Palo Alto Audit Finds Hidden HOA Fees Undermining Affordable Homebuyer Program
Key Takeaway: A Palo Alto city audit found that undisclosed HOA fees burden low-income buyers in the Below Market Rate homeownership program, which has just 247 homes and built none in the 2010s.
Palo Alto’s affordable homeownership program is being undermined by hidden homeowners association fees and an aging stock of homes, a city audit has found. The Below Market Rate (BMR) purchase program covers about 10% of the city’s existing affordable homes, and the audit by Kate Murdock of Baker Tilly, the city’s auditor, recommends greater fee transparency, San Jose Spotlight reported.
The program has just 247 active BMR ownership homes, the vast majority built before 2000. None were built in the 2010s, and only 15 more have been added this decade as of 2025, Palo Alto Online reported in the original story published Wednesday, October 14.
What the audit found
The audit’s central finding is a lack of transparency around HOA fees, which the program does not control but which may affect whether a household can remain in its home or maintain it over the long term. The audit recommends increasing fee visibility for prospective buyers, working with nonprofit Alta Housing to identify significant HOA dues and maintenance pressures, and starting to track formal complaints.
The initial sale price is set by the Planning and Development Department director, and Alta Housing solicits buyers from a waitlist that prefers people who live or work in Palo Alto, Palo Alto Online reported.
“These (HOA) expenses are not controlled by the (below market rate housing) program, but they may affect a household’s ability to remain in the unit or maintain it over the long term”.
Palo Alto City Auditor’s report, via San Jose Spotlight
An aging program with no replacements coming
Some of the earliest BMR homes, built in the 1970s, could exit the program by 2033 if not transferred, and with no construction in the 2010s there is no corresponding replacement cohort to offset future losses. The city holds a right of first refusal on some homes, letting it buy back properties to preserve affordability, Hoodline reported.
The longstanding resale formula makes older homes significantly cheaper than newer ones, so waitlisted buyers hold out for older homes while newer units are harder to place. The audit recommends following Mountain View’s strategy of formally tracking BMR turnover and vacancies.
“there is no corresponding replacement cohort to offset potential future losses in the near term”.
Palo Alto City Auditor’s report, via San Jose Spotlight
Council reaction
The Policy and Services Committee discussed the findings at its meeting on Tuesday, October 13, 2026, and voted unanimously to approve them, though full City Council action may not come until 2027.
Committee chair Julie Lythcott-Haims questioned the broader strategy behind the stalled production. Housing Rights Commission chair Michelle Kraus called the situation “an issue of retention”, and Vice Mayor Greer Stone said she was “constantly surprised and frustrated” by hidden HOA costs in listings, per San Jose Spotlight.
“The big zero there jumped out at me”.
Councilmember Keith Reckdahl, via San Jose Spotlight
What happens next
The auditor’s recommendations now head toward potential policy changes: clearer fee disclosures for buyers, coordination with Alta Housing on dues and maintenance pressures, formal complaint tracking, and turnover monitoring modeled on Mountain View’s approach.
“If you build it, will they come? And if they don’t, what have we done wrong?”.
Julie Lythcott-Haims, Policy and Services Committee chair, via San Jose Spotlight
Key Story Metrics
| Figure | Reported Status |
|---|---|
| Active BMR ownership homes | 247 |
| Share of the city’s existing affordable homes | About 10% |
| BMR ownership homes built in the 2010s | 0 |
| Built this decade (as of 2025) | 15 |
| Earliest 1970s homes could exit the program | 2033 if not transferred |
| Committee vote | Unanimous approval, October 13, 2026 |
| Full City Council action | Expected in 2027 |
✓ Verified
The audit’s core figures (247 active BMR ownership homes, zero built in the 2010s, 15 built this decade, about 10% of existing affordable homes, and the 2033 expiry horizon) are consistent across all three outlets: San Jose Spotlight, Palo Alto Online, and Hoodline.
⚠ Still needs confirmation
Additional secondhand context (San Jose’s June 2026 audit figures, the $205,500 Santa Clara County area median income, 2014-2022 housing permit numbers, and the $41 million Hamilton Avenue garage vote) appeared in only one outlet’s coverage and was excluded from this article.
Frequently Asked Questions
How many BMR ownership homes exist in Palo Alto?
247 active homes, according to the audit, and the vast majority were built before 2000.
Why were none built in the 2010s?
Partly due to legal challenges to inclusionary housing requirements, City Attorney Chris Jensen told the Policy and Services Committee. This decade has added 15 as of 2025.
What did the audit recommend?
Increase the visibility of fees for prospective buyers, work with Alta Housing to identify significant HOA dues and maintenance pressures, start tracking formal complaints, and follow Mountain View’s approach to formally tracking turnover and vacancies.
When will the full City Council act?
The Policy and Services Committee voted unanimously on October 13, 2026, to approve the findings. Potential policy changes may not reach the full council until 2027.
Editor’s note: The original sjspotlight.com page could not be reached at publication time; the San Jose Spotlight reporting was verified through its MSN syndication and cross-checked against the Palo Alto Online original.
