written 1/8/2026
Homeowners associations (HOA’s) are a specific asset classes that have underwriting guidelines of their own. As non-profit entities that often do not own anything short of an operating bank account, they are subject to a different type of scrutiny from underwriters and funders. On CleanFi.com, there are some specialty funders that will appear when you onboard a project as an HOA.
Issues to look for when qualifying an HOA for building improvement or maintenance financing
There are a a couple of common issues that will create challenges for an HOA seeking traditional financing, such as credit-based loans or capital leases:
– The first is lack of reserves. If HOA dues strictly cover the immediate needs of a building only, that leaves the organization vulnerable to sudden capital expenses. The lack of demonstrated ability to pay other obligations in order to take care of those sudden capital expenses implies an association that is not prudently managed. That scares creditors.
-The second is when an HOA maintains its books through the services of a member of the HOA, one who may not be qualified beyond a working knowledge of an electronic bookkeeping program, such as QuickBooks. In the best of cases, that member might be a certified public accountant. But if they are not willing to provide their CPA seal to the building’s financials, then their expertise does not add value to the credibility of those books.
– Finally, it is common for small HOAs to manage their building themselves rather than use a recognized, established management service. Typically, this comes from an effort to minimize the burden of Hoa dues on members. This is frowned upon by creditors who wants to see professional management and maintenance of the building in order to avoid erosion of value. Building management companies understand the process of planning for capital expenditures and are adept at providing a schedule of appropriate reserves so that the building is able to continue operating without deterioration.
It is more difficult for small HOAs to get credit than it is for larger HOAs. The reason is the creditor’s desire to even out their risk. The fewer the units in a building, the more likely that an increase in the late or delinquent rate of dues will destabilize the finances of the organization. Many credit-based funders set their HOA size minimum to 25 units, and project value minimum of $500,000 to $1M.
Third-party financing and HOA’s
For “energy independence” investments, such as solar or storage, another solution might be third-party owned financing, such as an operating lease or a power purchase agreement. Those investors span from sophisticated funds that manage large specialty portfolios to individual investors who feel that they know that particular asset class. For that financing mechanism, the minimum is more geared to the size of the system (for example, $500,000 min for solar).
Based on that reality, we can see that a small HOA that manages its own books and its own building, has less than 25 units, and has no reserves, needing to borrow less than $500,000, will have virtually no option available to them in the financial market no matter what improvement they are attempting to make from solar to HVAC from roofing to EV chargers from battery storage to water management.
A workaround for a homeowner’s ssociation that doesn’t meet one or more of the above critical criteria for project financing is to begin immediately increasing the dues to its membership in order to build up a reserve. The monthly increase should cover more than the anticipated monthly servicing of the debt for their improvement. it will demonstrate to the creditor that the membership is committed to the financing of their project and also to building up reserves beyond that for any unexpected capital expense that would befall them unexpectedly.
C-PACE and HOA’s
Commercial Property Assessed Clean Energy Loans is also very difficult for HOAs because C-PACE, by nature, puts a property assessment against the very property on which the improvement is being made. Typically, an HOA does not own property. It exists as an extension of the owners of units within a multi-family building, or the multi-office commercial building. The job of the HOA is to manage all of the common areas, which are the areas that are accessed by all members jointly and by guests, as well as the exterior envelope of the building.
It is true that sometimes common areas are owned by the HOA. However, those sections of the edifice cannot be tied to a specific parcel number with the county and therefore cannot be subject to a property tax assessment, which is a requirement of C-PACE financing. That is how the debt servicing on a C-PACE loan occurs: through the annual or bi-annual mailing of a property tax statement.
Also, any property that does not have its own parcel number cannot be subject to an independent valuation. One cannot evaluate how much a property is eligible for in C-PACE funds unless one begins with a valuation, given that C-PACE as a mechanism allows for only a portion of the free equity in any property value.
There are exceptions, of course. Some HOAs actually do own a building, such as a pool house and pool. They may have a free-standing gym or perhaps a golf course. Those entities might in fact have their own parcel number while being owned by the HOA. In that case, a valuation of those properties would create the opportunity for a C-PACE loan against the free and clear value of said entities, so long as the HOA held title.
In that case, the HOA could borrow up to 30% of the appraised market value of its real estate asset. For any of the improvements referred to above.
There have been instances where all members of the HOA were willing to take a share of the cost of the improvement via individual CPACE assessments against each of their individual units. While that is technically possible, it is never done. The reason for that is two-fold: 1. It transfers the mechanism from being commercial PACE to residential PACE. Very few C-PACE funders also do Residential PACE. Also, the extremely complex process of breaking up an assessment into dozens of small assessments he is administratively and financially prohibitive.
© 2026 Philippe Hartley for CleanFi.com