By Brad Baecht & Caronlina Serrano / Published November 2022
Florida community associations and property managers do not need an economics degree to understand that inflation—and the possibility of a recession—will have a significant impact on the costs involved with the daily operation of communities. It will be felt in the year ahead, so prudent decisions should be made now to recession-proof communities across our state.
An inflation cycle exacerbates supply chain issues from the past few years, with everything from food to gasoline building materials, and maintenance items becoming more expensive. Association boards and managers must have proactive conversations to protect their communities from these macro-economic dynamics while maintaining a flexible approach as the cycle evolves.
From luxury high-rises to sprawling, single-family HOAs, qualified reserve specialists are being retained to conduct new reserve studies. These studies factor inflation into replacement cost calculations, while also accounting for fluctuations in labor and material costs. They are a pivotal first step to preventing special assessments. Such studies also must account for Florida’s new law imposing reserve requirements and mandating 25-year inspections. Many older buildings will have to embark on expensive restoration projects to comply with the law. That is where the pain of labor and material cost hikes will particularly be experienced. Bringing in third-party experts, including attorneys, to explain the post-Surfside tragedy reserve requirements can help residents fully understand the advice managers are giving. Florida communities have many seasonal residents from other states and countries, and they might not be up to speed on the law changes.
Other important considerations and best practices for Florida’s communities include the following:
Association boards are not alone in this predicament. Their property management companies should be able to assess each association’s cash flow needs and identify sources of funds, either through maintenance fee increases or securing a loan from a reputable association bank.
Following these steps will protect Florida communities from any near-term, inflation-related volatility and also help ensure a sound financial future.
Brad Baecht & Carolina Serrano
Vice President, KW PROPERTY MANAGEMENT & CONSULTING
Brad Baecht and Carolina Serrano are vice presidents at KW PROPERTY MANAGEMENT & CONSULTING. KWPMC is one of Florida’s largest residential property management companies, with more than 2,000 employees and 90,000 units under management. Its portfolio includes upscale high-rise towers, townhome communities, and homeowners associations. Visit www.kwpmc.com for more information.