Community Associations are Caught Between a Rock and a Hard Place in California, but No One is Talking About it.

Yes, Axela Technologies is based in Florida, but we still care about what is going on in California. As national debt collectors for community associations, we pay attention to what is happening in other states. Lately, we’ve noticed a problem. California’s community associations are caught between a rock and a hard place financially, especially condo associations. With over 1,182,700 condo units in California (according to CAI), you think this would be big news. Oddly, no one seems to be talking about it, except CACM (the #1 resource for state-specific HOA management credentials in CA). We don’t understand why this isn’t getting more attention unless California’s cities want to end up like Detroit.

So, what’s causing community associations to be stuck in a financial rock and hard place, and what can we do about it? Let’s dive in.

How California’s Community Associations Got Caught Between a Rock and a Hard Place

California’s community associations are integral to the state’s housing infrastructure, especially given the vast number of condo associations within the state. However, these associations are currently facing a financial conundrum that has largely flown under the radar despite the potential implications for residents and the broader community.

Aging Infrastructure

The root of the financial strain lies in the aging infrastructure and deferred maintenance in most of these associations, most of which were constructed between the 1960s and early 2000s. That means they are somewhere between twenty and sixty years old. However, funds are typically only reserved for components with a lifespan of less than thirty years. But what about critical components such as foundations, building exteriors, elevated walkways, and balconies, which are deteriorating and pose significant risks but were not included in the reserve studies that dictate funding levels? California’s susceptibility to natural disasters, including floods, fires, and earthquakes, further threatens the integrity of these structures. Additionally, California has an extensive coastline and many condo communities near the coast, where constant moisture in the humid air speeds up wood rot and contributes to mold growth.

High Cost of Living

Moreover, California’s high cost of living compounds the issue, making it politically unpopular to raise assessments to fund necessary repairs and maintenance. This reluctance to raise dues and expedite assessment collections is at odds with the urgent need for infrastructure upgrades and disaster preparedness. Boards of directors in California face a real moral dilemma, especially in lower-income areas. Do they keep increasing assessments to keep up with the rising cost of repairs and maintenance when doing so may cause some to lose their homes to foreclosure, possibly contributing to delinquenciesand the overwhelming number of unhoused persons living in the state?

Legislative and Insurance Hurdles

Legislative and insurance hurdles present another layer of complexity. Recent legislative actions have aimed to restrict HOAs’ ability to raise funds through assessment increases while simultaneously mandating that costly inspections and repairs be reported to the government every nine years. This legislative squeeze is happening while insurance companies are withdrawing from the property insurance market for HOAs or hiking prices to unprecedented levels. CA condos are seeing property insurance increases that make mafia rates seem reasonable in comparison. 

What Can We Do About This Sticky Situation?

A multifaceted approach is required to address these challenges. However, if we don’t act now, California community associations will stay caught between a rock and a hard place.

  1. Raising awareness about community associations’ financial predicament in California is crucial. As one of the larger states in the nation, what happens in California tends to impact us all. Bringing this issue to the forefront of public discourse will make it a trending topic that can no longer be ignored.
  2. Engagement in legislative processes is also vital. Community members and associations must actively participate in legislative happenings and petition state representatives for solutions that facilitate financial stability rather than create insurmountable obstacles.
  3. Get connected with CACM. The California Association of Community Managers (CACM) stands as a beacon of advocacy and resourcefulness in these trying times, offering guidance and support to navigate the complex landscape of HOA management. Their efforts underscore the importance of professional management and informed decision-making in the face of such financial adversity.
  4. Communicate these issues to your homeowners. The more you maintain an open and honest discourse with the membership about the challenges community associations face statewide, the more they will understand when the board faces tough, unpopular choices. Furthermore, this education of the membership increases the odds that individuals will vote against proposed ballot measures that would make things even more difficult for the communities they live in.

As you can see, California’s community associations are at a critical juncture. The path forward requires a concerted effort from all stakeholders—residents, association boards, management companies, and legislators—to ensure the sustainability and safety of these essential components of California’s housing market. The time to act is now to prevent the financial rock from becoming an insurmountable mountain.

If you are a board member, community manager, or management company executive in California, we invite you to contact us to see how Axela Technologies can help you collect more delinquent assessments while saving the association money and keeping foreclosures at a minimum. You’re in a tough spot, and we can help. 

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