What 15% means for a real Michigan budget

Take an association with $400,000 in annual budgeted assessment income. The old floor was $40,000 a year to reserves. The new floor is $60,000. If the association is not already there, that $20,000 comes from somewhere — an assessment increase, a cut elsewhere, or the project becoming ineligible.

Ineligible means something specific and severe. A project that does not meet the standard cannot have its units financed with conventional loans sold to Fannie Mae or Freddie Mac. Cash buyers and portfolio lenders remain, and unit values move accordingly. Projects flagged “Unavailable” in Fannie Mae's Condo Project Manager are ineligible for sale to Fannie Mae outright.

The Michigan-specific problem

Michigan's condominium stock is old and heavily suburban. The state's housing stock has a median age of about 53 years, against a national median of 45. Older buildings have shorter remaining useful lives on every major component, which means a properly conducted reserve study recommends a larger contribution — and the new rules require the budget to carry the study's highest recommendation, not its most comfortable one.

So the two changes compound. An older Michigan project is more likely to have been using baseline funding precisely because a fully funded plan looked unaffordable, and is now required to abandon baseline funding and hit 15%.

A board's options between now and January

1. Find out which funding method your last reserve study used. If it was baseline, the study will not support a compliant budget after 3 August 2026, and it is already past that date.
2. Calculate 15% of budgeted assessment income and compare it to your current reserve line. This is a two-minute calculation and most Michigan boards have not done it.
3. Build the increase into the 2027 budget cycle, not the 2028 one. The threshold applies to loan applications dated on or after 4 January 2027, which means a unit going on the market in spring 2027 is already exposed.
4. Tell the owners why. An assessment increase framed as “the board decided” is a recall petition; the same increase framed as “units become unfinanceable without it” is a different conversation.

The bill that would have done this in Michigan law

House Bill 5784 would require a professional reserve study every five years for associations with more than 20 units or a $20,000 budget, and would require the board to fund to the study. It has been in House Regulatory Reform since April with no hearing, and its identical predecessor died the same way in the last Legislature.

The point worth making to a Michigan board is that the outcome no longer depends on that bill. The discipline is arriving through the mortgage market, and it arrives whether or not Lansing acts.

What to watch next

Whether FHA follows. It has not: no 2024, 2025 or 2026 Mortgagee Letter revises condominium project approval, and the governing framework is still the 2019 rule and Handbook 4000.1. For older, lower-priced Michigan condominium stock, FHA approval is now the more forgiving path — a divergence that is new as of 2026.