of rising HOA costs for homeowners, not just in its affordable program but in market rate units as well. According to a 2019 survey of registered HOAs in the city, the average monthly HOA fees are $308 per month, up significantly from $177 in 2012, the last time the City looked at HOA costs. In addition, the average cost of special assessments — additional costs that can’t be covered by the HOA reserve fund — was about $3,000 per unit, per year.

Rising costs are particularly concerning to Boulder’s affordable homeowners, considering 95% of them live under an HOA. In a separate 2019 survey of affordable homeowners, 65% said that HOA fees were more than expected, with an average cost of $241 per month. The survey also showed this led to dissatisfaction with homes, especially among the half of respondents who also had a lump sum special assessment in the time they’ve owned their home.

“Rising HOA fees are across the board (and across the country) as more HOAs are reckoning with deferred maintenance and low HOA fees set by developers to make the initial purchase more attractive,” says Jay Sugnet, senior planner at the City of Boulder’s Housing and Human Services department. 

The City does review HOA structure and documents when approving permanently affordable units “to make sure that we think it’s going to be successful,” Sugnet says. And the cost of an HOA is factored into qualifying limits for potential affordable homeowners. 

But, developers are responsible for setting up HOAs with governing documents that determine board structure, fee schedules, basic rules and regulations throughout a complex or neighborhood, and the rights and responsibilities of homeowners. In purchasing a home, the homeowner is essentially signing a contract with the association, one that the City is not involved in. And it’s up to the owner, whether in the affordable program or not, to do their own due diligence regarding the financial solvency of an association before they buy. 

In some HOAs, owners pay a flat fee regardless of square footage. Others allocate monthly payments and even special assessments based on size. Regardless, in general, market rate and affordable owners pay the same amount for shared infrastructure — roofs, stairs, sidewalks — or amenities — pool, gym, community room— depending on the association. “Developers oftentimes use a standard set of documents,” says Loura Sanchez, a lawyer and the incoming 2022 Rocky Mountain chapter president of the Community Associations Institute (CAI). “And there isn’t a lot of thought that goes into, does it work in this community? Does it work for this particular marketplace?”

With about 1,000 members in Colorado, CAI is a trade organization open to everyone involved in community associations, from board members and homeowners to other professionals that serve the community, like property managers, attorneys, landscape companies and pool operators. She says costs may seem high, especially within HOAs that hire professional management companies, but ultimately homeowners are “going to reap the benefits” of paying HOA dues and maintaining shared property.

“I think that’s one thing that people forget about associations — one of the primary purposes is to preserve, protect and enhance property values,” Sanchez says. “And that means operating your association fully. And that cost is recouped in the fact that your property values stay strong.”

While this may be the goal for market-rate owners, inclusionary housing units are deed restricted, limiting how much value a home can appreciate. In Boulder, it’s no more than 3% a year. This can cause competing interests when it comes to managing an HOA. 

“There are people who own market rate units in our community that really do want to continue to improve the buildings, and they are willing to spend $500 a month on an HOA, and that’s something that some of the affordable homeowners can’t stomach, can’t afford,” says Kyle Wolf, an affordable homeowner in Iris Hollow and previous board president of that community’s HOA.

“At some point we have to reach a cap where you find the perfect balance between what affordable homeowners can afford and what market-unit homeowners want to pay [so that they’re] getting what they want out of the property,” Wolf says.

According to a state database, Boulder has just over 300 HOAs, but that might not be totally accurate according to Brenda Ritenour, neighborhood liaison for the City of Boulder. The state keeps a list of registered HOAs, but while registration is required by state law, it doesn’t have any way to ensure HOAs comply.

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“In Colorado, there’s actually no regulatory oversight of HOAs or community association managers,” says Geoffrey Salant, HOA Information Officer with Colorado’s Division of Real Estate.

According to his office, 45% of Coloradans live in housing governed by an HOA. In 2020, there were approximately 7,500 registered HOAs, and another 2,600 whose registrations expired in the same year, totaling more than 10,000 in the state.

“A common misconception about HOAs is that they’re somehow quasi- governmental. They’re not. They’re nonprofit corporations, they’re private corporations,” Salant says. “I think that because you’re dealing with a home, the vast majority of people believe that there’s some sort of regulatory oversight or some sort of safeguard.”

HOAs in the state are governed by the Colorado Common Interest Ownership Act, which allows associations to enforce their covenants, collect dues and take out loans, as well as laying out some budget and transparency guidelines. It also requires HOAs to register with the state, providing its size, revenue and location, but providing names of board members and their contact information isn’t required, Salant says. And while his office collects all this information and provides basic information about the rights and responsibilities of homeowners through resource materials and educational forums, it isn’t a central repository of HOA governing documents, nor does it have any regulatory power over HOAs.

“What we don’t do, which is really important, is that we do not act as a regulatory program. We do not mediate or arbitrate. We can’t give legal advice. I cannot act as an advocate,” Salant says.“We cannot assess fines or penalties, and we do not enforce an HOA’s failure to register.”

