Homeowners association (HOA) dues in San Francisco are at all-time highs, making condo purchases harder for buyers already grappling with the highest interest rates we’ve seen in 20 years.
It’s no secret that HOA dues have been steadily rising, with a big uptick happening during the pandemic. Let’s face it, everyone working from home drove up operating costs like water use, property management, and of course, recycling all that cardboard and package material from deliveries. We can also more recently add escalating building insurance into the mix. HOA dues typically cover all these costs (and more). This is especially affecting in larger buildings, but even smaller ones are feeling the strain of keeping up with basic operating costs.
Only 192 condos of the 779 units currently listed in San Francisco have dues of $500/month or less. Half have monthly dues of $800 or more. And HOA dues unfortunately aren’t tax deductible.
High HOA dues seriously drive up buyer’s monthly payments. That partially explains why there’s so much inventory on the market in neighborhoods with larger, 20+-unit buildings like South Beach, Hayes Valley, Nob Hill, North Waterfront, Downtown/Financial District, Mission Bay, and Yerba Buena. (SoMa tends to have HOA dues on the lower side, incidentally.)
It’s worth mentioning that HOA dues are also based on a unit’s square footage. Buyers looking for spacious condos in large buildings will be paying upwards of $1,000/month, and closer to $2,000/month for ultra-luxe buildings, especially if they’re newer construction. I toured Nob Hill’s 875 California (photo above courtesy Polaris Pacific) last year with clients and liked the location and overall property. However, dues of $1,700/month for one of their 539-square foot one bedrooms currently on the market for $1,010,000 will likely be prohibitive for most buyers in this price range.
Similarly, HOA dues for a 2BR/2BA, 1,700-square foot unit in South Beach’s newer The Avery will run you just under $2,000/month. A 1,300-square foot 2BR/2BA unit listed for $1,259,000 at One Hawthorne (built 2010) in Yerba Buena carries dues of $1,500/month.
Granted, buyers in the higher price ranges may not be as sensitive to the HOA dues. But everyone is looking for a deal these days, and high HOA dues don’t convince buyers they’re getting a deal.
So how do we keep the condo market moving for properties that have high monthly dues? Here are some pro tips:
Buyers: Factor in HOA dues when you get preapproved for a loan , and be realistic about the dues range based on the type of property and location you want. Watch out for additional monthly costs that may cover other amenities like parking. (Some condo buildings have separate parking HOAs that carry a fee in addition to the regular HOA dues.) Work with your Realtor ahead of your property search to target buildings and neighborhoods with dues that will be affordable for you.
Sellers: Consider sweetening the pot by crediting one or two years’ worth of HOA dues to the buyer. That can help you stand out from the pack, particularly if your condo has been on the market for 30 days or more.