Protect homeowners from special assessments — or guarantee them

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OPINION – Two bills moving through the Legislature this session could fundamentally reshape how California’s homeowners associations manage their finances.

AB 2050 (Caloza-D) would mandate reserve funding for the first time, requiring associations to maintain balances that do not fall below zero over a 30-year horizon. SB 1007 (Menjivar-D) would cap assessment increases to the rate of inflation.

One requires communities to save. The other limits their ability to do so.

The stakes extend well beyond building maintenance. More than 14 million Californians live in HOA communities and nationally three out of four associations have reserves funded below the levels experts consider adequate.

Starting in 2027, Fannie Mae and Freddie Mac will require associations to allocate at least 15% of their annual budget to reserves or risk losing eligibility for conventional mortgage financing. For communities that do not get their finances in order, homeowners may not be able to sell to buyers who need a loan.

This is a housing market problem.

I know because I am living it. I bought my condo in Long Beach in July of 2024, after 25 years in a single-family home in Los Angeles. Shortly after moving in, I learned our association had serious cash flow problems. Neighbors asked me to step into the president role. I said yes without understanding what I was walking into.

Our insurance carrier told us we would be non-renewed unless we immediately replaced every electrical panel in the building and completed walkway and balcony repairs required under state law. The cost was over $100,000. Our reserves were nearly empty.

So, our board did the only thing we could. An emergency assessment for the electrical panels. A year-long assessment for the repair work. Two consecutive 20% assessment increases to keep up with rising insurance and inflation.

All of it landed on homeowners at once, many of whom are on fixed incomes and had no idea any of this was coming.

The first time a neighbor confronted me about the assessments, I was getting out of my car in the garage. It was not the last time. Texts, emails, face-to-face in the hallway. “Your assessments” were causing hardship. “Your assessments” were unfair.

I had been HOA president for a matter of months and had become the face of their financial pain. Few understood that the board was doing its fiduciary duty to fund mandated repairs and address maintenance that had been deferred for years.

California requires a reserve study every three years but has no requirement to actually fund the items the study identifies. It is the equivalent of requiring a diagnosis and hoping for the best.

Our reserve funding is below 10%. A costly elevator modernization a few years ago depleted the account, and the money was never replenished. This is not unique to our building. An estimated 43% of California associations are below the 50% funded mark.

The consequences are predictable. Associations with depleted reserves rely on special assessment votes to fund repairs that should have been planned for years earlier. Those votes often fail. Owners vote to kick the can down the road, and the can gets heavier every year.

When something finally breaks, the bill arrives all at once as a special assessment that can run tens of thousands of dollars per homeowner. These sudden costs disproportionately harm seniors and families on fixed incomes, the very homeowners who can least afford a surprise.

AB 2050 would address this by requiring associations to maintain adequate reserve funding over a 30-year horizon, with a 2032 operative date that gives communities six years to plan. This is what California needs.

Adequately funding reserves reflects the true cost of owning a home in a shared community. Every roof, elevator, and plumbing system has a lifespan. Planning for those costs is how we protect homeowners from financial devastation.

SB 1007 would move California in the wrong direction. The costs our building faces, from insurance to roofing to elevator repairs, have nothing to do with the price of groceries. An inflation-only cap would have made it illegal for our board to pass the very increases that kept our building insured and our walkways safe.

I love my building and my neighbors. But we need a financial framework that matches the reality of maintaining shared infrastructure, before more communities end up where mine is now.

Karin Kroener-Valdivia is the president of her condominium association in Long Beach.