California bill would cap HOA fee increases

from Nadia LathanCalMatters

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Robert Henricks reluctantly voted to increase monthly homeowner association fees in his San Diego County community, raising them by $100 a month to $550.

“With the cost of living, the cost of projects, we’ve put off raising the monthly assessment two out of three years,” said Henricks, who serves on the board of his Rancho Bernardo HOA.

But even he admits he’s now among thousands of Californians feeling stymied by rising HOA fees on top of unprecedented mortgage rates, utility bills and insurance premiums.

One solution is to limit the increase in fees. California lawmakers are considering a measure Senate Bill 1007which would limit how much associations can increase membership fees each year.

It’s the latest bill targeting HOAs and how they collect fees in the Legislature this session in an effort to address housing affordability. While the crackdown has been mostly successful and bipartisan, this biggest push to slow rising fees has divided some Democrats.

The Rise of the HOA

HOAs are almost ubiquitous in today’s housing market.

Nationally, 67 percent of all new single-family homes in 2024 were in HOAs, up from 46 percent in 2009, according to US Census Bureau. More than a third of Californians live in one, including about 65% of all California homeowners.

Californians also pay among the highest average monthly fees in the nation, nearly $300 a month, according to Census Bureau. The owners of the San Francisco Bay Area and Los Angeles can face even higher feesup to several thousand dollars per month.

In an HOA, the costs of maintenance, repairs and insurance are divided among the homeowners after the elected board members determine the annual budgeted expenses. Some funds go to routine maintenance of things like pools, clubhouses or golf courses, while others are earmarked for major projects like roof repairs.

They are self-governing and controlled by residents, who create and enforce their own rules, covering everything from what paint colors are allowed to what trees can be planted.

Under current law, contributions cannot increase by more than 20% each year.

The new proposed legislation would limit annual HOA fee increases to no more than 8% without a vote by HOA members.

“This bill is about giving information to the homeowner to know how much they’re going to pay,” Democrat Van Nuys Caroline Menjivarthe bill’s author said at a hearing in March.

“Pay me now or later?”

Consumer groups and realtors support the bill as a potential lifeline for low- and middle-income families already feeling squeezed by skyrocketing mortgage rates, gas prices and grocery bills.

Proponents cite examples such as a Walnut Creek Man whose monthly association fees are $1,500. Those fees, along with his condo insurance and property taxes, are now outpacing his mortgage.

The U.S. Department of Housing and most financial planners agree that Americans should pay no more than 30 percent of their monthly income for a home, and rising HOA fees prevent people from doing just that, said Marjorie Murray, president of the California Homeowners Association Law Center. at the March meeting.

“This is unsustainable. Even regular assessments raised by 20% will double in four years and triple in five,” she said. “Nobody’s salary, Social Security or retirement income is increasing at those rates.”

Excessive fines and retaliatory lawsuits have made HOAs polarizing for decades. But rising costs amid the affordability crisis have prompted multiple efforts by state lawmakers to rein in their power, including a new state law caps fines at $100 for violation.

One billed as “HOA Transparency Act” will push them to act more like local authorities when it comes to open records and public meetings. Meetings should be made more accessible to members and disciplinary actions cannot take place out of the public eye.

Another proposal requires associations stash money in savings account to help prevent expensive one-time assessment fees to pay for basic maintenance, a problem most common in older condominiums. Builders and brokers support it.

Follow the money

Under Menjivar’s bill, homeowners could still raise fees by more than 8 percent a year to cover the cost, but they would have to do so through a popular vote, said California Association of Realtors lobbyist Sanjay Wagle. The association has given more than $10 million to lawmakers since 2000, according to the CalMatters Digital Democracy database. He argued that most people would not leave a leaky roof or faulty plumbing unfixed, for example, because it would lower the value of their property.

“The blockers trust the homeowners. They will protect their investment,” Weigel said.

Construction groups are more skeptical. They worry that capping fees will hurt HOAs’ ability to maintain properties.

The divide became clear last month when six Democrats joined a majority of Republicans in voting against the bill during a Senate hearing, rare public opposition in the Democratic-controlled legislature, where lawmakers typically choose not to vote at all and not against the colleague’s account. It advanced on a 24-13 vote.

Opponents of the bill said it was unlikely that a majority of residents would agree to dramatically raise their own fees. This can lead to some downstream effects, such as banks being less willing to finance mortgages if HOAs are tight on cash.

And one lawmaker defended HOA boards, saying skyrocketing energy and insurance bills are to blame for rising fees.

“I don’t think HOA board members personally make or charge more than what they’re trying to do,” Encinitas Democrat Sen. Katherine Blakespear said who voted against the bill.

Henricks, who lives in an 88-unit condominium with his wife and cat, agrees.

He worries that the lower cap will turn into a “pay me now or pay me later” situation, where expensive projects in his 1970s-era two-story apartment — such as refurbishing all five of the building’s aging elevators — will become nearly impossible.

“That’s the number one major expense that we’re building our reserves to cover,” Henricks said. He said lower fee increases would result in gradual, more frequent increases in the future, rather than larger increases spread over several years.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.