The rise of community associations across the U.S. holds promise for management companies in 2024—but companies also need to be prepared to face a unique set of challenges in the coming year.
Which opportunities and obstacles will association managers face in 2024, and how are they adapting their strategies in this evolving environment? Buildium surveyed more than 1,100 association management professionals and board members to find out exactly that.
Here are the five trends that our research predicts will shape the community associations industry in 2024, from new opportunities for growth to a greater need for operational efficiency during the ongoing labor shortage.
1. Management companies see tremendous opportunity for growth as HOA development continues.
Buildium’s survey found that portfolio growth is community association management companies’ #1 priority for 2024—and a full 91% of community association management companies plan to expand their portfolios over the next two years.
What will make this level of growth possible? The development of new community associations is continuing at a steady clip, giving association managers the chance to partner with developers to manage these new communities. Overall, 38% of companies plan to grow by taking on management of new community build projects.
How quickly are new associations being formed? It’s estimated that 3,000 to 4,000 new associations will come into existence this year—and 78% of newly built homes on the for-sale market are located within community associations.
There are three other tactics that a smaller number of companies will leverage to grow in 2024: 29% plan to expand their services to a new geographic area; 25% will acquire other companies’ or investors’ portfolios; and 23% plan to expand the property types they manage in order to grow their portfolios.
2. Management companies are ramping up efforts to attract clients in a competitive market.
79% of companies told us that they plan to grow by actively recruiting association clients. That means competition for new business will be steep in the coming year, with smaller companies going head-to-head with larger firms that may be able to offer lower prices due to economies of scale.
This presents an opportunity for smaller association management companies to differentiate themselves from the competition by touting their ability to offer more personalized customer service than is possible for their larger counterparts. One way to do so is to encourage current clients to write reviews, whether they’re provided directly for use on management companies’ websites, or indirectly through third-party review sites, such as Google.
Other strategies that companies will focus on to attract new association clients in 2024 include investing in paid advertising, increasing their activity on social media, and looking to lead generation tools like All Property Management.
Lastly, some of our survey respondents told us that in order to take on new associations, they’ve found it necessary to winnow down their current client list to prepare for growth. This requires evaluating which clients take up the most resources for the smallest benefit, increasing their team’s workload without offering a clear opportunity for profitability.
3. The right technology is key as teams strive to maintain the same level of service as they expand.
In Buildium’s survey, many association management leaders told us the sky’s the limit when it comes to growth opportunities in 2024. However, as the labor shortage continues to impact the property management industry, leaders are concerned that adding new doors without being able to grow their teams could lead to burnout.
That’s where technology comes in. Association management companies are turning to a wide range of tools to help them increase their operational efficiency and scale their processes as they expand their portfolios. In fact, our survey respondents selected efficiency as their #2 priority for 2024.
Which technologies are making the biggest difference for association management teams? Our respondents told us that association management software has been indispensable in allowing them to automate payments, communications, accounting, maintenance requests, and financial reporting over the past year. In addition, the ability to give homeowners access to a self-service portal has been a game-changer in reducing the number of calls they receive.
Lastly, 24% of association management companies told us that they’ve turned to virtual assistants to expand their teams’ capabilities. The most common roles filled by virtual assistants are customer service representative, administrative assistant, accountant, bookkeeper, and assistant community manager.
4. Profitability continues to be strained by high costs, necessitating price increases for many companies.
91% of community association management companies expect their revenue to increase over the next two years—an increase of 10 percentage points over the last year.
However, profitability remains a challenge in 2024, with prices for labor and materials having risen to new highs over the last few years. In addition, for management companies and community associations alike, taxes and insurance have grown significantly more expensive.
As a result, 70% of association management companies plan to raise their prices in the coming year. In addition, a handful of respondents told us that it’s become necessary to charge extra for special projects that fall outside the lines of their contracts. Our respondents told us that association clients’ expectations seem to rise to new heights with each passing year, with board members expecting to receive more services for the same price; so, raising prices will require them to make the value of their services even clearer.
Other tactics that association management companies plan to use to increase revenue include leveraging technology to improve their efficiency, which 55% of companies plan to do; and expanding the services they provide to potentially create new revenue streams, which 43% will attempt in 2024.
5. Board members report a decrease in community engagement, potentially leading to less rule compliance.
Community associations are reporting greater turnover in residents from year to year, as well as an increase in overall diversity—from the age and family status of current residents, to the number of renters living in the community. Some board members report that incoming residents seem to be less engaged with the community and have mixed feelings toward the institution of homeowners associations in general.
As a result, boards are concerned that residents will feel less invested in upholding the association’s CC&Rs. Thirty-eight percent of survey respondents named rule enforcement as a major source of stress heading into 2024.
In addition, boards themselves are experiencing turnover and are having great difficulty recruiting new volunteers. With 72% of board members being in their sixties and older, many want to retire from their responsibilities within their communities but are unable to do so with no one to fill the vacancies. Finding the people necessary to keep the community running was selected as a top pain point by 33% of our survey respondents.
Association management insurance eases the financial burden of unforeseen events so you can focus on your board, your homeowners, and your growing business. But with so many options to choose from, where do you start? Download Buildium’s latest guide to learn how to evaluate policies for your association management business, ensure you’re getting the best protection at the best rates, and more: Association Management Insurance Simplified