Overview

As I’ve written and podcasted about on several occasions, under the Davis-Stirling Act, California HOAs can raise regular assessments up to 20% every year without requiring consent from the homeowners. A new law currently wending its way through the Legislature, SB 1007, seeks to cut that ceiling by more than half, lowering the no-vote limit from 20% to roughly 8%. Homeowners squeezed by California’s cost of living tend to see that as overdue protection. HOAs facing insurance spikes, mandated repairs, and underfunded reserves tend to see it as a budget straitjacket. Both positions draw on real facts, and the bill has divided lawmakers on both sides of the aisle.

While the fee cap reduction is drawing the most attention, SB 1007 does more than lower that number. It would require HOAs to affirmatively disclose what they pay their management companies, give members a plain breakdown of what their dues fund, and show members how the HOA’s actual spending compared to what it budgeted for the year. It would also give homeowners a new right to review the evidence against them before an HOA imposes a fine or reimbursement charge. This Fact Sheet explains what SB 1007 is all about and how it would change the Davis-Stirling Act if it passes.

[SB 1007 remains a pending bill, not current law. Lawmakers have already amended it, they can amend it again, and it can die in committee. It’s also one of several bills targeting California HOAs right now, including a separate reserve-funding proposal set to take effect in 2032 that could conflict with the cap in ways neither bill fully resolves.]

Key Points

If it passes, SB 1007 would change the Davis-Stirling Act on four fronts, and only one of them, the fee cap, has drawn real controversy. The points below start with what the bill actually does, including the parts almost nobody is fighting about, and then lay out the strongest arguments on each side of the cap debate. Supporters and opponents both build their cases on real facts about California’s cost of living, HOA finances, and the way assessment increases compound over time. Because the bill remains in play and lawmakers keep amending it, nobody knows whether this bill will pass, and even if it does, what it will look like at the end of the process.

