California homeowners could soon face higher costs.
Homeowners association dues may rise across the state if Gov. Gavin Newsom signs a bill that could reach his desk before the end of the month.
Assembly Bill 2050 would require HOAs to plan for the next 30 years of expenses and conduct a formal review of their reserve funds.
Under the proposal, if an association’s reserves are expected to drop below zero at any point during that period, it would have to direct at least 15% of its gross annual budget into reserves beginning in January 2032.
When an HOA lacks enough money in its budget to meet that requirement, the bill would compel it to raise money through a special assessment charged to homeowners. The exact impact on monthly HOA fees remains unclear.
The potential change could affect millions of Californians. U.S. Census Bureau data shows that nearly one in four California households pays homeowners association fees.
Newsom has until September 30 to either sign AB 2050 into law or veto it.
The Consumer Federation of California has opposed the measure, arguing that any reserve requirements should be paired with limits on how quickly HOA fees can increase.
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“We’re not against reserving, but it ought to be combined with some reasonable limitations on what could be increased and how rapidly, along with some important guardrails on financial protection and responsibility so the residents don’t get ripped off because the board acts like a kangaroo court,” Robert Herrell, the organization’s executive director, told the San Francisco Chronicle.
“I don’t know that you want to sign a bill that’s essentially going to directly lead to massive assessment increases on 14 million Californians,” he added.
Supporters say the legislation would help HOAs prepare for long-term maintenance, repairs and other property-related expenses. Robert DeNichilo, legislative co-chair of the Community Associations Institute’s California Legislative Action Committee, told the Chronicle that the bill would account for “the actual cost of ownership.”
California HOAs can currently raise regular dues by as much as 20% per fiscal year without seeking approval from community members.
Condominium communities could feel the effects most sharply. Fannie Mae plans to require condo associations to place 15% of their annual budgets into reserves starting next year, up from the current 10% requirement.
Nathan Godin, a doctoral student at UC Berkeley’s Haas School of Business who studied a similar Florida law enacted in 2022, told the Chronicle that the measure could distribute HOA costs more fairly between current and future homeowners.
“You don’t want to be basically passing the buck on to future owners,” Godin said. “You want to have this month-to-month payment instead of expecting some future special assessment. It’s just better practice.”