In Part 1 of this series, I discussed why Texas is only partway toward a solution to the condominium supply problem, focusing on the need for continued statutory reform, including modernization of condominium development financing and greater flexibility in how permanent property insurance is structured.
In Part 2, we examined Fannie Mae’s most recent lender guidance and its impact on affordability. Evolving reserve requirements and eligibility standards are directly influencing both buyer qualification and the total cost of ownership.
A recent article in The Wall Street Journal, “Surging HOA Fees Are Pushing Homeowners to the Brink,” highlights rising HOA fees as a national issue affecting both existing owners and prospective buyers.
This Part 3 ties those threads together. Rising HOA fees are not the root problem. They are the visible output of a system under pressure.
HOA budgets function as pass-through mechanisms. They do not create costs; they absorb and allocate them. When costs increase elsewhere in the system—insurance, financing constraints, construction risk, or operational ambiguity—those costs ultimately flow through to owners in the form of higher assessments and special assessments.
As discussed in Part 1, the insurance structure is a primary driver. Where insurance for both common elements and units is aggregated into a single master policy, premium increases are concentrated at the association level. That aggregation may be appropriate in many projects, but in others it unnecessarily amplifies cost pressure. Allowing unit-level insurance, subject to defined standards, can shift and better distribute that burden. Structure, in this context, directly affects affordability.
As discussed in Part 2, lender requirements are also driving costs. More conservative underwriting, increased reserve expectations, and heightened project scrutiny do not just affect loan eligibility. They directly influence operating budgets and required assessments, further compressing affordability.
Construction defect liability operates more indirectly but no less materially. That risk is primarily priced through commercial general liability and wrap policies obtained by the developer. Those costs are embedded in the delivered price of units. Sensible liability reform should reduce that risk and, in turn, be reflected in underwriting. To date, that transmission has been inconsistent, and the expected pricing benefit has not fully materialized.
Equally important, and often overlooked, is document drafting quality. Imprecise unit boundary definitions, unclear maintenance allocations, and poorly constructed operational provisions create ambiguity. That ambiguity leads to disputes among associations, owners, and insurers. Disputes increase claims, delay resolution, and introduce friction into routine operations. Over time, those inefficiencies manifest as higher operating costs and higher assessments.
If the objective is to stabilize condominium affordability and restore supply, these components must be addressed collectively. Insurance markets must better differentiate risk. Statutory frameworks should allow flexibility in how that risk is allocated. Lender standards must balance safety with practical project viability. And document architecture should be treated as a core element of cost control, not an afterthought.
Absent that alignment, the trend identified in The Wall Street Journal article is not likely to reverse. HOA fees will continue to rise, special assessments will become more common, and condominium ownership will become increasingly out of reach for middle-market buyers.
