Budgeting in Inflationary Times

Read full article on New England Condominium. 

Over the past several years, rising costs have become an unavoidable reality for co-op and condominium boards and the managers who advise them. From everyday supplies to major capital projects, nearly every line item in an association’s budget has climbed, driven not just by inflation but by lingering supply-chain disruptions and labor shortages.  

For many boards, the fundamental question isn’t whether costs are rising, but rather how to plan and budget effectively in this environment.  

Inflation and Broader Cost Drivers 

Inflation continues to push up prices for materials and services, impacting many aspects of the real estate industry. Supply chain bottlenecks and a tight labor market, which were exacerbated by the pandemic and ongoing workforce changes, have extended project timelines and pushed vendor bids higher.

Ajo Kurian, Senior Vice President of Systems and Technology at AKAM, notes that these conditions require extra prudence in financial planning: “While vendors and contractors have adjusted pricing and services accordingly, co-op and condominium boards should plan to remain very prudent when it comes to budgeting and planning for projects. In addition to higher costs, timelines for repair and renovation projects have extended as well.”  

Practical Budgeting Strategies 

Given this backdrop, boards are being advised to take a more conservative and forward-looking approach to budgeting. Kurian recommends anticipating increases well above historical norms: 

“We highly recommend accounting for a five- to seven-percent increase in line items like materials and supplies for future budgets whenever possible. While this amount is double the typical forecasting, conservative budgeting will help cover any unexpected costs, even as we move towards more stability.”  

Boards can also mitigate some cost volatility by prioritizing critical systems and purchasing in bulk where feasible. As Kurian further observes, 

“The availability and pricing for products affected by supply chain issues (except oil) can shift at a moment’s notice. Co-op and condo boards should be thinking about their most critical building system services and supplies, and purchasing in bulk wherever possible.”  

Looking Ahead 

Budgeting in these inflationary times is inherently uncertain, and no forecasting method can offer perfect accuracy. Still, through careful planning, conservative assumptions, and transparency with members, boards can better weather cost pressures while maintaining financial stability. Robust dialogue among boards, managers, and vendors, combined with a strategic approach to budgeting, remains essential as associations work to absorb higher costs without jeopardizing long-term health.