• Current law already lets your HOA raise regular assessments by up to 20% a year without a membership vote. Under Civil Code 5605, an HOA board can increase regular (general) assessments by as much as 20% over the prior fiscal year’s amount, and can levy special assessments totaling up to 5% of the HOA’s budgeted gross expenses, all without a membership vote. Anything above those two ceilings requires approval from a majority of a quorum of members voting by secret ballot. SB 1007 targets the first of those numbers, the 20% regular-assessment ceiling, and leaves the 5% special-assessment ceiling untouched. [For a detailed breakdown of when your HOA can and can’t raise assessments on its own, read my Fact Sheet, “When Can a California HOA Raise Assessments Without a Vote?”]
• SB 1007 would cut the no-vote ceiling on regular assessments from 20% to roughly 8%. The new law seeks to amend Civil Code 5605 to bar an HOA board from raising regular assessments by more than 8% above the preceding year’s regular assessment, adjusted for inflation, unless a majority of a quorum of members approves the larger increase. That “adjusted for inflation” language in the current draft leaves the true ceiling unsettled because readers can take it as a flat 8% or as 8% layered on top of an inflation figure, which would run higher. [Hopefully, the Legislature will address that in an amendment, as it will present a very real problem if its left as currently written.]
  • SB 1007 would add new financial disclosures. The bill seeks to amend Civil Code 5300 and Civil Code 5320 to require HOAs to state what they pay their management companies, give members a plain breakdown of what their regular assessments fund, and compare each year’s budgeted expenses against what the HOA actually spent, category by category. Homeowners rarely get a clean side-by-side of projected versus actual spending, and this requirement would expose an HOA board that routinely budgets one way and spends another.
  • SB 1007 would also give homeowners new due-process rights. The bill seeks to add a statute to the Davis-Stirling Act, Civil Code 5860, which will require HOAs to hand over any physical evidence they relied on, including photos, video, or audio, at least five business days before a disciplinary hearing or response deadline in which the HOA is seeking to impose monetary penalties or charges. It goes further and requires HOAs to produce the metadata behind any digital evidence, meaning the time, date, and location data embedded in a photo or recording. [That metadata requirement gives homeowners a way to test whether a photo actually shows what the HOA board claims it shows, and when.]
• Supporters build the case for the 8% cap on affordability and homeowner control. Consumer advocates, realtors, and many homeowners have made numerous arguments in favor of SB 1007. All of the more popular arguments rest on legitimate issues regarding California’s economy, or on the arithmetic of how assessments compound year over year. The most common arguments in favor of the 8% cap include the following.
  • California’s cost of living has already stretched household budgets before HOA dues enter the picture. Californians pay more than residents of almost any other state for housing, groceries, and fuel, so the same dollar buys less here than it did a few years ago and less than it buys elsewhere. When an HOA runs a 20% dues increase on top of that, it compounds a squeeze that’s already well underway. Supporters argue that a lower cap keeps the HOA from piling onto a cost burden the rest of the state’s economy already imposes.
  • Californians already pay national-outlier prices for electricity and homeowner’s insurance in their own budgets. California’s residential electricity rates run roughly 87% above the national average and rank highest in the continental United States. Likewise, California’s homeowner’s insurance market has hit households with steep premium hikes and non-renewals over the past few years. Those are personal costs that drain a homeowner’s wallet before a single dollar of HOA regular assessments comes due. Supporters argue that homeowners already absorbing outlier energy and insurance bills have little cushion left for a 20% dues jump on top.
  • At its current 20% level, HOA dues can double in about four years and nearly triple in six. The current ceiling compounds, so a $400 monthly dues figure can reach roughly $830 in four years and close to $1,200 in six if an HOA board maxes out the increase every year. An 8% cap flattens that curve dramatically, stretching the same doubling from about four years to roughly nine. Supporters argue that the flatter trajectory gives families a real chance to keep dues aligned with the rest of their budget.
  • Wages, Social Security, and pensions almost never rise anywhere near 20% in a single year. Paychecks and fixed retirement income tend to move up by low single-digit percentages, if they move at all, while the current cap lets dues climb 10 to 20 times faster. That gap forces homeowners, and retirees on fixed incomes in particular, to cover a rising bill with income that stays flat. Supporters argue that tying the cap closer to the pace of ordinary income growth keeps HOA membership sustainable for people who can’t simply earn more to keep up.
  • The cap isn’t a freeze, because members can still vote to exceed it. Supporters argue that SB 1007 doesn’t forbid increases above 8%. It just requires the HOA board to win approval from a majority of a quorum of members before imposing one. Supporters argue that this puts the biggest decisions about a homeowner’s housing costs in the hands of the people who actually pay them, instead of leaving a handful of directors free to impose steep increases on their own.
• Opponents of SB 1007, however, build their case against the 8% cap on reserve health and unavoidable costs. HOA boards, building-industry groups, and many accountants have argued that SB 1007’s 8% cap won’t make an HOA’s real costs any smaller or solve any problem. The most common arguments that these opponents have asserted include the following:
  • A cap on regular dues today tends to produce larger, less predictable special assessments tomorrow. Opponents point out that an HOA’s costs don’t shrink just because the HOA board can’t raise regular dues to meet them, so the shortfall resurfaces later in the form of more one-time special assessments. Regular increases are smooth and foreseeable, while special assessments arrive in lump sums that can reach thousands of dollars at once, which is far harder to budget for. Critics call this a pay-me-now-or-pay-me-later problem, where the cap trades a predictable annual increase for an unpredictable future shock.
  • An 8% cap can’t stretch to cover insurance, mandated repairs, and other costs the HOA can’t control. The largest example is insurance, where California HOAs have faced premium increases that in some cases run several hundred percent in a single renewal cycle, along with non-renewals that force HOAs into far costlier coverage. [If you’re interested in learning some more about the impact of rising insurance costs on HOAs, read my Fact Sheet “The Impact of Rising Insurance Costs on California HOAs.” You can also watch an episode of my podcast, HOA HELL, where Sam and I discussed the insurance crisis in California HOAs in great detail.] Common-area energy adds to the strain, since HOAs pay for lighting, elevators, pools, and irrigation at the same outlier electricity rates that hit households. Mandated balcony inspections and repairs under the SB 326 Balcony Law, codified at Civil Code 5551, pile on further, because that law requires HOAs to fix what the inspections uncover no matter what the budget allows. Opponents argue that an 8% ceiling can’t absorb cost drivers of that size, which leaves the HOA underfunded or forces the very special assessments supporters designed the cap to prevent. [For what the Balcony Law requires and why its repairs are driving record assessments, read my Fact Sheet, “California HOA Balcony Inspection Law: What SB 326 Requires.”]
  • Capping regular dues will starve the reserves that HOAs need to fund major repairs. HOA boards fund reserves out of regular assessments, so a tighter cap gives boards less room to set money aside for roofs, elevators, and other big-ticket components as their replacement dates approach. Opponents warn that an underfunded reserve doesn’t make the eventual repair any cheaper, it just leaves the HOA scrambling to pay for it when the component fails. [This risk sharpens against a separate pending bill, AB 2050, which beginning January 1, 2032 would require HOAs whose reserves are projected to run dry over 30 years to shift at least 15% of their gross annual budget into reserves each year, and to levy a reserve funding special assessment, even above the assessment caps, to close any gap.] Opponents go on to argue that at a time where too many California HOAs have critically underfunded reserves already, any effort to make funding reserves harder will cause far more problems than a cap will solve.
  • Chronic underfunding pushes HOA boards to defer maintenance, which is exactly what laws like the Balcony Law aim to prevent. When a cap keeps dues from covering real costs, cash-strapped HOA boards often delay repairs, recreating the deferred-maintenance conditions those safety laws exist to stop. A wood balcony left uninspected and unrepaired is the exact hazard behind the 2015 Berkeley collapse that led to SB 326’s Balcony Law. Opponents warn that deferral also raises the HOA’s exposure to negligence claims and to lawsuits from homeowners when the HOA fails to maintain the common area it’s legally obligated to keep up.
  • A capped HOA raises its own odds of a Fannie Mae or Freddie Mac delisting flag. Both Fannie Mae and Freddie Mac screen condo projects for red flags like underfunded reserves and deferred maintenance, and HOAs that fail to meet their minimum requirements result in those HOAs being delisted. In short, HOAs that are delisted blocks conventional financing for every unit in the project, which shrinks the buyer pool to virtually zero (leaving only cash purchasers). Opponents argue that a cap which quietly starves reserves can end up costing owners far more in lost property value than it ever saves them in dues. [For what these designations mean and how HOAs claw their way back to eligibility, read my Fact Sheet, “California Condo Declared ‘Unavailable’ by Fannie Mae and How HOAs Can Fix the Problem.” You can watch Sam and I discuss the delisting problem in an episode of our HOA HELL podcast.]
  • The member-vote safety valve that supporters are touting often jams shut in the real world. Supporters treat the member vote as the release mechanism for increases above the cap, but opponents counter that in the real world, relatively few members will vote to approve raising their own assessments, even when their HOAs genuinely needs the money. The bill’s own critics in the Legislature raised exactly this point. Opponents argue that a well-run HOA board facing a real funding gap can find itself unable to close it, leaving the HOA underfunded by default no matter how responsibly its board run it.
• If your HOA is raising dues, levying a special assessment, or hiding the numbers, call the HOA attorneys at MBK Chapman. The HOA attorneys at MBK Chapman spend their days holding California HOAs to the assessment limits, notice rules, and disclosure duties the Davis-Stirling Act already imposes, and they know how bad HOAs work to sidestep each one. If you live in a bad HOA and its pushing for an assessment that doesn’t add up or its skipping a vote the law requires, contact us, and we’ll handle your HOA.

