Florida HOA fees are increasing and condo owners are taking the brunt of it. What to know

Florida property owners have been struggling to cope with soaring home insurance premiums, and now they're experiencing another rising cost: HOA fees.

However, condo owners are experiencing the most significant jump in HOA fees. What's driving those fees for condo owners is an ugly mesh of inflation, home insurance premiums and a law stemming from the collapse of the Champlain Towers in Surfside, Florida, in June 2021.

In Altamonte Springs, residents of Lakewood Park Condos told WESH 2 that their HOA fees increased nearly 100%. Owners living in the complex's smallest unit, a 649-square-foot condo, now pay $712.93 monthly for their HOA fees.

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A Spectrum News report revealed that the Wekiva Country Club Villas Homeowners Association in Longwood similarly raised their HOA fees as their annual insurance premium rose from $91,000 in 2023 to a whopping $233,000 in 2024.

Here’s what you should know about the rising cost of HOA fees in Florida.

Rising inflation increased the cost for everything

Most problems in life stem from several compounding issues, and HOA fees are no exception. While inflation throughout the U.S. cooled throughout 2023, prices for goods and services are still up, and no sign of relief is in sight.

The tricky thing about inflation is that costs are sprinkled over everything. An increase in gas might softly hit your pocketbook when you fill up your vehicle, but it will also hit you in invisible ways such as increasing the price of groceries or other products that have logistical costs consumers typically don’t worry about.

For HOAs, the price of rising inflation hit from every direction: The rising cost of materials and labor means maintenance and services HOAs use increased in turn. Home insurance premiums soared as companies became insolvent or pulled out of the state and the frequency of severe hurricanes increased.

The final cherry on top was the passage of S.B. 4-D, a bill that requires condominium and cooperative association buildings that are three stories or taller to undergo milestone structural inspections with new requirements, reserve funds to pay for future long-term maintenance costs and more.

Soaring insurance costs are another big factor

Last year, the Insurance Information Institute (Triple-I) projected that insurance rates in the Sunshine State could increase by at least 40%. Mark Friedlander, the Triple-I's director of communications, said that the average Florida homeowner is paying nearly $6,000, more than triple the U.S. average of $1,700 annually.

Why are Florida home insurance rates rising? That is another complicated answer. One of the reasons stems from insurance companies who are in liquidation and others who are pulling out.

Progressive announced in early October that it planned to send out non-renewal notices to roughly half of its home insurance policies in December. The move would impact an estimated 100,000 homeowners as the company said it sought to "rebalance" its exposure in Florida.

Progressive Home is one of the largest homeowner insurers in the state by direct premiums written, making up 3.9% of the market share, according to Triple-I.

Progressive's announcement comes after AAA sent out a similar batch of non-renewal notices for some of its homeowner policies and Farmers Insurance announced it was leaving Florida entirely.

AAA is still writing policies, but the company said it would not renew its package policies that combine home, automobile and optional umbrella coverage. AAA says a "small number" of customers will be affected.

The Florida Department of Financial Services has a list of 14 companies that are in liquidation. This means that the Office of Insurance Regulation determined there are grounds for the Department of Financial Services to proceed with charging these companies for delinquency.

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A growing population boom that started in July 2021 made Florida the fastest-growing state in the nation, adding to a general increase in the state's cost of living and the highest inflation rate in the nation, according to data collected from the U.S. Bureau of Labor Statistics in a WalletHub assessment of inflation in 23 major metropolitan cities.

For decades, there has also been a steady increase in insurance payouts due to changes in the climate, according to reports from the National Flood Insurance Program. Stronger and more frequent storms, tornadoes, hurricanes and heat waves, combined with more people living in Florida, means a higher probability of insurance companies having to make huge payouts – particularly during hurricane season.

Costs for building materials and repairing property both increased by more than 30% during the pandemic, according to a 2022 report on building costs by the National Association of Home Builders.

Finally, lawsuits between insurance companies and contractors or insurance companies and policyholders are driving up costs. According to the Insurance Information Institute, only 9% of the nation's home insurance claims come from Florida. But 79% of the nation's homeowners' insurance lawsuits come from the state.

New Florida laws present new challenges for HOAs

Following the shocking collapse of the Champlain Towers in Surfside, Florida, which resulted in the deaths of 98 people, Florida lawmakers quickly moved to prevent similar occurrences with new laws.

One of the the new laws, SB 4-D, is a double-edged sword for condo associations, unit owners and insurers, creating new hurdles they must address for the sake of safety. Here’s a look at what the bill does.

Milestone instructional inspections

Under the law, buildings that are three stories or taller must undergo milestone structural inspections to evaluate their structural integrity and make recommendations for necessary improvements. The first milestone inspection must be completed by Dec. 31 of the building’s 30th year, which many Florida condos have or are rapidly approaching.

New reserve fund requirements

Another major requirement introduced by SB 4-D revolves around how condo associations have to handle their reserve funds. Before SB 4-D, associations could vote to waive their reserve contributions, but that option will be gone at the end of 2024.

Reserve funds are used by associations to help pay for needed maintenance. The new law doesn’t require that associations have their reserve fund full by the end of the year, but it does require that they are on track to fund the replacement of a component by the time it nears the end of its useful life.

To determine how much money an association needs to retain, they are required to complete a Structural Integrity Reserve Study by Dec. 31, 2024. The study must be completed every 10 years.

This article originally appeared on Pensacola News Journal: Florida HOA fees are soaring. Here's what to know