Why Are HOA Fees So High in San Diego, California?

It’s no secret that HOA fees vary by state; and in many cases, simply by the development itself. Fees can range from a couple hundred dollars a month to a few thousand; and although the average cost is more than $300 per month, in some states like California, it’s much higher. It’s important to note, however, that HOA fees are not static – they can go up each year or every few years, depending on the needs of the association.

What items do HOA fees cover?

Every HOA offers different services and amenities, which is one reason for the varying fees. If you are considering moving into a neighbourhood run by an HOA, make sure you get a copy of the budget, reserve study, and their Covenants, Conditions, and Restrictions (CC&R) for the exact breakdown of what is or isn’t covered. Typically, HOA fees cover the following:

• Administration and Management
• Maintenance
• Utilities
• Insurance
• Reserve funds

Why are HOA fees so high in San Diego, California?

There are a number of reasons California is seeing slightly higher HOA fees in recent years. Here’s a list of a few of them.

High water costs

Because much of California has experienced drought and low water levels in recent years, water costs have been rising more than those in other states. This contributes greatly to increased HOA fees, as these fees are often a large percentage of an association’s budget.

New legislation

Each year there are quite a few new laws signed by the governor in California that affect HOAs and how they operate. Many of these laws cause an increase in costs in order to comply with them. An example of a few of these recent laws include:

• Assembly Bill 5: One of the most significant new laws is Assembly Bill 5, which changes the legal definition of an employee. The law created Labor Code Section 2750.3 and affects any HOA using “independent contractors” who might be reclassified as “employees.” In addition, California’s new minimum wage law has increased employee costs for associations and every business the association uses. The minimum wage increase not only affects minimum wage workers but all others as well.
• SB 323: Adds several new requirements to the HOA election process which requires additional mailings and the need to hire an inspector of election for voting and counting of the ballots.
• SB 326: Requires periodic inspection of vertical elements in HOAs by an architect or engineer. The first inspection must occur by 2025, and again every nine years afterward. It applies to balconies, walkways, and other above-ground elements attached to the buildings. This will be costly since most likely there will not be enough architects and engineers to handle the demand, which will drive up the price.

HOA is under reserved

When an HOA without money in reserve is faced with expenses outside its general operating budget, the HOA will likely have two choices: increase HOA dues significantly right away, or levy special assessments.

The need to raise dues significantly and having special assessments penalize current owners for the HOA’s previous lack of planning. It’s much more fair and efficient to set aside funds each year for replacement costs as outlined in a Reserve Study. A small increase each year is usually much easier for the membership and will help to minimize delinquencies.

If you’re looking for an experienced HOA management company that understands how to keep costs as low as possible in San Diego, Associated Professional Services can help. Take a look at our services or contact us to request a proposal.