Condo Prices Drop as Florida’s Real Estate Market Struggles

The Florida real estate market is currently in shambles due to new regulations and rising HOA costs. Could this set a new precedent across U.S. real estate?

The Current Dilemma

As a result of the June 2021 collapse of Champlain Towers South, a 12-story condominium in Surfside, Florida, Florida state legislation passed the SB 4-D Bill in May 2022. This bill requires all Florida condos over three stories tall and over 30 years old to undergo thorough inspection by an architect or engineer. If substantial damages are found, condos must complete necessary repairs within a year or they will be deemed unsafe for human occupancy.

Home Insurance Premiums are Skyrocketing Too

On top of these new safety measures, Florida saw the biggest spike in prices for homeowner insurance during this past year. According to a February 2024 article by Insurance Business, Florida saw a 68 percent increase in homeowner insurance premiums, despite the average premium in Florida already standing at a whopping $6,000.

The Worst of All? Rising HOA Fees

On top of extensive repair costs for building owners and insurance costs for residents, there is an additional cost that is proving to be the most burdensome of all for both parties – homeowner association (HOA) fees.

What Exactly is an HOA?

An HOA is an organization that manages a gated community, a residential neighborhood or townhouse community that enforces various rules to protect an area’s property value. Some of these rules can include what plants are acceptable to have on a lawn or what paint color the exterior of a house or condo can have. 

There Are A Lot of HOAs Out There

According to a study done by the National Association of Realtors, about 75.5 million Americans live in a community that has an HOA. This accounts for more than 30 percent of homes across the United States.

How Much Do HOAs Cost?

In Florida, HOA fees can range anywhere from $100 to $800 a month depending on location, specific amenities provided and maintenance needs in an area. But in this year alone, some Florida residents have reported paying up to $1400 a month to their community’s HOA.

HOA Members Can Be Far From Friendly

Not only are HOAs known for their high cost, they are also known for their enforcement of their extremely strict – and sometimes illegal – regulations. 

A HOA Tried to Deny a Veteran His Service Dog

In 2018, the Orlando Sentinel reported the story of Robert Brady, a 70 year old veteran who lived in an Orange Tree Village Condominium with his dog, Bane. According to Brady, Bane has helped him cope with difficult memories, and a letter from his psychologist mentioned that the dog appeared to keep Brady’s mental health issues in remission. However, Brady lost an arbitration with his HOA to keep his dog, despite these benefits, because Bane exceeded the HOA’s weight limit for dogs.

Another HOA Embezzled Millions From Their Residents

According to a 2022 article from the Miami Herald, multiple board members from the Hammocks Community Association in the West Kendall suburbs of Miami, Florida were arrested for charges of racketeering, money laundering, fabricating evidence and using shell companies. Their arrest warrant details how the HOA’s board members stole at least $2 million of their neighbors’ monthly maintenance fees for personal use.

People Want To Escape HOAs – and Understandably So

Based on the current news associated with HOAs, it makes sense that homeowners are trying to leave them — or avoid them altogether. A March 2024 study conducted by Rocket Mortgage found that 57 percent of homeowners in the U.S. dislike having an HOA, with 10 percent of them stating that they considered selling their home because of their HOA.

Condo Owners Are Trying To Save Face

To offset the rising costs of home insurance premiums and HOA fees, condo building owners have resorted to drastically reducing their listing prices to attract buyers. According to an article from Newsweek earlier this month, out of the 45 thousand condos listed for sale on Zillow in Florida, approximately 9,500 — or about 20 percent — of them had a price reduction.

Buyers Are Not Taking the Bait

Despite the increase in condo listings across Florida state, many of them have been on the market for months, and, if not addressed, could prove to be catastrophic for the state’s real estate market. As former Florida Republican state senator and current president of the Florida Policy Project said, “… you could have potentially thousands of listings of condos, no buyers or very few buyers, uncertainty around the condos, and banks refusing to lend to certain communities … .” 

HOAs Need Serious Renovations

It is clear that the common denominator behind rising home insurance costs and vacant condos across Florida are HOAs. But what could be done to prevent this from happening in other states?

States Can Limit How Much HOAs Can Charge

In California, there are several laws in place that limit the fees that HOAs can charge. One of them includes California Civil Code Section 5605 which states that HOAs can increase their dues annually, but it cannot exceed by more than 20 percent of the previous year’s dues.

States Can Control How HOA Fees Are Used

In New York State, HOAs are required to maintain detailed records of all financial transactions and must provide members access to these records. It also requires HOAs to create a comprehensive financial plan that includes potential earnings from fees and projected expenses for maintenance and repairs that must be approved annually by the state.

States Can Prohibit What Rules HOAs Can Enforce

Even Florida governor Ron DeSantis passed regulations to keep HOAs in check. Under a state law that took effect last month, HOAs are restricted from enforcing some of the most complained about rules and fines, including charging residents for leaving their garbage cans at the end of the curb or their driveway for more than 24 hours or for leaving up holiday lights or decorations for too long.

Change is Possible

In short, despite the rise of HOA fees having a concerning effect on the Florida real estate market, hope is not lost. It is up to the state government to take example from other states like New York and California and continue to pass regulations that ensure that these organizations don’t get too power hungry.

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Featured Image Credit: Shutterstock / Bilanol.

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