SB 1007 and the Future of HOA Governance in California

For years, California HOAs have operated in a strange middle ground. They function like miniature governments, collect mandatory assessments, enforce rules, manage multimillion-dollar budgets, and make decisions that directly affect property values and quality of life. Yet they often do so with limited oversight and increasing pressure from rising costs, deferred maintenance, insurance instability, and homeowner distrust.

Now comes SB 1007, a proposed California bill that has sparked strong reactions across the HOA industry.

Supporters call it a long-overdue consumer protection measure. Opponents argue it could unintentionally destabilize associations financially and make it harder for boards to meet their obligations responsibly.

What is clear is this: if passed in its current form, SB 1007 would reshape how associations budget, communicate, and govern.

What SB 1007 Would Do

The bill, introduced by Senator Caroline Menjivar, focuses on three major areas:

Assessment increase limitations

Financial transparency requirements

Due process rules for homeowner discipline hearings

According to the current proposed language, associations would be restricted to an 8% annual assessment increase unless a majority of homeowners approve a higher increase through a membership vote.

That change is significant.

Under current California law, boards can generally increase regular assessments by up to 20% annually without a homeowner vote. SB 1007 would reduce that flexibility by more than half.

The bill also seeks to require clearer financial disclosures, increased transparency surrounding management company relationships and compensation, and expanded homeowner access to disciplinary hearing evidence.

On paper, many of these ideas sound reasonable. Transparency and homeowner education are important goals.

But HOA operations rarely follow predictable financial patterns.

Insurance markets fluctuate rapidly. Utility costs spike. Labor and vendor pricing continue climbing across California. Emergency repairs do not wait for election cycles. Reserve obligations are growing. Structural inspection requirements are becoming more demanding.

That is why this bill has become such a major concern throughout the HOA industry.

Why Many HOA Professionals Oppose SB 1007

Organizations across the HOA management and legal space argue that the bill oversimplifies how associations function financially.

An HOA is not a business generating profits. It is a nonprofit corporation responsible for maintaining shared infrastructure and common areas. When costs rise, associations cannot simply absorb them indefinitely.

If boards lose flexibility to raise assessments responsibly, there are concerns that communities could experience:

Increased deferred maintenance

Larger special assessments

Reduced reserve funding

Deteriorating property conditions

More financial emergencies

Greater risk of litigation

Lower property values over time

Ironically, legislation intended to make HOA living more affordable could create deeper financial instability later.

That concern becomes even more serious when mortgage lending enters the conversation.

The Mortgage Lending Problem Few People Are Talking About

One of the most overlooked consequences of SB 1007 is how it may impact mortgage lending and property values.

Lenders are already placing increased scrutiny on:

HOA reserve funding levels

Deferred maintenance

Structural integrity

Insurance stability

Financial health of associations

Following major condominium failures and growing concerns about aging infrastructure nationwide, mortgage agencies and lenders have become far more cautious about underfunded communities.

That means associations with weak reserves or visible maintenance issues may face:

More difficult loan approvals

Higher borrowing costs

Reduced lender confidence

Stricter underwriting requirements

If associations are restricted from raising assessments adequately to fund reserves and maintain infrastructure, communities could unintentionally become less attractive to lenders.

And when financing becomes harder or more expensive to obtain, property values are often affected.

This creates a dangerous cycle:

Boards cannot raise dues enough to fund reserves properly

Maintenance gets delayed

Reserve strength weakens

Lending scrutiny increases

Buyers face tougher financing conditions

Property values soften

Communities rely more heavily on special assessments

That is one of the industry’s largest concerns with the current version of SB 1007.

Why Some Homeowners Support It

At the same time, homeowner frustration is real.

Many residents feel disconnected from HOA financial decisions. Some owners have experienced steep dues increases with little explanation. Others feel disciplinary processes lack transparency or fairness.

SB 1007 attempts to address those concerns by requiring:

Simplified financial explanations

Greater transparency around management costs

Access to evidence before hearings

More homeowner involvement in major assessment increases

Supporters argue that associations wield enormous power over homeowners and should operate with stronger accountability standards.

And in fairness, many homeowners do not fully understand how their assessments are being used.

That communication gap has been growing for years.

The Competing Pressures

The reality is that California HOAs are caught between two competing pressures:

Homeowners want affordability.

Communities require funding.

