One of next year's new HOA costs already has a start date: January 1, 2027. That day, every Tennessee homeowners' or unit owners' association that collects assessments for common expenses must carry theft coverage generally worth its reserve balance plus a quarter of a year's dues, and never less than $10,000. For a board whose current bond falls short, the difference arrives as a bigger premium, after the budget has already been voted.
HOA fees are going up because the costs behind them are going up on a schedule anyone can read: insurance premiums have outrun inflation, new state laws add coverage and reserve duties, and reserve funding is starting to turn from advice into a requirement. A board that reads those changes now can put each one on its own line in next year's budget, at a per-home monthly number, instead of explaining a surprise later.
The short answer
- Insurance costs have outrun inflation. Ask for the renewal estimate before the budget vote, not after.
- New laws add lines. Tennessee's theft-coverage duty starts January 1, 2027; a 2026 California bill, AB 2050, would require associations to fund reserves from 2032.
- Price each change per home per month, and give it its own line owners can read.
The pattern: Costs that announce themselves
Dues shocks feel sudden to owners, but most of the costs behind them were quoted, signed or studied months before the bill.
The board that waits for the bill absorbs the shock. The board that reads ahead budgets the line. Here are the three forces worth reading ahead on for a 2027 budget, each from its public source, and what each one becomes in next year's numbers.
Force one: Insurance, faster than inflation
The federal government measured this. In January 2025 the Treasury Department's Federal Insurance Office published an analysis of homeowners insurance policies from more than 330 insurers, covering 2018 to 2022.
8.7% faster than inflation: how much average homeowners insurance premiums per policy rose in 2018 to 2022. — U.S. Treasury, Federal Insurance Office, January 16, 2025
That study covered homeowners' own policies, not association policies. But a pool, a clubhouse and an entrance are insured by the same industry, facing the same climate losses. Treasury found people in the 20% of ZIP codes with the highest climate risk paid $2,321 on average, 82% more than those in the lowest-risk 20%.
What it becomes in the budget. Do not carry last year's premium forward. Before the budget meeting, ask your agent for a written renewal estimate on every policy. In the illustrative 100-home example from our per-home cost walk-through, insurance is $7,400 a year. If the estimate comes back 15% higher, that is $8,510: $1,110 more, or $0.93 per home per month ($1,110 ÷ 100 ÷ 12).
Force two: New coverage duties, written into law
Tennessee's Public Chapter 731 (Senate Bill 2326), signed April 23, 2026, requires associations that collect common-expense assessments to obtain and keep a blanket fidelity bond, or an equivalent policy, against theft or dishonesty by its officers, directors and employees, or by a managing agent and the agent's employees. It takes effect January 1, 2027, according to the Tennessee General Assembly's record of the bill.
The amount is a formula, which means a board can work it out tonight:
Tennessee's minimum theft coverage, from the General Assembly's bill summary.
- Reserves: The reserve balance
- Plus: One quarter of a year's assessment income
- Floor: Never less than $10,000
Worked through the example. Say the 100-home community holds $60,000 in reserves and bills $96,000 a year in dues. Its minimum coverage is $60,000 + $24,000 = $84,000. If its current bond covers less, the premium line will move. Ask the agent to quote the new limit before the vote, and put the difference on the administration line.
Outside Tennessee, what coverage your association must carry depends on your state's statute and your governing documents; your documents and your attorney decide.
Worth knowing A bond sized to the reserve balance grows as the reserve grows. A board saving harder for reserves should expect this line to rise with it.
Force three: Reserves, from advice toward requirement
A reserve study tells a board what to save. In many places, nothing has required the board to actually save it.
California requires associations to inspect their major components at least every three years and to study their reserve needs over the next 30 years. As the state Senate Judiciary Committee noted in June 2026, current law does not require the association to fund its reserve account. That year the Legislature took up AB 2050, which, as the committee analyzed it, would require associations, beginning January 1, 2032, to fund their reserve accounts each year at least at the minimum contribution level their reserve study sets, and to move at least 15 percent of the annual budget into reserves in any year the study shows the account running out within 30 years. Check your own state's current law, and the bill's final status, before relying on it.
What it becomes in the budget. Use the reserve study's recommended contribution, not last year's transfer. In the example, the study calls for $30,000 a year and the community moved $18,600 last year. That gap, $9.50 per home per month, is most of the reason the example's dues rise from $70 to $80.
The 2027 budget: One line for each force
Before your board votes next year's budget, check each:
- Every insurance policy has a written renewal estimate, not last year's premium.
- Your theft or fidelity coverage limit has been checked against your state's rule and your documents.
- The reserve line uses your study's recommended contribution.
- Each change above has its own line, at a per-home monthly number.
- Every line that moved more than 10% has one sentence explaining why, and the paper behind it.
In the example, the reserve gap is $9.50, and a 15% insurance renewal would add $0.93 on top: two lines, each with a source, instead of one unexplained total.
Download the free 2027 Budget Quote Request Pack: three short letters a board sends this month, to its insurance agent, its reserve study provider and its attorney, so every new line arrives with paper before the vote.
Frequently asked questions
Why are HOA fees going up so much everywhere? Mostly because the costs behind them are rising: insurance premiums have outpaced inflation, states such as Tennessee are adding coverage duties, reserve funding is moving toward a requirement in places such as California, and some communities are catching up on reserves they underfunded for years.
Does Tennessee's new fidelity bond rule apply to every association? It applies to associations that collect common-expense assessments, starting January 1, 2027. Read the enacted text with your attorney to confirm how it applies to yours.
Can a board avoid an increase by skipping the reserve line? It can lower this year's number and raise the risk of a special assessment later. Whether dues can change, and by how much, depends on your governing documents and your state's law.
This article is general information, not legal, insurance or accounting advice. Every figure in the example is illustrative.