Stagflation – and What It Means for Your Community Association

In the world of community associations, where budgets are tight, reserve funding is critical, and every dollar must stretch further than the last, few economic conditions are more challenging or confusing than stagflation. While the term might sound like something out of an economics textbook from the 1970s, stagflation is making a worrying comeback in today’s headlines. And, if you are on the board of a condominium, homeowners’ association, or large-scale community, it is essential to understand what stagflation is, why it matters to you today, and how to preserve your association’s financial health during turbulent times.

What Is Stagflation?

Stagflation is the rare and unpleasant combination of stagnant economic growth, high inflation, and high unemployment. Typically, inflation and unemployment do not rise together. In fact, traditional economic models suggest they move in opposite directions. But during stagflation, prices go up, people lose jobs, and economic activity slows all at once, a perfect storm for anyone trying to manage long-term finances, especially in shared ownership communities.

The term gained prominence in the 1970s, when the U.S. faced an energy crisis, I waited in line for hours to get gas, double-digit inflation was over 20%, and sluggish growth happened all at the same time. Fast forward to today: global supply chain disruptions, rising energy costs, wage pressure, and a volatile geopolitical climate are reigniting fears of stagflation. And while the broader economy might be able to weather the storm with interest rate adjustments and fiscal policy, community associations are much more vulnerable.

Why It Matters to Your HOA or Condo Association

You might be thinking, “We are not Wall Street. We collect dues, pay bills, maintain the pool, and pave roads. True, but your association is also an economic microcosm. It relies on stable cash flow, predictable expenses, and well-structured reserve investments. Here’s how stagflation can potentially throw a wrench into that system:

1. Budget Shortfalls Become More Likely

Inflation drives up the cost of everything from landscaping to insurance. But if your community dues have not increased in step with these rising costs, you are essentially operating at a loss. In a stagflation environment, increasing dues becomes more difficult, especially if homeowners are experiencing job loss or wage stagnation themselves. Boards are stuck between rising expenses and a population struggling to pay more.

2. Reserve Funds May Lose Purchasing Power

Many associations rely on reserve funds to cover major capital projects, roof replacements, elevator upgrades, structural repairs. If those reserves are not properly invested, they risk losing value as interest rates change and inflation eats away at their purchasing power. A roof that costs $300,000 today might cost $360,000 next year in a stagflationary environment, meaning yesterday’s maintenance fee funding plan could be tomorrow’s shortfall.

3. Delayed Maintenance = Higher Future Costs

Faced with shrinking budgets, some boards may choose to delay or defer capital improvements. But in periods of economic uncertainty, deferring maintenance is often the costliest decision of all. Emergency repairs are almost always more expensive than planned replacements, and inflation only compounds the problem. What you put off today could double in cost within just a few years.

4. Home Values Could Suffer

Buyers are already cautious in a high-inflation, low-growth economy. If your association is underfunded, unable to maintain common areas, or forced to levy special assessments, you risk turning away potential buyers and lowering property values. In stagflation, perception matters—financial instability is a red flag for lenders, insurers, and future residents.

What Can Your Community Association Do?

So, what is the smart move? How does a board act responsibly in a climate of rising costs and economic stagnation?

• Review and Adjust Budgets Proactively

Do not wait for a crisis to act. Work with your management company and professional HOA financial advisors to reevaluate your budget quarterly, not just annually. Anticipate cost increases, and plan for them. If dues need to be increased, be transparent with owners and communicate the rationale clearly and early.

• Reassess Reserve Studies and Update Them for Inflation

Stagflation magnifies the risk of underfunded reserves. Make sure your reserve study reflects today’s costs and inflationary pressures. If your study is more than three years old, it is probably outdated. Partner with qualified reserve specialists who understand how to build in conservative inflation assumptions and recommend structured investment strategies to preserve and grow your reserves.

• Invest Reserve Funds Strategically

Any excess cash sitting in a non-interest, or low-interest-bearing account is losing value every day in a high-inflation environment. Associations need to consider how low-risk investment vehicles such as Treasury securities, insured CDs, and market-linked instruments can provide better yields with appropriate safety. This is where an experienced HOA investment advisor like The March Group becomes invaluable—we specialize in preserving capital while seeking returns that outpace inflation.

• Communicate with Transparency and Purpose

Homeowners may not understand terms like CPI, PPI, fixed-income bond yields, or real return, but they do understand rising costs. Consider hosting educational sessions for owners and stakeholders. Provide easy-to-understand newsletters and simplified visuals that explain how inflation affects the association. Transparency builds trust, and trust earns the support needed to take tough but necessary actions.

In Closing

Stagflation may sound like an abstract economic concept, but for your community association, its effects are very real. Rising costs, shrinking values, budget strain, these are the frontlines of economic pressure. But with proactive planning, smart investment strategies, and clear communication, your board can weather the storm.

The March Group has been guiding communities through economic cycles for over four decades. We have seen the seventies inflation crisis, the 2008 crash, and the pandemic-era upheaval, and we have helped thousands of associations preserve and grow their assets and plan for the future. Stagflation is not the end of the road—it is just another curve on the journey. And with the right team, your community can navigate it wisely.