Both are valid.

Boards are increasingly expected to:

Fund reserves properly

Address aging infrastructure

Meet new legal inspection requirements

Handle escalating insurance costs

Improve transparency

Avoid special assessments

Keep dues low

In many communities, all of those goals cannot coexist simultaneously.

That is why legislation like SB 1007 creates such intense debate. It forces California to confront a difficult truth about HOA living:

Shared ownership comes with shared financial responsibility.

There is no version of HOA governance where aging buildings, rising insurance costs, reserve obligations, and inflation disappear simply because assessment increases are capped.

What Happens If Associations Cannot Raise Assessments?

This is where the conversation becomes especially important for board members.

When regular assessments cannot keep pace with actual operating costs, associations often compensate in other ways:

Deferred Maintenance

Projects get postponed.

Roof replacements wait another year. Paint cycles stretch longer. Plumbing repairs become reactive instead of preventative.

Over time, that creates larger and more expensive failures.

Larger Special Assessments

Unfortunately, limiting gradual annual increases can lead to sudden large assessments later.

Instead of incremental financial planning, owners may face emergency assessments with little warning.

California has already seen this happen in communities struggling with infrastructure repairs and reserve shortfalls.

Reduced Property Values

Today’s buyers and lenders increasingly examine:

Reserve studies

Financial statements

Deferred maintenance history

Insurance strength

Special assessment history

Communities that appear financially unstable may become less attractive to both lenders and buyers.

Volunteer Burnout

Board service is already difficult.

Legislation that increases operational complexity without addressing broader financial realities may discourage qualified homeowners from serving at all.

That impacts governance quality long term.

Where the Bill Currently Stands

As of May 2026, SB 1007 remains active within the California Legislature and continues moving through the legislative process.

Importantly, the bill may still change significantly before any final vote occurs.

California HOA legislation often evolves heavily after industry feedback, committee review, lobbying efforts, and public response.

What Boards Should Be Doing Right Now

Whether SB 1007 ultimately passes or not, this legislation signals where the conversation around HOA governance is heading in California.

Boards should prepare now.

Improve Financial Communication

Even communities with strong finances often struggle to explain them clearly.

Boards should work closely with management companies, reserve analysts, and legal counsel to simplify financial communication for homeowners. Residents are far more likely to support necessary increases when they understand the reasoning behind them.

Review Reserve Funding Carefully

Associations that have delayed reserve contributions for years are especially vulnerable in the current environment.

Reserve studies should be updated regularly, and boards should understand the long-term implications of underfunding.

Document Decision-Making Thoroughly

Transparency matters more than ever.

Boards should maintain detailed meeting minutes, provide clear rationale for increases, and communicate proactively before major decisions.

Educate Homeowners

Many homeowners do not fully understand:

Reserve funding requirements

Insurance market pressures

Vendor inflation

Infrastructure aging

Lending scrutiny

Legal obligations boards must meet

Education reduces conflict and improves trust.

Stay Engaged Legislatively

This is not the time for associations to ignore Sacramento.

Board members, managers, and homeowners should actively follow pending legislation and communicate with legislators about the real-world operational consequences these decisions may create.

Organizations like Community Associations Institute are actively encouraging homeowner and board participation regarding the bill.

What Residents Should Be Doing

Homeowners also play an important role here.

If residents want lower dues, they should also understand:

reserve obligations

infrastructure costs

insurance realities

lender expectations

long-term maintenance planning

HOAs cannot function sustainably on frustration alone.

Residents should:

Attend board meetings

Review budgets

Read reserve studies

Ask informed questions

Vote in elections

Participate constructively

The healthiest associations are rarely the ones with the lowest dues.

They are the ones with informed homeowners, transparent leadership, and long-term planning.

The Real Question Behind SB 1007

At its core, this bill asks a much larger question:

What should HOA governance look like in modern California?

That conversation is only beginning.

The pressure on associations is not going away. Aging infrastructure, affordability concerns, insurance instability, and growing homeowner expectations will continue reshaping the industry over the next decade.

SB 1007 may ultimately pass, fail, or emerge in a heavily amended form.

But regardless of the outcome, the message is clear:

California homeowners are demanding more transparency, more accountability, and a greater voice in how their communities are governed.

The challenge will be finding a way to provide those protections without undermining the financial stability communities depend on to survive.