Factoring Costs from COVID-19
By Karen Martinez, CCAM, CAMEx. Published and Reprinted with permission from the January/February 2021 issue of Common GroundTM magazine, the flagship publication of Community Associations Institute (CAI).
Close to a year since the COVID-19 pandemic upended our lives, we now have some insight into its impact on community association operating budgets, reserves planning, maintenance requirements, and increased costs for professional services.
Sustainable association operations require accurate planning that is largely based on the reliability of budget projections and reserve studies. Any miscalculation from unforeseeable events—such as the pandemic—can easily result in unanticipated operating costs or an underfunded reserves fund that will pose challenges for both the association and its residents.
For example, the effect of residents spending more time at home and around the association will likely shorten the lifespan of common area, amenity components and systems from increased use. An association with a pre-COVID-19 reserve study that projected a component replacement at 10 years may be confronted with repairs or replacements much sooner than the initial forecast.
A sustained presence of residents in a community association has led to higher operating expenses as well, including waste removal, routine maintenance and upkeep, and energy use. Costs associated with cleaning and disinfecting frequently touched surfaces and purchasing personal protective equipment also need to be factored into operating budgets for this year.
Boards should anticipate possible increases in fees for professional services too, such as those from community management companies. Shelter-in-place and stay-at-home orders required management professionals to comply with health and safety mandates and function with a partial or fully remote workforce. Many management companies stepped up their operations to meet associations’ increased needs, leading to working more hours than initially contracted.
In addition, general costs of doing business rose globally in 2020 stemming from wage increases, annual inflation, increase in employer premiums, cost of living, and implementation of new technologies and equipment to manage remote workforces and provide continued services. These were compounded by the demand for often expensive and scarce protective equipment and cleaning and disinfecting supplies, which took a toll on businesses struggling to meet their bottom lines.
While companies can’t expect to pass all of these costs to their clients, some percentage must be recovered to remain operational. This is particularly relevant when comparing aging community associations that require more management resources and professional services than newer properties. Associations should be prepared to assume a portion of these business costs.
Being aware of COVID-19’s ongoing impact on community associations and on the service professionals who support them will help boards and management companies more realistically forecast future expenses. Reassessment of operating budget line items and reallocation of reserve amounts to meet updated component projections based on the worst-case scenario is prudent.
The pandemic also has revealed a unique opportunity for boards to benefit their communities. It’s a good time to assess the condition of the association’s infrastructure and create a proactive maintenance plan to improve property values. Residents working from home who have flexible schedules, for example, may be more inclined to volunteer in committees or as part of a neighborhood watch group.
The pandemic and emerging technologies have significantly changed where and how work will be performed in the future. Research and consulting firm Global Workplace Analytics projects that roughly 60% of workers around the world worked from home in 2020, and an estimated 80% want to make the switch to full-time remote work. If a large number of residents remain working at home, it could bring more changes to community associations.
Spending the majority of the day inside the community can make boards prioritize the enhancement of residents’ quality of life with aesthetic improvements to common areas, which also will increase curb appeal. Furthermore, boards may need to clearly distinguish in their governing documents the differences between at-home workers and residents who establish home-based businesses, which are typically prohibited from operating in a residential community.
Professional community association management companies have always provided support and services to boards from an off-site location. Those with cloud-based technologies, newer property management software, and protocols for staff working remotely have all the tools in place to fully meet the needs of both the association and its residents during and after the COVID-19 pandemic.
Virtual meetings, which helped ensure business continuity during the initial stages of the pandemic, have become the norm to facilitate communication between boards and management. New technologies and close monitoring of employee productivity produce more transparent reporting from the management company for the communities they serve. Expanded access to personal accounts and association records give residents more autonomy and control to make assessment payments, request documents, and more.
While we can’t foresee to what extent COVID-19 will leave its indelible mark on our professional and personal lives, this new normal is teaching us to anticipate, prepare for, and leverage any outcome.
Karen Martinez is CEO at ASPM-San Diego.