Recently, The Atlantic published an article called “The Collapse of the American Condo.” The authors claim that the United States must start building more condominiums if we want people to keep becoming homeowners.
I personally live in the heart of the condominium world (aka South Florida), and work with condos of all sizes every day. I know first-hand that condos have helped millions of Americans become homeowners, and in many cities, condos are the most affordable path to ownership.
In the last five years, I saw more rental buildings being developed than condominiums. I didn’t pay it much mind, because it seemed like the natural result of the new Brightline Train Station. But after reading this article, I realized that the condo shortage was not “bias confirmation,” but actually a reality.
While the article beautifully explains an important concern (condos are harder to build today), it leaves out something very important: even when condos are built, they cannot survive without strong financial management and reliable cash flow.
Low Supply is Only Half the Problem
The Atlantic article spends a lot of time discussing why fewer condos are being built.
The authors point to several reasons:
- Zoning rules that favor single-family homes
- Tax policies that discourage condo development
- Construction defect lawsuits
- Stricter lending rules after the 2008 financial crisis
These are all real and valid issues.
But condo construction is only part of the condo shortage problem. There is another concern that quietly affects every condominium community after construction is complete, and that would be financial stability. Delinquency rates and cash flow issues are what lenders, insurers, and buyers all look closely at.
Condos Only Work When Everyone Pays
A condominium is a unique form of housing.
Each owner holds the title to their unit, but everyone shares responsibility for the building. The roof, elevators, insurance, hallways, landscaping, utilities, and much more all depend on regular assessments.
When owners pay their fees on time, the system works. But when too many owners stop paying, the entire community begins to struggle.
Problems start to appear quickly, and they include property values declining, special assessments, low reserves, insurance premium increases, delayed preventive maintenance, and almost no capital improvements.
In other words, cash flow is the lifeblood of a condominium. Without it, even the best designed building can fall into trouble.
The Impact of Delinquency on the Condo Shortage
If too many owners are behind on their dues, the entire community is put at risk.
Banks may refuse loans not only to the condominium project but to borrowers if their condo appears on the Fannie Mae and Freddie Mac notorious “blacklists.” Both Fannie and Freddie (allegedly) maintain internal databases that mark condominium projects eligible or ineligible for mortgages they will purchase from lenders.
Insurance may become expensive, and when that happens, many boards will increase the deductible and lower the coverage to stabilize the cost of the premiums.
All this discourages buyers and with that your property value goes down.
This is where good collections become essential.
A Healthy Condo Needs a Predictable Cash Flow
Think of a condominium like a small city. It has roads, infrastructure, utilities, and shared responsibilities, but unlike a city, the condo does not collect taxes. It depends entirely on assessment payments from owners.
If 100 owners live in a building and only 85 pay, the community cannot operate properly. A 15% delinquency rate is untenable, and so too is a 1% delinquency rate because condos are a zero-dollar business where the receivables exactly match the payables. One missed payment from just one owner is a risk to all.
Boards then face difficult choices such as raising fees on the paying owners, delaying repairs, and worst of all, dipping into reserves to pay for day-to-day operating expenses.
None of these options are good. The better solution is consistent, fair, and professional collections.
When a condominium tries to solve financial problems by cutting expenses, there is only so much that can be reduced. Maintenance, insurance, and utilities still must be paid. But when it comes to collections, a condominium has real options.
Today, associations can leverage a no-cost, no-risk collection solution that does not take a percentage from the association. Instead, the cost of collecting is placed on the delinquent owner, where it belongs.
This means condominiums do not have to dip into their operating accounts or create a special budget line for attorneys to enforce their security interest through foreclosure. With the right collections partner, communities can restore cash flow while protecting the association’s finances and the interests of the owners who pay on time.
Good Collections Protect Communities
Collections sometimes gets a bad reputation. But when done correctly, collections protect everyone in the community.
Professional collection programs encourage owners to resolve balances early, offer payment plan solutions, maintain compliance with consumer laws, and, most importantly, restore cash flow.
When associations collect what is owed, they can maintain the property, fund reserves, and keep insurance coverage strong to protect property values. That stability makes condominium communities healthier and more attractive to buyers.
Solving the Condo Shortage Depends on More Than Construction
The Atlantic article highlights an important truth: America needs condominiums! They provide an affordable path to homeownership and help cities grow responsibly. But building more condos is only half the solution.
The other half is keeping them financially healthy after they’re built. Strong governance, clear uniform collection policies, and effective collections ensure that every owner contributes their fair share.
When that happens, condominium communities do more than survive; they thrive.
Axela believes that thriving communities begin with predictable revenue. Our collections technology facilitates early engagement and respectful resolution. Going straight to an association lien foreclosure is not prudent, and not the best way to restore to your community’s collection issues.
If your condo Board is ready to try a new approach to condo association recovery, contact us today for a no cost and no obligation collections technology consultation.
