Merritt Burnham thought he broke the cycle of paycheck-to-paycheck living when he bought his one-bedroom Summit County condominium in 2020.

At age 28, Burnham had spent his adult life as a renter facing continuous cost increases and no way to build equity. When he moved to Summit from Boulder in 2019, he lived for a year at his parents’ house in Frisco while he saved for a downpayment on a home.

But homeownership didn’t bring the stability he’d hoped for.

Now, at age 31, Burnham is living with his parents again part-time. He rents his condo during the winter to pay for a surge in homeowners association fees that currently sit at $913 each month, up from around $450 in 2020.

“It’s gotten crippling,” Burnham said. “I didn’t even realize HOA fees could go up to $900 for a one-bedroom.”

Summit County homeowners are joining a chorus of property owners across Colorado who say their HOA fees have exploded in recent years — driven in part by a rise in insurance premiums. An analysis by the Summit Daily News found that some insurance premiums have gone up as much as 300% in the last year, leading to a doubling in monthly HOA fees.

Coupled with spiking property taxes this year, the fees are squeezing budgets for first-time homebuyers and prompting rent hikes by landlords who say they need to offset their costs. In mountain resort communities like Summit, where housing prices already sit well above the state average, local leaders say it’s just another factor in an ongoing affordability crisis.

“It’s really death by 1,000 papercuts,” said Summit County Commissioner Tamara Pogue.

“When your property taxes go up, when your HOA fees go up, when gas prices are high, when groceries are more expensive — it’s that combined pressure that I think a lot of our residents are facing right now.”

High risk, low reward

A number of cost hikes have pushed HOA fees to all-time highs, but homeowners say none have been as burdensome as insurance premiums.

While state officials have yet to compile data on average increases for HOAs representing multifamily properties, such as condos or townhomes, a March 2023 study by the Colorado Division of Insurance reported a 52% increase in premiums for single-family homes between January 2019 and October 2022.

According to Carole Walker, executive director for the Rocky Mountain Insurance Association, the reasons are linked to an increase in severe weather events that threaten insurance companies’ financial viability.

“Behind the scenes, what’s happening is — you have these escalating catastrophic risks colliding with what is, for insurers, the hardest financial market in a generation,” said Walker, whose organization represents insurers in Colorado, Wyoming, Utah and New Mexico. 

Colorado ranks third in the country for wildfire risk and second for hail, according to Walker. As climate change fuels larger and more frequent weather disasters, homes in fire- and hail-prone areas are becoming a greater liability for insurers.

The 2021 Marshall Fire in Boulder County, for example, destroyed over 1,000 homes and is estimated to have cost $2 billion in damages. A 2017 hail storm that pummeled northern Colorado and the Front Range was even more costly, coming in at $2.3 billion.

While no single disaster is responsible for heightened insurance costs, Walker said these events are becoming more common and more expensive in states like Colorado, meaning insurers are taking on increased risk.

Then there’s reinsurance, which pays for an insurance company’s ability to cover a home in the face of disaster. Companies potentially taking on billions of dollars to repair and rebuild properties are struggling to find reinsurers to buy insurance from, Walker said.

Forced to reduce their risk, some insurance providers have dropped HOAs that represent high-value properties. In some cases, insurers have stopped renewing plans altogether — diminishing market options and driving up costs.

Wildfire and hail aren’t the only reasons for more expensive insurance plans.

Inflation, which reached a 40-year-high in 2022, has driven up everything that insurance companies pay out, like construction materials and labor. According to Walker, it’s made Colorado the third least profitable state for insurers behind Louisiana and Texas.

Walker said it begs the question, “At what point can we keep a stable, competitive private insurance market?”

Compounding fees

For homeowners like Burnham, insurance premiums have exacerbated other financial stressors.

Even before his HOA fees increased, Burnham said his budget was tight. In 2021, he decided to short-term rent his 680-square-foot condo in Wildernest, a neighborhood just outside Silverthorne, as a way to change that.

After he did, his costs began to stack up.

In 2022, Burnham’s HOA charged him a $4,000 special assessment fee that he paid over six months, according to documents he provided to the Summit Daily News. Unlike monthly dues, these types of fees are usually issued on an as-needed basis, like paying for one-time maintenance costs. In Burnham’s case, it went toward covering a surge in insurance premiums for the HOA.

His monthly dues, separate from the special assessment, also climbed. At over $900, the fees are now double what he paid when he first purchased his unit in 2020.