When disputes do arise between homeowners and HOAs, there is very little the state or local jurisdictions can do to help. Under a previous state program, certification was required for community association managers and it provided a more robust complaint process, Salant, who worked as an investigator for the program, says. That program ended in 2019, however, after Gov. Jared Polis vetoed a bill to renew it. CAI has a certification program, “as a way to have some type of accountability or oversight of how people show up in the community association realm, particularly in those States that don’t have any regulation like Colorado now,” Sanchez says. Currently, about 350 of CAI members in Colorado have these certifications and designations. 

The state still collects HOA complaints, but it can’t investigate them. 

In 2020, Colorado’s HOA Information and Resource Center fielded about 1,000 complaints from homeowners, many of whom were surprised the state couldn’t do more to help them. The number one complaint, according to the state report, had to do with the lack of communication between the board and homeowners. Homeowners also complained that their HOAs were not following governing documents and failing to provide maintenance. (Real estate brokers also appealed to the state when they had trouble getting HOA documents during a real estate transaction.) But any dispute between an HOA and a member of an HOA is considered a civil matter, and Salant says all his office can really do is provide homeowners with education and resources about how HOAs function. If necessary, his office can also direct them to alternative dispute resolution or community mediation.

“Ultimately,” he says, “if there’s a stalemate and [homeowners] cannot come to a resolution with their HOA, they’re only left with litigation,” Salant says.

“Admittedly, when I first bought into the program, even though I was an older adult, I was still pretty naive about HOAs,” says Kathleen Kryczka, who has owned an affordable unit in the Steel Yards neighborhood in East Boulder since 2005. “I just had cursory knowledge of HOAs, and I knew I’d be paying a fee and I sort of trusted the process.”

John R. Ford Kathleen Kryczka, who lives in the Steel Yards, recently filed a lawsuit against that HOA, claiming it had failed to enforce its rules and regulations. Photo by John R. Ford

She says for the first 10 years of living in the complex, she really didn’t have any issues, although HOA fees have risen significantly since she bought it. But in the last several years, she alleges, “the services have plummeted and there’s particularly been a lot of health and safety issues that have been neglected,” she says. After months of trying to communicate with her HOA over her concerns, she filed a lawsuit against Steel Yards Condominium Association (SYCA) on June 14.

The lawsuit alleges that SYCA failed to enforce its rules and regulations, causing Kryczka harm. Some of the complaints in the lawsuit have to do with neighbors’ behavior, like smoking marijuana in a way prohibited by the community covenant, using charcoal grills on balconies and owners not taking responsibility for renters not following association rules. She also alleges, however, that the HOA and its contracted management company Boom Properties, failed to maintain windows and caulking, allowing moisture and eventually mold to grow, which exacerbates her asthma. The lawsuit also states that Kryczka slipped and fell on ice around the complex twice in 2020, the second time resulting in spinal damage and surgery. In the end, Kryczka alleges SYCA failed in its fiduciary duty to her as a homeowner and is seeking monetary compensation. Her suit also takes issue with a recent harassment policy passed by the board that “prohibits excessive or repeated correspondence and challenging communications.”

“They’re behaving in a way that is making it so difficult for people to continue to afford to live there,” she says. “A lot of my fellow homeowners will blame me for causing the HOA fees to go up [because of the lawsuit], but I wish they’d see that it is the HOA board’s and management company’s incompetence that is what’s costing the HOA, not an outspoken owner who simply wants contractual services she pays for.”

Given the active lawsuit, SYCA declined to speak with BW.

So what are the solutions?

When it comes to solutions — there aren’t many.

“When the only pathway is to litigate, then we’re missing some opportunities there,” Ritenour, the neighborhood liaison, says.  

Across the board, the focus is on educating homeowners and potential buyers about the function of HOAs and the rights and responsibilities of members, whether in affordable homeownership programs or not.

“Particularly first-time homeowners, they don’t understand the reality of how an association is organized, what the board’s responsibilities are, what management’s responsibilities are,” Sanchez from CAI says. “They don’t really understand, and so there’s frustration there.”

In Boulder, the City has expanded its education programing for potential buyers in the affordable housing program in an attempt to inform people ahead of purchasing the home. “The City can’t remove all risk — every home has risks — what we can do is make sure that people are making informed choices about those risks,” Sugnet says.

Inevitably, costs of homeownership are going to increase over time.  It’s the same as if you were renting, Sugnet says. Even rates within the City’s affordable rental program increase 1-3% each year, he says.

“And it should be the same with owning a home. You shouldn’t expect that your costs are going to be stagnant,” he says.

 Additionally, the City has also expanded its educational offerings to HOA board members or officers, with classes on creative financing, assessing HOA loans and reserve planning, among other topics.

“One of the things that we’ve been trying to do with these education programs is help [HOA officers] remember that they are beholden to the people that live in that HOA and that their decisions need to be made with the entirety of their community in mind,” Ritenour says, adding the courses have been well received, although the City doesn’t have any data on the effectiveness of such programs.

