The State of HOA Reserves in 2026

Let’s start with the basics. Every HOA maintains shared assets—roofs, roads, pools, elevators, building exteriors. These assets don’t last forever. They depreciate, deteriorate, and eventually need replacement.

A reserve fund is money set aside specifically to pay for those future expenses. It’s not a savings account—it’s an accrued liability that your association owes to itself.

The critical question isn’t “Do we have reserves?” (95% of associations do). The real question is: “Are our reserves adequate to cover what’s actually coming due?”

That’s measured by “percent funded”—the ratio of your current reserve balance to the total amount you should have saved by now based on asset deterioration.

• 0-30% funded = High risk (special assessments likely)
• 30-70% funded = Moderate risk
• 70-100% funded = Strong position
• 100%+ funded = Financially resilient

National data shows most associations fall well below 70%. Our research reveals why—and what happens next.

Reserve studies exist. Professional guidance is available. State regulations are tightening. So why do 70% of associations remain underfunded?

Our research identified the real barriers—and they’re not what you’d expect.

It’s not lack of information. Nearly 90% of associations have commissioned a reserve study. Many boards report being “very familiar” with their reserve obligations.

It’s not lack of expertise. Reserve professionals provide clear funding recommendations. The math isn’t the problem.

The real issue? Governance incentives that reward short-term thinking over long-term responsibility.

Boards face intense pressure to keep dues low today—even when it means deferring obligations that future owners will pay for (with interest). Reserve contributions feel abstract and distant. Special assessments can be framed as “one-time exceptions.”

This creates a dangerous cycle: underfund → defer → crisis → special assessment → repeat.

What Happens When Reserves Fail

The consequences of underfunding are no longer theoretical. They’re showing up in:

Special assessments – 30% of surveyed associations issued one in the last five years. Another 35% expect one within the next five years.

Loan denials – Lenders now scrutinize reserve funding during underwriting. Associations below benchmarks face mortgage rejections, directly impacting property values.

Insurance non-renewals – Insurers question whether reserves are adequate to cover deductibles and future losses, especially after visible deferred maintenance.

Marketability collapse – Buyers avoid underfunded communities. Properties become harder to sell and financing becomes harder to secure.

In extreme cases: safety failures – Deferred structural maintenance doesn’t just cost money. It creates risk.

The data is clear: associations that treat reserve funding as optional are not managing risk—they’re transferring it to homeowners, lenders, and in the worst cases, to public safety.

Reserve funding operates under a complex web of industry standards, state regulations, and lender requirements that many board members don’t fully understand. Getting this framework right isn’t optional—the risks to associations that fail to fund properly are now severe and immediate.

The 70% Underfunding Crisis

National research and survey data from 56 real associations reveal a troubling pattern:

Nearly all HOAs maintain reserve funds (95-96% nationally), but having a reserve account doesn’t mean it’s adequate. More than 70% of associations are underfunded relative to industry benchmarks, and roughly one-third report reserves below 50% funded—a level widely considered high risk.

Our survey data mirrors this reality. Among responding associations:

• ~48% report reserves below 60% funded or don’t know their funding level
• ~21% don’t track reserve components systematically
• ~62% lack confidence their current reserve plan is sufficient
• This isn’t a data gap. It’s a governance gap.

Reserve Studies Exist—But Aren’t Being Followed

The problem isn’t lack of information. Between 88-95% of associations have commissioned a professional reserve study. The disconnect happens after the study is completed:

• Many boards report being “very familiar” with their reserve study
• Yet fewer than one-third fully fund reserves at recommended levels
• A meaningful share are unsure whether they even have a current study

The issue isn’t technical ignorance. It’s a repeated choice to defer funding to avoid short-term conflict.

Reserve studies provide the roadmap. But boards often treat funding recommendations as suggestions rather than obligations—until a crisis forces their hand.

How Tracking Systems Predict Outcomes

Our research uncovered a critical operational pattern: how associations track reserves directly correlates with funding health.

Current tracking methods among surveyed associations:

• ~43% use spreadsheets (person-dependent, error-prone, rarely auditable)
• ~21% don’t track reserve components or forecasts at all
• ~18% use HOA software platforms
• ~11% rely on consultant-managed systems

Associations relying on informal spreadsheets or no tracking system are significantly more likely to report:

• Uncertainty about percent funded
• Low confidence in reserve sufficiency
• “Surprise” capital needs
• Special assessments triggered by costs that should have been anticipated

In reserve governance, visibility precedes discipline. You cannot fund what you cannot see clearly.