Short-term renting has proved to be a lifeline for Burnham, who also works at an architecture firm based in Frisco. Still, more than half his total net income goes solely to his HOA and his mortgage payments, according to financial documents Burnham provided to the Summit Daily.

His income will shrink further this year when he receives his notice of property taxes, which are directly tied to his home’s value.

Burnham said he purchased his unit for $295,000 in 2020 — just before prices soared amid a pandemic-fueled buying frenzy. In 2023, his valuation shot up to $500,000, a nearly 70% increase that’s likely to mean hundreds of dollars more in taxes in 2024.

While Burnham hopes to eventually move back into his condo full-time, he still needs greater financial padding to make it happen. For now, he’ll continue to short-term rent — unless he decides to sell his place and “forever be back in this loop of struggling,” he said. “I think a lot of people are moving out of the area. It’s just becoming harder and harder.”

Raising rents

Tom Castrigno lives in a three-bed, two-bathroom townhouse outside Frisco. His HOA, which represents 14 homes, is facing a nearly 60% increase in its insurance premiums this year after its previous insurer declined to renew its plan in 2023.

The reason, according to Castrigno, is because the company changed its policy to now only insure HOAs representing less than 10 homes.

Now under a new plan with a different insurer, the HOA’s premiums have risen from $12,320 to $19,621, he said. It’s trickled down to a monthly HOA fee increase of 10% in 2024 after already being raised by that same amount in 2023.

Castrigno said he could also see a 30% increase in his property taxes based on how much his home and others like it have risen in value. While Castrigno said he’s absorbing some of those cost hikes, he’s also raised rent for the bedroom he leases by about $30 a month, going from $865 to $895.

He suspects other landlords will do the same.

“Typically between 3% and 5% is what you see property taxes and insurance fees go up by. That’s going to translate to a modest rent increase,” Castrigno said. “But when you see those jump dramatically, that’s going to translate to a bigger rent increase to a tenant.”

Tim Berg, a second-home owner who owns a condo in the Ford Hill complex in Breckenridge, rents his two-bedroom unit for $3,000 per month and offers a 12-month lease suited for local workers. Facing heightened HOA fees and a possible 40% increase in property taxes, Berg said he may need to raise rent by as much as 30% — a $1,000 increase.

The income he derives from renting mostly goes toward his mortgage, though in recent years it hasn’t been enough to break even, Berg said.

“People think if you own a property you’re a tycoon, but that’s not the case for most of the people that bought a property,” Berg said, adding that he is holding onto the unit with the hope of passing it along to his children.

Along with insurance, homeowners said they’re seeing higher HOA fees driven by inflationary pressures on essential services including higher labor costs for snow plowing and capital improvements. Some have also pointed to inadequate reserves with their HOAs that have spurred cost hikes to pay for long-needed maintenance.

“I call it the Summit County tax,” Berg said. “Everything is expensive in Summit County.”

Pogue said the county government is working with state legislators on a bill this session that would give counties the authority to provide property tax rebates to property owners under certain circumstances. The rebates could, for example, dissuade a landlord from raising their rent amid escalating housing costs.

“I think there are a lot of strategies that are in development right now to try and relieve some of those pressures,” Pogue said.

Housing market concerns

After years of owning a second home in Keystone, Dave Miller is looking to sell.

His two-bed, two-bathroom condo has sat on the market since October and already came down $50,000 in price, from $765,000 to $715,000. That puts the condo well below the average price for a multifamily unit, which was $953,000 in 2023.

“We are having a hard time getting anybody interested in it because they keep coming back to the high HOA fees,” Miller said.

In 2022, Miller’s HOA lost insurance after its provider decided to stop covering buildings with a net worth of more than $20 million. Miller’s building is valued above $30 million, he said.

“Our HOA board shopped probably 20, 25 different insurance companies — and not one of them would offer to write a policy to cover us,” Miller said. “So there was a scramble to try to find something.”

Desperate for insurance, his HOA eventually found a plan for 2023, but it caused insurance premiums to surge from $48,000 per year to $768,000, according to documents Miller provided to the Summit Daily. The HOA changed plans again, lowering premiums to around $550,000 before changing plans one more time. This year, premiums are around $200,000, which represents a more than 300% increase.

Miller said it’s more than doubled his monthly dues, rising from $700 in 2022 to $1,500 this year.

Local real estate experts said scenarios like Miller’s are becoming more common as unprecedented upticks in HOA fees could threaten movement in the housing market. Sky-high insurance premiums and the subsequent rise in fees have an acute impact on larger buildings that house condominiums — usually considered to be among the most entry-level housing.

