If your association's last reserve study is from 2019 or earlier, it priced every replacement at pre-COVID costs. Those costs have moved a lot. A board that budgets from that study is funding a plan built on prices that no longer exist.
This guide explains how far construction costs have moved, what that does to an old study, and the steps that fix it.
What happened to construction costs
The Bureau of Labor Statistics tracks a producer price index for the materials and services that go into new nonresidential construction. It is a broad measure of input costs. It excludes labor, so it understates what a finished project costs. Here is what it shows (BLS series WPUIP231200, as published by the Federal Reserve Bank of St. Louis):
| Period | Index (Dec 2014 = 100) | Change from Dec 2019 |
|---|---|---|
| December 2019 | 109.7 | n/a |
| December 2023 | 149.5 | about 36% higher |
| August 2026 | 168.3 | about 53% higher |
This index does not measure your roof or your paving. Roofing, asphalt, concrete, and lumber each moved on their own schedules, and bids in your market will differ. The table shows the direction and the scale. It is not a conversion factor for your study.
What this does to an old study
An old study goes wrong in four ways.
- Replacement costs are too low. Every line in the cost column was priced before the increase. The total the community needs to replace its components is higher than the study says.
- The funding plan is too small. The recommended annual contribution was sized to the old totals. Following it now leaves the reserve short of what the projects will cost.
- Percent funded misleads. The old study compares your balance to the old fully funded number. Against today's costs, the same balance covers less. A community that looked 70% funded may be well below that. Our guide to HOA percent funded explains how the figure is built.
- The calendar drifted. Some components aged faster or slower than the study assumed. Others were replaced, which resets their remaining life. Prices cannot tell you any of that.
What an inflation adjustment fixes and what it misses
Some boards ask for a simple escalation of the old numbers. That is a reasonable first step, and it is what a Level III update does when the study has no site visit. See our guide on how often an HOA should update its reserve study for the three levels.
| What you need | Cost adjustment only | Update with site visit (Level II) |
|---|---|---|
| Current replacement costs | Estimated by escalation | Re-priced from current conditions and quantities |
| Condition and remaining life | Carried over from the old study | Re-inspected |
| Components added or removed since | Missed | Caught |
| Completed projects | Only if the board reports them | Verified on site |
If the last study is more than a few years old, the site visit matters as much as the prices. Escalating numbers for a component that has failed, or was replaced, produces a precise answer to the wrong question. If the association has never had a full study, or the property has changed a lot, a new full study (Level I) is the better starting point.
Cost is also not uniform. Escalation applied as a single percentage across every line hides the fact that some components rose much more than others. A component-level re-price handles that.
Steps for the board
- Find the date and level of the last study. Check the cover page and the year the cost estimates were built.
- List what changed. Note completed projects, new amenities, damage, and bids the association has received since.
- Compare recent bids to the study's estimates. If actual bids come in well above the study, your plan is out of date. This is the most persuasive evidence you can show owners.
- Order the right update. Pick Level II or Level I when the study is old or the property has changed. Choose Level III only when the inventory is still reliable.
- Reset the funding plan and the budget. Adopt the new contribution schedule, or record why the board chose something else.
- Tell owners early. A dues increase explained with current numbers lands better than a special assessment after a bid arrives.
What happens after the update
Once you have current costs, the near-term projects need scopes and bids. Prices vary widely right now, so comparing bids side by side is worth the effort, and project oversight keeps the work matched to the contract. If you want the study itself refreshed, see our reserve study service.
This guide is general information, not legal or financial advice. Index figures come from the Bureau of Labor Statistics via the Federal Reserve Bank of St. Louis (FRED). Your governing documents and your association's attorney control what your board may levy or adopt.