SB 1007 forces a genuine tradeoff, and both supporters and opponents have valid points. A lower assessment cap shields homeowners from dues that outrun their incomes, and it hands them a direct vote over the larger increases. That same cap can also leave HOAs short of what their insurance, repairs, and reserves actually cost, which tends to resurface as special assessments, deferred maintenance, or a financing flag that hurts every owner’s property value. The bill is still moving, its “adjusted for inflation” language still isn’t settled, and it shares the field with other HOA measures that could reshape the math again. Stand by for updates as things progress.

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About Michael Kushner

Michael Kushner is a California attorney with over 30 years of experience representing homeowners in disputes with their HOAs. He is widely regarded as California’s leading homeowner-side HOA attorney, and has built one of the state’s most prominent law practices dedicated to holding HOAs accountable under the Davis-Stirling Act and California law.

In addition to his law firm’s work, Michael is a recognized lecturer, author, and the host of the hit HOA HELL podcast, where he provides homeowners living in HOA-governed communities with clear, practical strategies for dealing with bad HOAs. He’s also the author of the best-selling book, HOA HELL | California Homeowners’ Definitive Guide to Beating Bad HOAs, which has become a go-to resource for both homeowners seeking real-world solutions to their HOA disputes, as well as those good HOA board members who are interested in doing a good job.

About MBK Chapman Fact Sheets

Homeowners searching for answers online will often come across articles that appear authoritative, but are actually written as search-engine marketing content rather than by an experienced HOA lawyer. These pieces tend to prioritize keyword density over clarity, accuracy, or legal context, which often leaves homeowners more confused than informed.

At MBK Chapman, our Fact Sheets are part of our HOA Law Library and are written by Michael Kushner, an HOA lawyer with decades of hands-on experience representing California homeowners. In fact, Michael Kushner is the HOA lawyer who pioneered the systems and strategies used by some of California’s most successful homeowner-side HOA law firms.

Each Fact Sheet is deliberately concise, statute-based, and designed as a quick-reference guide to help homeowners understand key HOA laws and enforcement rules at a glance.

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