“For some of our larger complexes in our community, it almost becomes out of reach,” said Dishon Lutz, a Summit County broker and past president for the Summit Association of Realtors.

The issue comes at a pivotal moment in the housing market, as certain economic forces could spur more opportunity for buyers and sellers. Interest rates, for example, are forecast to come down this year after nearly two years of sustained increases.

Currently sitting at a more than 20-year-high, the rates impact payments on everything from mortgages to credit cards to vehicles. It’s created what real estate experts referred to as “golden handcuffs,” wherein homeowners who may want to downsize are reluctant to sell because it would mean giving up their fixed-rate mortgage for a higher monthly payment with a new home.

While a drop in interest rates could make for more attractive mortgage plans, any changes could be undercut by higher HOA fees, causing what some brokers fear could be a stagnant market.

Summit Association of Realtors Executive Director Sarah Thorsteinson said it has spurred discussions between real estate agents, state lawmakers and the insurance industry to find a remedy.

“We want to support our locals and want to make sure they can live and work in our community,” Thorsteinson said. “All sides realize that this is a problem, and everybody is looking for a solution.”

Hunting for solutions

Finding an answer to escalating HOA costs won’t be simple, but state lawmakers said they are zeroing in on insurance premiums.

Last week, legislators introduced House Bill 1108, which seeks to charge the state’s insurance commissioner with conducting a study into insurance costs that can become the baseline for future policy.

“We really don’t have something in the market right now to meet the needs of our HOAs, timeshares and hotels, but that’s what this study is aiming to do,” said House Speaker Julie McCluskie, a prime sponsor of the bill and a lawmaker representing Summit County.

The current proposal would give the commissioner until Jan. 1, 2026, to submit his report.

McCluskie said she’s heard from constituents who need relief much sooner than that but explained, “I think our challenge is the time it will take us to select data and review what is going on nationwide to see how other states are handling some of these challenges.”

Sen. Dylan Roberts, another prime sponsor also representing Summit and other mountain communities, said it’s possible the bill could be amended to speed up the report’s timeline, which he would likely support. But it also can’t come at the expense of delivering rushed policy recommendations.

“As legislators, I think we have a responsibility to look into it … but we do need to be very careful, especially in this market, because we’ve seen other states have too heavy of a hand on this topic, and it’s caused some very negative unintended consequences,” Roberts said.

Roberts cited states like California and Florida, which have seen an exodus of insurance companies partly due to intense state regulation that has made doing business in those states unfeasible.

State Insurance Commissioner Michael Conway said that is the situation Colorado must avoid.

“We still have good availability — decent ability throughout the state,” Conway said. “We have an affordability problem for sure, but right now we don’t have an availability crisis.”

Conway said he’s confident the study will bring the state and insurance providers together to find common ground. The industry is “very, very wary about reaching a tipping point where they are writing products that aren’t affordable for people, and they end up losing customers,” Conway said.

“At its core, we have to figure out ways to bring more competition to the market” and “save people money,” he added.

As lawmakers push for long-term policy solutions, a state-run safety net plan is currently being built that could provide some help — but only for certain homeowners. The FAIR Plan was signed into law last year and is designed to be a last-resort insurance option for homeowners who can’t find insurance on the private market.

Its policies will be written by the state but funded primarily by private insurance companies that will be mandated to pay into the program. The plan will be for residential properties valued at $750,000 or less, meaning HOAs — which often represent combined values far exceeding that amount — will likely be ineligible. Instead, the proposal is geared toward single-family homeowners who shop for their own insurance. It could be live by early 2025.

“We know that the FAIR Plan was a really good start,” McCluskie said. “And I’m confident, when we get that plan stood up, it’s going to help provide relief to our residential property owners.”

Walker, the insurance association executive director, said there are also ways individual homeowners can be a part of the solution.

“We can’t just be looking at this as an insurance problem, really what this is is a risk problem,” Walker said, adding, “Wildfire is one of the natural disasters where you can put the odds in your favor.”

Pogue said Summit County has invested millions of dollars into mitigation efforts, thanks largely to a voter-approved fund from 2018.

Those efforts include offering grants to HOAs to help cover mitigation projects and providing free chipping and disposal of branches, logs and small trees that can be fuel for fires. The county also requires a certain amount of defensible space for homes, which refers to an area where vegetation has been cleared or reduced to slow the spread of wildfire.

“There’s no question, in mind, that this work has made Summit County safer,” Pogue said. “While it may not give us the kind of relief we may want to see in terms of premiums, I do think it contributes to whether our HOAs can get insurance at all.”

Published on SummitDaily.com.