The short answer: On September 29, 2026, Governor Newsom signed AB 2050, a new California law that, starting January 1, 2032, requires homeowners associations to fund their reserves at least at the minimum level in their reserve study, and requires associations projected to run out of reserves within 30 years to put at least 15% of their annual budget into reserves each year. Nothing changes in your 2026 or 2027 dues because of it, but underfunded associations will likely start raising dues before 2032 to avoid a forced special assessment. If you're buying a condo or townhome, the HOA's reserve health already affects whether you can get a conventional loan, so it belongs on your checklist now.

As of October 21, 2026.

What does California's new HOA reserve law actually require?

AB 2050 (Caloza) was chaptered as Chapter 796, Statutes of 2026, after passing the Assembly 65–4 and the Senate 30–3 (LegiScan, AB 2050 history). It amends the Davis-Stirling Act, the part of the Civil Code that governs HOAs, condos and other common interest developments.

Today, California associations must have a reserve study (an inspection of big-ticket items like roofs, paint, paving and elevators, with a 30-year funding plan) at least every three years. But current law requires the study, not the funding. A board can read the study and choose not to follow it. Starting in 2032, AB 2050 changes that (Senate Judiciary Committee analysis):

  • A funding floor. Every association required to have a reserve study must fund reserves each year at least at the minimum level in its most recent study.
  • A 15% rule for associations at risk. If the study projects the reserve account will go below zero at any point in the next 30 years, the association must transfer at least 15% of its gross annual budget into reserves every year until that shortfall disappears.
  • A special assessment backstop. If the regular budget can't cover the required amount, the association must levy a reserve special assessment, with a member vote required to go above the usual cap. Those funds must go into the reserve account, and associations can't levy this kind of reserve assessment more than once every nine years.

AB 2050 timeline

  1. 1

    Sept. 29, 2026

    Signed into law

    • Chapter 796, Statutes of 2026
  2. 2

    Jan. 1, 2027

    Law takes effect

    • Current reserve-study rules continue
    • No change to 2026 or 2027 budgets from this law
  3. 3

    2027–2031

    Runway years

    • Boards can raise reserves gradually
    • Watch your annual budget and reserve disclosure
  4. 4

    Jan. 1, 2032

    Funding rules apply

    • Fund at least the study's minimum level
    • 15% of budget if reserves are projected to go negative within 30 years
Simplified summary. Your association's governing documents and attorney are the final word. Source: LegiScan AB 2050 history; California Senate Judiciary Committee analysis

Will my HOA dues go up because of AB 2050?

If your association is already well funded, probably not because of this law. If it isn't, very possibly, and the increase may come well before 2032 as boards try to close the gap gradually rather than all at once.

This is where the two sides of the debate come in. The bill's sponsor, the Community Associations Institute's California Legislative Action Committee, and the California Association of Community Managers argued that steady reserve funding prevents deferred maintenance, emergency repairs and large surprise special assessments, and helps associations meet mortgage-market standards (Senate Judiciary analysis). Opponents, including the Consumer Federation of California, the Center for California Homeowner Association Law and Housing and Economic Rights Advocates, warned that it could sharply raise assessments for owners on fixed incomes and, in the worst case, push some toward foreclosure (Senate Judiciary analysis; CBS San Francisco, Sept. 23, 2026).

Both points are fair: a predictable monthly due is easier to plan for than a surprise special assessment, but only if you can carry it.

A hypothetical, for scale: an association with a $400,000 annual budget whose reserves are projected to run short would need to put at least $60,000 a year (15%) into reserves once the rule applies. Across 100 units, that averages $600 per unit per year, some of which may already be budgeted. Your association's numbers will differ.

How do HOA reserves affect getting a condo mortgage?

