New Bill Puts Millions of California Homeowners at Risk of Higher HOA Fee

The deadline is approaching for California Gov. Gavin Newsom to decide on a bill designed to protect homeowners, but which critics contend may raise homeowners association fees for millions of California residents.

According to Realtor.com, the bill, Assembly Bill 2050, was proposed in February by Democrat Jessica Caloza and co-authors Republican Diane Dixon and Democrat Richard Chavez Zbur.

It passed last month after several amendments were made to the proposal. It’s sitting on Newsom’s desk awaiting his signature by Sept. 30. But with concerns about housing costs weighing on the minds of many voters, Newsom’s decision may be fraught, Realtor.com noted.

According to the bill, HOAs handle the maintenance, repair, and replacement of community communal areas, “including, but not limited to, roofs, paving, mechanical systems, and critical infrastructure.” And, to protect the safety and property values of their residents, HOAs must “proactively and adequately save for these significant long-term structural and operational obligations.”

HOAs that don’t properly fund reserve accounts put homeowners at risk of needing to levy steep special assessments, the legislation continued.

The bill comes after several cases of large HOA special assessments on California homeowners, such as the condo owners in San Clemente who faced a $26,000 emergency assessment to replace their roofs, Realtor.com noted. Nationwide, almost 44% of homes for sale carry HOA fees, according to Realtor.com research.

Maintain Minimum Reserves

If signed into law, Realtor.com said that AB 2050 would require HOAs to maintain a minimum reserve contribution level to ensure that projected reserve balances do not fall below zero over 30 years.

If projections show that an association’s reserve balance may fall below zero at any time over the following 30 years, the legislation would require that it transfer 15% of its gross annual operating budget into its reserve each year until properly funded.

“AB 2050 is about affordability, fairness, and protecting homeowners from financial surprises. Today, homeowners are being hit with massive special assessments seemingly overnight because their associations haven’t adequately planned for major repairs, long-term costs, or natural disasters,” Caloza noted in a statement to Realtor.com.

“For families already struggling with the high cost of housing, an unexpected bill for thousands or even tens of thousands of dollars can be catastrophic. And for many first-time homebuyers, a condo is their first opportunity to own a home and begin building wealth. Unpredictable HOA costs jeopardize that dream,” she added.

Caloza said that the lack of predictability and sustainability compound the state’s ongoing affordability and housing crisis.

Additional Inspections

Caloza’s office referenced California SB 326, which requires additional inspections for any balconies, decks, stairways, or walkways more than 6 feet off the ground, Realtor.com reported. While previous safety requirements only included visual checks, Realtor.com noted that this bill requires the inspection of hidden framing elements, load-bearing wood supports, and waterproofing systems on a regular cycle.

Critics of the bill said they worry that increases could force many Californians out of their homes if fees become unmanageable.

Executive director of the Consumer Federation of California, Robert Herrell, and president of the Center for California Homeowner Association Law, Marjorie Murray, wrote for Capitol Weekly that taking 15% from an HOA’s operating account would still put strain on homeowners amid the affordability crisis, Realtor.com noted.

“AB 2050 doesn’t explain how the operating account, the money used for daily expenses—like paying the property manager and keeping the lights on—is to be replenished. The only logical answer is that the board would have to increase regular monthly assessments. State law lets HOAs raise regular dues 20% a year, though few homeowners see their income rise at this rate,” they wrote for Capital Weekly.

Caloza responded by saying the proposed bill is about responsible, long-term planning and avoiding unexpected assessments for homeowners and associations. The goal is to help homeowners plan, rather than being vulnerable to major bills overnight.

“Predictability is a critical part of affordability, especially for working families and first-time homeowners. No homeowner should be blindsided by a sudden special assessment that can run into the thousands of dollars,” she said.