As we look ahead to 2025, community associations are poised to experience a significant demographic shift. Millennials make up 38 percent of homebuyers, and Gen Z is beginning to embark on homeownership as well. It’s not just TikTok dances that younger homeowners bring to the neighborhood: Executives and HOA/COA board members should be particularly cognizant of the financial burden incurred by Millennial and Gen Z homeowners – and what that means for future patterns in HOA delinquency.
Millennial and Gen Z Makeup
To understand how these generational shifts impact HOAs and COAs, it’s important to define the demographics:
- Millennials: Born between 1981 and 1996, this group is entering their late 20s to mid 40s, representing the largest share of new homeowners and the most impactful consumer segment to most industries.
- Gen Z: Born between 1997 and 2012, this younger cohort is just beginning to enter the housing market, with the oldest members in their late-20s. Those who manage condominiums in metropolitan areas have likely seen their share of new Gen Z homeowners.
These groups not only bring distinct financial pressures, but also present specific communication and payment behaviors that management companies and boards should consider when evaluating their technology offerings.
Why Younger Homeowners Bring Increased Delinquency
Millennials and Gen Zers face financial challenges that may cause a spike in delinquent assessments across the HOA/COA industry. Millennials, having endured the Great Recession and the COVID-19 Pandemic, struggle to match the earning potential of previous generations. A majority of Millennials are reported to spend nearly half their income on housing, and despite reaching middle age, 25 percent are still reliant on their parents to live comfortably.
For Gen Z, the financial picture is even more strained. This generation is entering the market with higher levels of debt due to rising housing costs, inflation, and student loans. According to a recent report from The Washington Post, Gen Z pays 31 percent more for housing than Millennials and has higher delinquency rates on credit cards and auto loans. These pressures suggest that Gen Z and Millennials may face greater difficulties in paying HOA or COA assessments, contributing to increased delinquency rates.
How Technology Can Prevent Spikes in HOA Delinquency
In reviewing the stats, one may be concerned of the impact in adequate reserves funding for HOAs and COAs as younger homeowners, so the saying goes, “enter the chat.” After all, on-time assessments are crucial for community financial health.
By utilizing the latest in AI-driven technology and digital payment offerings, management companies can proactively prevent increased delinquency while improving the recoupment of current past-due assessments – all without attorney involvement. Here’s how:
- Proactive, Personalized Communication: Utilizing predictive analytics, management company executives can determine the likelihood of repayment for past due accounts and the best path forward in terms of communication channel and timing – all while adhering to state legislative guidelines.
- Digital Payment Options: Incorporating digital wallets like Venmo and PayPal empowers homeowners to pay overdue assessments conveniently, improving collection rates. This is especially important for younger generations: A recent survey from Payments Dive finds that 61 percent of Gen Zers use digital wallets for loan payments, among other transactions.
- Automated Payments and Communications: Offering recurring payments while using Generative AI to automate regular communication will proactively prevent past due payments from moving into third party collections. In the same study mentioned above from Payments Dive, a whopping 48 percent of Gen Zers find it challenging to remember to pay bills on time. Not only will a recurring payment feature remove this barrier, but automated communications will serve as the gentle reminder most need to pay on time. Best of all, the management company doesn’t have to do anything to process these communications and payment features, as the technology takes care of it.
By adopting these solutions, management companies can proactively address generational shifts and prevent increased delinquencies that would prove costly to the community at large.
Want to know more about the trends shaping AR recovery in 2025? Read our latest report, AI at the Helm, to learn more about the key shifts and trends transforming the AR and collections process in community association management.
