When he purchased his condo unit at The Village at Petrini Place in 2010, David Polifko was making a bet on the up-and-coming Western Addition neighborhood. The area has changed, but so have his costs.
In the last 15 years, Polifko’s homeowners association dues have increased from $500 to $1,100 a month, vastly outstripping inflation. On top of that, he and his neighbors had to spend $600,000 two years ago for a major renovation triggered by a new state law requiring more scrutiny on balconies. Then, as scaffolding was erected around the 134-unit complex for the repairs, the residents’ pooled home insurance policy was abruptly canceled.
When the HOA found coverage through an alternative provider, the quoted premium went overnight from $98,000 to $964,000, roughly $7,194 per unit. The deductible for a disaster rose from $10,000 to nearly $100,000. “All of this just eats into what you can save,” Polifko said.
Condo owners across the city are navigating a perfect storm, as high interest rates, rising construction costs, an imploding insurance market, and a growing “blacklist” of distressed properties have conspired to diminish values and make some sales seem impossible.
“More and more people are questioning if they can sell their property today,” said Polifko, who serves as the HOA board president. One resident of Petrini Place, who purchased a unit for $675,000 in 2023, discovered this year that the balcony needed to be reconstructed after dark water staining appeared in January. The HOA had to pick up the $44,000 tab using its reserves.
“The condo market was already tough, and it’s not getting any easier,” Polifko said.
Throughout the 2010s, condo values climbed, even as San Francisco added thousands of units to its housing stock. Then came the pandemic, which upturned the real estate markets and left the condo category as one of the losers.
According to Compass data, the median value for a condo last year was down 6% from the peak in 2019. It takes nearly twice as long to sell a condo as a single-family home, the widest gap in 20 years.
Condos have traditionally represented a steppingstone to homeownership because of the lower price point and ability to resell for a gain.
But motivated buyers and sellers looking to close deals have a new roadblock to contend with: a confidential “mortgage blacklist” of some 780 condo complexes across California.
The list, maintained by government-sponsored Fannie Mae and Freddie Mac, contains properties considered to have inadequate insurance or in need of crucial repairs. Dozens of buildings have been added since February, according to Boston law firm Allcock Marcus, which has access to the list.
It’s nearly impossible to secure a conventional mortgage to buy a condo in a building that is on the blacklist. This means buyers often resort to alternative loans with higher interest rates and down payments — and sellers lose potential buyers who are put off by those hurdles.
Allcock Marcus’ latest tally counts 19 blacklisted properties in San Francisco, encompassing nine ZIP Codes and more than 2,550 units. The firm declined to share the addresses of the properties. Reasons for inclusion on the list include insurance issues, deferred maintenance, or litigation for safety and structural soundness.
Had Petrini Place failed to find an insurer or delayed its balcony inspections, it would have been a prime candidate for the list. But the HOA’s quick action spared it, according to brokers familiar with sales at the complex this year.
Homeowners there are in the clear for now, but they’ve got an increasingly higher price to pay for it.
Taking it year by year
A 2015 balcony collapse in Berkeley, which led to the death of 13 Irish exchange students, inspired SB 326, a state law mandating safety inspections.
The 2019 legislation requires any building with three or more units that have balconies “supported substantially” by wood to be inspected for damage. If a building is not greenlit by state inspectors by the end of this year, then lenders will not legally be allowed to provide new mortgages for units in the property.
It is not clear if there is a state-run database that tracks compliance. Two balcony inspection companies told The Standard they flag life-threatening damage to public officials for immediate fixes; otherwise, they document their assessments and provide them to the HOA.
When buyers apply for a home loan, underwriters must confirm that lender and state requirements are met before the mortgage can be processed. A borrower might be preapproved for a loan and have an offer accepted by the seller, but a deal could be held up if the property is found to be not in compliance with SB 326.
In the case of Petrini Place, the HOA opted to bundle the balcony inspections with other necessary capital projects — like repainting the 23-year-old property, waterproofing the windows, and fixing gutters and downspouts — since expensive scaffolding would have to be erected anyway.
Of the 134 balconies inspected at Petrini, engineers opened 27 to look for rot or decay. Of those, five required total reconstruction. In 2023, the HOA was quoted $25,000 for each repair, Polifko said. Two years later, when another balcony required reconstruction, the HOA was quoted $44,000 for the job, including the cost of new scaffolding.
“People have definitely lost their appetite for the HOA,” Polifko said of the community’s recent spending. “Which means the onus is on the board to make sure that money is spent well.”
Even with these costs, the condo owners at Petrini Place received what could be considered a reprieve in the current insurance market. Their insurance broker, Michael Miller, shopped the property to providers in an attempt to get a discount on the $964,000 premium quote they received from Lloyd’s of London in 2024.
He found a way to reduce that cost to $602,000 by utilizing the state’s FAIR plan to cover the first $20 million of the policy and piecemealing together three other providers to split the remaining liability, in what’s known as “wraparound” coverage.
The new fee represents a significant discount but is still more than six times what the property was paying just two years ago.
“The home insurance market [in California] almost collapsed 18 months ago,” Miller said, highlighting the exodus of several large providers. “You just got to see what the market bears year to year. It takes time for carriers to develop new products to meet the demand.
“No one wanted to take on [Petrini Place’s] first tranche [of $20 million] last year,” he added.
This year, the FAIR plan covers the complex only for fire, while the other insurers handle water damage and other liabilities.
Don’t expect home insurance prices to fall back to pre-pandemic levels anytime soon. Miller said any future insurance quote will be at least two to three times higher than those of 2019, since materials and labor are more expensive and consecutive natural disasters have wiped out major insurers’ reserves.
Despite these headwinds, Polifko views his home at Petrini Place as a good long-term investment. While fed up with the insurance industry and weary of paying more fees, the residents are largely happy with the results of the major projects that have been completed.
“There’s no sense in trying to time the market,” he said. “The only ideal time to buy is when you can afford it. At the end of the day, it’s yours.”