Most buyers don't hear about this until escrow. When you finance a condo with a conventional loan that will be sold to Fannie Mae, the lender must review the project, not just you and the unit. Fannie Mae's August 2026 guidance says (Fannie Mae, Project Standards FAQs):

  • 10% to reserves. Under a full review, the HOA budget must allocate at least 10% of assessment income to replacement reserves. Special assessments can't substitute for that. A reserve study can serve as an exception, but the budget must then meet the study's highest recommended funding level.
  • Limited Review is gone. For loan applications dated on or after August 3, 2026, loans are no longer eligible for sale to Fannie Mae under the old, lighter "Limited Review" process, so more condo loans now get the full project review.
  • Critical repairs. A project that needs critical repairs, or fails a required structural safety inspection, is ineligible until the work is done. That includes unfunded repairs costing more than $10,000 per unit that should be done within 12 months.

Reserve benchmarks condo buyers should know

10%Fannie Mae budget-to-reserves minimum (full review)15%AB 2050 transfer if reserves projected to go negative (from 2032)
Fannie Mae measures reserves against assessment income; AB 2050 uses gross annual budget. Source: Fannie Mae Project Standards FAQs (August 2026); California Senate Judiciary Committee analysis of AB 2050

So AB 2050 and the mortgage rules point in the same direction. Over time, a well-funded association means more buyers can get conventional financing, which supports resale value. An underfunded one can mean higher dues now, or a buyer pool limited to cash, portfolio or other non-agency loans later.

What should I check before buying a condo in California?

Ask for these early, ideally before you remove contingencies:

  1. The annual budget report and reserve disclosure. California associations must send owners a budget report each year that includes a reserve funding disclosure, including whether reserves are projected to be sufficient over 30 years.
  2. The latest reserve study. Look at the "percent funded" figure and the recommended contribution versus what the board actually budgets.
  3. Board minutes from the last 12 months. That's where talk of dues increases, special assessments, roof or balcony repairs, and litigation shows up first.
  4. Your lender's condo questionnaire, early. I order it as soon as we're in escrow, because a project problem is much easier to solve with time on the clock.

If you're comparing a condo with other paths to ownership, my guide to buying, remodeling or rebuilding in California covers the bigger trade-offs.

Reading from outside California? AB 2050 applies only to California associations, but Fannie Mae's condo project rules apply nationwide, so the reserve and critical-repair checks above matter wherever you buy.

Derek\'s take

In 20 years and more than 1,200 loans, some of the most stressful closings I've seen weren't about the buyer's credit or income. They were about the building. A great unit in an underfunded complex can turn into a surprise assessment or a loan that can't be sold to Fannie Mae. AB 2050 gives boards a clear runway to fix that by 2032, and as an owner or buyer, the best thing you can do is read the reserve numbers now instead of later. If you're eyeing a condo or townhome and want help reading an HOA budget, or want to know how a project's status affects your financing options, book a call with me. Thirty minutes, no credit pull, no obligation.

Frequently asked questions

When does California's HOA reserve law take effect?

AB 2050 takes effect January 1, 2027, but its funding requirements apply starting January 1, 2032. It doesn't change 2026 or 2027 association budgets.

Does every HOA have to put 15% of its budget into reserves?

No. The 15% transfer applies only when the association's reserve study projects the reserve account going below zero at some point in the next 30 years. All associations required to have a reserve study must still fund at least the study's minimum level.

Can my HOA levy a special assessment under AB 2050?

Yes. Starting in 2032, if the budget can't cover the required reserve funding, the association must levy a reserve special assessment, with a member vote needed to exceed the usual cap. It can't levy that kind of reserve assessment more than once every nine years.

Can an underfunded HOA stop me from getting a conventional condo loan?

It can. Under Fannie Mae's full review, the budget must allocate at least 10% to reserves (or meet a reserve study's highest recommendation), and projects needing critical repairs are ineligible until the work is finished. Other loan options may exist, so it's worth a conversation early.

This article is general education, not legal, tax or investment advice, a commitment to lend, or an offer of credit. For questions about your association's obligations, consult your HOA's board or a California HOA attorney.

Sources

This article is general education, not a commitment to lend, an offer of credit, or tax, legal or investment advice. All loans are subject to credit approval, income and asset verification, and property appraisal. Programs, rates, terms and limits change without notice; figures are current as of the publish date. Derek Shao, NMLS #242117, CA DRE #01358261. Financial Dynamics, Inc. DBA Emory Financial, Company NMLS #393986. Equal Housing Opportunity.