I received the following question about HOA fees and typical maintenance costs from a reader via email:
Why are so many condo HOA fees are so high? Alternatively: are the maintenance costs of a small single-family home (SFH) much higher than most people assume, or is the monthly fee of a well-run HOA a great estimate of what it costs to maintain a SFH similar to the units in the HOA?
In most discussions about the costs of owning real estate on Seattle Bubble, I see assumptions about monthly maintenance costs for smaller SFHs being something like $100-$200.
But even though many HOAs should get good economies of scale for repairs, roof replacements etc. (as compared to the average SFH), and they don’t always include maintenance of pools, hot tubs and other possibly costly shared assets, many of them end up with HOA fees above $400. This seems to be the case even for well run HOAs that don’t have lots of deferred maintenance without funds built up, empty/foreclosed units, etc. Very few, if any, seem to get down to $100-$200 per month in fees.
Condo HOA fees are something that I have never really looked into closely, but I do know that they often include not only typical maintenance and shared space costs but also monthly bills like cable, trash, and sometimes water—expenses that can easily add up to an additional a few hundred dollars a month for a typical single-family home.
Generally the number I like to use for estimating the ongoing maintenace cost for a single-family home is one percent of the purchase price per year. A $250,000 home might cost about $2,500 a year to keep up, while a $750,000 home will be more expensive, running you closer to $7,500. Of course, these costs are never spread out evenly throughout the years, so some years you may spend very little, while other years you may need a new roof (can cost $20,000+), new paint, and a bunch of new appliances.
The benefit of a condo HOA is that unlike most owners of single-family homes, the HOA forces owners to save for these big expenses in small chunks every month. That said, it certainly seems possible that some HOA fees are unnecessarily high. I’m sure some HOA boards would prefer to err on the side of collecting a little too much each month rather than risk ending up with a burdensome special assessment.
Perhaps Urbnlivn‘s proprietor Matt Goyer will grace us in the comments with some insights from someone who follows the condo market a lot closer than I do, and owns two condos of his own. I’ll walk down the hall and ask him.