Salant at the state says he also often encourages people, whether in permanently affordable programs or not, to run for a seat on their HOA board if they’re unsatisfied with how it’s being managed. But, “Nine times out of 10, however, the response is, ‘I don’t have time for that,’” he says.

Wolf, who lives in Iris Hollow, agrees that the best way to deal with rising HOA costs is to be involved. Wolf ran for his HOA board several years ago, when he got a notice in the mail for a special assessment. At the time, he says, he felt there was a lack of transparency from the HOA — especially when it came to times, location and agendas of meetings. So, when he was elected, he made communication a top priority.

“To a certain extent, the people who are on the boards need to also ensure that everyone’s involved,” he says. “We can be as clear and communicative as possible and [help people] understand that without raising dues regularly and consistently, then when things come up, we may not have the money to work on a project.”

But in Boulder, Sugnet says, many affordable homeowners feel there is a lack of representation on their HOA boards and often affordable owners feel out-voted, especially in mixed-use developments that aren’t just balancing market-rate and affordable residential views, but also commercial owners as well.

“Unfortunately, I think it discourages some affordable homeowners from participating in their HOA [because] they feel like they may not be able to effectively advocate for their position,” he says.

HOAs could, therefore, reserve at least one board seat for an affordable owner, if not more depending on what proportion of the units in a complex are designated affordable.  

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Melissa Garcia, an attorney with Altitude Law who teaches some of Boulder’s HOA classes, says one association she works with recently discussed including a requirement for an affordable homeowner board seat when updating its covenants. But it was the first time Garcia had heard of the idea and ultimately that board didn’t do it.

“I think there’s this fear that all of a sudden this person’s going to be here and all our decisions are going to be driven by this person, because they’re the most dynamic or whatever,” she says. “But it’s only one person — you just need to hear what’s happening with that group.”

In the last couple years especially, Garcia says HOA boards she works with have been appointing ambassadors for certain interest groups within an association. So, for example, a rental ambassador could help an HOA minimize issues with renters, many of whom probably aren’t aware of requirements laid out in the association’s covenants.

“It’s something that some boards are starting to consider because they know that if they hit the problem right away and they figure out a solution proactively, then they’re not going to have those rental problems,” she says.

“I haven’t seen the same thing for HOA affordable programs,” she adds, “but I think that if it arises, it’ll arise in Boulder.”

In response to concerns over rising HOA costs, the City of Boulder is in the process of implementing two new programs to hopefully alleviate some of the burden for owners in the affordable program. When it comes to costly special assessments, the City is offering grants, which will come out of the City’s affordable housing fund and go directly to the HOA. In exchange, the owner agrees to lower the resale price of their home by that same amount, effectively repaying the City when they decide to sell. The grant program has yet to distribute any funds, but the hope is it will not only help current homeowners, but that it will also increase the affordability of homes in the future with the lower price at resale.

The City also hears concerns from owners that rising HOA costs will make it increasingly difficult to sell their home, given affordable units come with fixed appreciation, Sugnet says.

“If that happens, we have the ability to broaden the pool of potential applicants,” he says. “And that has to do with expanding the income levels that are allowed to purchase that home.”

While units in the permanently affordable program are restricted to certain qualifying income limits, certain variables — insurance, taxes, HOA costs — are outside the City’s control. Eventually, this could mean the home becomes unaffordable for the people within the program that meet the income limits. If that happens, then on a case-by-case basis, the City can increase the income limit for a unit by 10%, making it available to higher income households, while still selling it below the market rate. To date, the City has yet to increase the limits on any units based on the new process, which has only been in place for a couple months.

“We’re trying to do what we can as a city to help with some of the pressure points. And we think what with these two programs we’re doing that,” Sugnet says. “Beyond that, I’m not sure what the solution is.”

What is clear, however, is that HOA costs are going to continue to rise. Electricity costs more every year, as does water, landscaping and management services. Multiplied by the number of units in an HOA, and the costs add up. So far, it’s hard to judge the efficacy of the City’s solutions, be it more HOA education for buyers and officers, the special assessment grant program or increasing income limits for affordable units. There just isn’t enough information or data to know. Garcia, from Altitude Law, says there’s more that could be done to help mitigate rising costs for both market-rate and affordable homeowners. She says that in recent years, she fielded more requests than ever to amend HOA covenants to better reflect the communities they cover.

“A lot of boards just sort of operate on what was happening 10 years ago. It just doesn’t work anymore,” Garcia says. “I think that the rising costs are forcing boards to really look at who their heroes are, who their resources are, how to change their documents to address this, and maybe how to change the services.” 

This is part of a series on affordable housing funded in part by the Solutions Journalism Network

If you currently live or have experience with Boulder County’s affordable housing programs, we want to hear from you. Please email editorial@boulderweekly.com, with “affordable housing” as the subject line.