A possible recession has businesses on edge as many are reevaluating costs and priorities in preparation for an uncertain future. For homeowners associations (HOAs), there’s concern that economic hardship could add to the intense pressure they are under to retain and hire the people they need to stay in business.
The HOA industry gained popularity in the 1960s and has grown steadily ever since. Today, more than 25% of homeowners live in an HOA community. Despite economic pressure, growth isn’t expected to slow anytime soon thanks to rises in homeownership and the demand for more HOA communities. To keep up, HOAs need to protect their razor-thin margins and ensure they have what they need to not only do the work, but to compete in a red-hot market.
Economic uncertainty makes it especially difficult.
To help guide businesses of all kinds through a potential recession, we surveyed 500 middle market professionals in August 2022 to understand how they are navigating these uncertain times and what they are doing to get ahead.
Here’s a look at what they told us, and a deep dive into how uncertainty is impacting HOAs. We’ll look at what’s keeping them awake at night, how prepared they feel for a potential recession and how they are leaning on technology to help them through tough times.
HOAs are under pressure to maintain stability and growth while the future is anyone’s guess
Faced with uncertainty, business leaders often look to the past to guide them. HOAs experienced heavy pressure during previous recessions, including the 2008 banking crisis. Associations had to continue funding services and amenities while dealing with a growing number of vacancies and foreclosures. They cut costs by closing pools and clubhouses and reduced maintenance work. Some raised homeowner fees.
What threw the industry for a loop and continues to vex HOA management is The Great Resignation that emerged from the COVID-19 pandemic.
“HOAs have always had the challenge of finding and keeping people, but COVID exacerbated the challenge and forced them to find ways to do more with less,” said Pizzico.
According to a report from the Foundation for Community Association Research, 97% of HOAs are impacted by a shortage of community managers. They are not alone in their struggle to secure the talent they need. Our survey of businesses across industries shows that nearly two-thirds (62%) find retaining talent a high priority for their business over the next 12 months.
How are organizations coping with the shortage amidst the economic uncertainty created by a potentially looming recession?
They are searching for better ways of doing business.
Sixty percent of our survey respondents said they are looking for ways to reduce costs. Sixty-six percent said they are looking to create efficiencies to increase productivity and improve profit margins.
Pizzico said HOAs share those priorities as they fight to protect their cash flow while growing their members’ property values. Fortunately, the pandemic gave many HOAs a head start by compelling them to adopt technology for assistance.
HOAs rely on technology to create efficiencies and provide flexibility
Nearly half (48%) of our survey respondents said investing in technology is a high priority for their business over the next 12 months.
It’s for good reason: Technology investments are one of the most impactful ways to create time and cost-saving efficiencies. In fact, 30% of survey respondents said they are preparing for the forecasted recession by investing in technology to do just that.
Where are companies putting their technology investment dollars?
Thirty-six percent of survey respondents are focusing their investments on automation, including accounts payable (AP) solutions that replace manual back-office processes like invoice processing and bill pay that are critical to operations. AP automation provides flexibility — staff can handle tasks from anywhere, at any time. The digital tool also streamlines processes, reduces stress on staff and empowers community managers to handle greater workloads without adding more employees.
“HOAs that automated their back office to enable remote work during the pandemic have found that they can now do more with less,” said Pizzico. “The technology is also helping them retain talent by eliminating or reducing burnout and it’s improving the homeowners’ experience by removing clunky processes and digitizing the exchange of information around sales and service transactions.”
Our survey shows the host of benefits provided to those who have already adopted finance automation technology:
The importance of automation technology was also uncovered in AvidXchange’s AP Professional Career Satisfaction Survey conducted in partnership with The Institute of Finance & Management (IOFM) earlier this year. The survey found the more automation in a company’s finance department, the more satisfied finance professionals are with their roles and the more they agree with the statement: “My job utilizes my skills and abilities as much as it could.”
More satisfying roles make it easier for HOAs to hold onto staff and attract new hires, giving them an advantage over HOAs that are still relying on the old ways of doing business.
Are you ready to help your HOA prepare for the future?
While no organization, HOAs included, can predict whether a recession is imminent, they can prepare for the potential by learning from others, understanding their priorities and investing in technology to modernize and protect their businesses.
For more information about how automation can fortify your HOA organization, download our white paper, “How Middle Market Finance Teams are Preparing for a Recession.”