Inflation is here and no apparent relief in our near future. According to the most recent data from the United States Bureau of Labor Statistics the annual inflation rate for the United States is 8.5%. This increase has slowed slightly with the recent decrease in gas prices, but materials, food and shelter costs continue to rise. Experts believe that these increases will continue and there is no mention of slowing anytime soon.
Consumers have not seen these increases in over 40 years. Why does this matter to community associations? It matters because every vendor will need to increase their costs to keep up with inflation. We are talking increases from landscapers, management companies, pool maintenance companies, roofing companies, painting companies and asphalt paving companies just to name a few. These increases will require most associations to drastically increase their assessments.
Associations are already seeing an increase in contract cancellations and contract re-negotiations due to cost increases. Vendors have to consider not only rising prices in materials, but also increased employee cost due to a shortage in labor. For many vendors this means they need to outsource services. All these costs get pushed to the association. Vendors who can cancel their contracts are doing so at an alarming rate.
Boards need to also look ahead for any large capital projects and consider these increases in expenses. We are even seeing an increase in insurance rates for associations. Boards need to consider when their renewal dates are and be sure to include anticipated increases in the year ahead when working on the budget. It makes sense to contact your insurance broker and other vendors now and ask for these anticipated increases that will impact the budget.
Some things boards can do include adjusting the budget ahead of the actual increase. Consider whether you are allocating too much funding to any single line item. Boards can also look to cut costs. Review your vendor contracts to see if the market can deliver similar services for less money. Where possible, consider reducing hours of service from vendors. Taking even small steps to minimize expenses can reduce the need to raise fees.
Bottom line is the associations need to act now. Boards should discuss increases to the budget with their residents now so they can properly budget. Modifying a budget now will help ease your homeowners in dealing with the inflation we are all feeling.