Reserve Studies

Percent Funded, Explained: What Your HOA's Number Really Means

Percent funded gauge showing HOA reserve fund health levels from critical to fully funded

Open any reserve study and one number dominates the executive summary: percent funded. It's the industry's standard measure of reserve health — and one of the most misunderstood figures in HOA finance. Here's what it actually measures and what counts as a good number.

The Concept: Savings vs. Wear

Every component in your community is quietly "using up" its value as it ages. A

00,000 roof with a 20-year life consumes $5,000 of value per year. Ten years in, $50,000 of wear has accumulated — that's the roof's share of your community's fully funded balance: the total deterioration across every component, priced in today's dollars.

Percent funded is simply:

Reserve balance ÷ fully funded balance × 100

If accumulated wear across all components totals $400,000 and your reserve account holds

80,000, you're 70% funded.

What the Levels Mean

100%+ — savings fully match accumulated wear. Maximum security; special assessments are rare at this level.
70–99% — the widely used threshold for "healthy." Assessment risk is low.
30–69% — underfunded. Gaps tend to surface within 5–10 years as components come due.
Below 30% — critical. Communities here face a high probability of special assessments or loans.

The Misconceptions That Trip Up Boards

"Percent funded is cash on hand." No — it's a ratio against wear, not a dollar target. A community with $500,000 saved can be worse funded than one with $80,000, if the first has far more accumulated deterioration.

"Below 100% means we're in trouble." Not necessarily. 100% is the ideal, but most well-run associations operate in the 70–100% band by design, balancing reserve health against dues pressure. What matters is the trajectory: a 75%-funded community holding steady is fine; a 75%-funded community sliding 5 points a year is not.

"100% funded means we can stop contributing." Components never stop aging, so wear accrues every single year. Even a fully funded association keeps contributing — it's just maintaining pace rather than catching up.

"The number is exact." It's built on life and cost estimates, which is exactly why studies need regular refreshing — see How Often Should an HOA Update Its Reserve Study?

Why Lenders and Buyers Care

Percent funded has escaped the reserve study and entered the real estate transaction. Lenders reviewing condo projects, insurers setting terms, and informed buyers' agents all use funded status as a financial health screen. A weak number can quietly cost owners at resale — one more reason boards should know theirs and be able to explain it.

What to Do With Your Number

Find it — executive summary, usually page one or two of your study.
Look at the trend, not just the level. Pull the last two or three studies and see which direction you're moving.
If you're under 70%, build a catch-up plan into the next budget cycle — gradual contribution increases beat emergency corrections every time.
Share it with homeowners. A board that reports its funded status annually never has to explain a dues increase from scratch.

Percent funded condenses your entire reserve picture into one trackable number. For where that number comes from and the rest of the report around it, see The Complete Guide to HOA Reserve Studies.