California associations are facing what some are calling a long overdue relief package: a proposal to cap HOA assessment increases to the rate of the Consumer Price Index. Senate Bill 1007 sounds reasonable on the surface, because affordability matters. Nobody wants their HOA dues going up faster than their paycheck.
But here is the problem. Community associations are not landlords. They are not profit-driven businesses that can be compared to a grocery store or a gas station. They are not-for-profit entities that exist for one purpose: to maintain and protect the homes and shared spaces of the people who live within them. And what CA SB 1007 is proposing would tie their hands at exactly the wrong moment.
A community association that cannot maintain its property, fund its reserves, or keep up with insurance costs is not a more affordable place to live. It’s a more dangerous one… Affordability built on the back of deferred maintenance is not affordability. It’s debt with a delayed due date.
The Math Doesn’t Lie
Community associations operate on tight margins. Their income is the assessments they collect. Their expenses are everything it takes to keep the lights on, the roof sealed, the landscaping maintained, the pool clean, the elevators running, and the insurance active.
Those costs do not follow the Consumer Price Index.
Insurance premiums in California have been rising far above CPI for years, particularly after wildfire seasons. Contractor rates have climbed. Parts cost more. Water costs more. Labor costs more. When real operating costs outpace the cap, California associations have nowhere to go. If it costs a million dollars a year to run the community, the association must collect one million dollars. Not a penny less. It cannot cut profit—it doesn’t have profits. It can only cut services, defer maintenance, or hope nothing breaks.
Right now, a Board can raise regular assessments up to 20% per year without a member vote. SB 1007 would drop that cap to 8%, adjusted for inflation. Anything above 8% would require approval from a majority of a quorum of members. There is also a special rule for deed-restricted affordable housing units in communities formed after January 1, 2025, capping their assessment increases at 5% plus local CPI, not to exceed 10%.
Communities that are already struggling with delinquency will feel this most, since every unpaid assessment puts the association closer to the edge of what that cap allows.
California already has a model for businesses facing price constraints. Rental property owners operate under AB 1482 (California Civil Code Section 1947.12), which generally allows rent increases of up to 5% plus local CPI, capped at10% per year. The argument there is that landlords are running income-producing properties and need some protection from runaway rent hikes.
But that rationale does not apply here. California associations are not collecting income. They are collecting just enough to keep the community standing.
Insurance: The Hidden Crisis Inside the Crisis
Here is something the CPI cap conversation is missing almost entirely: HOA insurance.
California’s property insurance market is in turmoil. Carriers have been pulling out of the state, and those that remain are charging significantly higher premiums. Community associations are not exempt from this. In fact, many are more vulnerable because they carry blanket policies covering shared structures, common areas, and liability.
When an association cannot raise its budget, it faces a brutal choice: pay the higher premium and cut something else or reduce coverage and raise deductibles. Neither is acceptable. An association with inadequate insurance that suffers a major fire, flood, or structural failure is not just financially exposed. Its residents are exposed.
A CPI cap doesn’t have a carve-out for insurance market volatility. It doesn’t know or care that premiums in a wildfire zone went up 40% last year. It just says the number can’t go up more than the index. That is a problem with no good answer.
What Happens When the Money Runs Short
We’ve seen this play out before, and it’s not pretty. When an association cannot raise its budget to match its real expenses, a predictable chain of events begins:
- The Reserve Funds suffers. As operating budgets tighten, Boards raid reserves to cover day-to-day shortfalls. The reserve balance drops, but future repair needs do not disappear just because the money is gone.
- Then services get cut. The landscapers come less often. The cleaning crew gets cut to once a week instead of three times. The pool hours are reduced. The security patrols disappear. Residents notice.
- Next come the deferred repairs, and this is where things escalate. We saw it with the Surfside condominium collapse in 2021. Deferred maintenance is not just a financial problem—it is a life safety problem.
- And finally, a special assessment. And when the bill finally comes due (and it always does), the Board has no choice but to issue a special assessment. Suddenly, owners who were paying on time face a bill they were never expecting. Some can pay, sure. But not all. And so delinquencies rise, and the cycle of pain gets worse.
The Delinquency Effect
Even before a cap takes effect, delinquency remains one of the greatest threats to community financial health, and the cap would make this worse.
When an association is already operating at the edge of its budget and delinquencies rise, there is no buffer. Every unpaid assessment is money the association doesn’t have. Vendors don’t accept excuses. Insurance companies don’t defer bills. And when an association starts making late payments to its service providers, those providers start charging late fees or simply stop showing up.
There is no acceptable delinquency rate in a community association. None. Zero. If it costs a million dollars a year to operate a community, every dollar of that million needs to come in. A 5% delinquency rate is not a rounding error. It is fifty thousand dollars missing from the budget, and it means fifty thousand dollars of something doesn’t get done.
Communities that struggle with delinquency see it spread. When one owner stops paying and the board does nothing, neighbors notice. When the association stops enforcing collections out of inertia or lack of tools, more owners decide to wait and see. The association that acts early, consistently, and professionally keeps its delinquency rate low. The one that waits pays far more in the long run.
The End of Capital Improvements
Think about the projects that have been on the community wish list for years. New paint. Updated fitness equipment. Repaved parking areas. Improved lighting. A new sign at the entrance. These projects get funded when there is money in the budget beyond what is needed to keep the lights on.
Under a CPI cap, California association Boards will be in permanent survival mode. Every dollar collected will be spoken for before it arrives. There will be no room for improvement. Communities will age in place, not in the dignified way that phrase usually suggests, but in the way that means paint peeling, amenities breaking down, and the loss of curb appeal.
Property values in community associations are tied to the condition and reputation of the community itself. An aging, under-maintained HOA doesn’t just inconvenience its residents. It reduces the financial value of every home inside it.
The Reality for California Associations
In a perfect world, this legislation would make housing more affordable in California associations. But a community association that cannot maintain its property, fund its reserves, or keep up with insurance costs is not a more affordable place to live. It’s a more dangerous one. The deferred repairs and reduced services that follow budget caps won’t show up in the assessment statement, but they do show up in inspection reports, special assessments, and eventually in the asking price when an owner tries to sell.
Affordability built on the back of deferred maintenance is not affordability. It’s debt with a delayed due date.
Start Preparing Today
Financial stability now can make all the difference if CA SB 1007 passes and caps assessment increases. Managing delinquencies within your California association is a great first step in that process. Assessment recovery handled right, early, consistently, and respectfully, is one of the most important things a community can do to keep delinquency low and budgets healthy.
At Axela, we work with community associations across California and the country to help them protect their financial stability through HOA debt recovery technology. Our Easy Collect solution facilitates disciplined and ethical recovery of delinquent assessments without upfront costs to the association. Because every dollar collected is a dollar that goes toward keeping the community standing.
Contact us today to learn how resolving delinquencies can make a difference in your California association if CA SB 1007 takes effect.
