California Housing Update: From Early Signals to Emerging Priorities in 2026

As the 2026 legislative session progresses, California’s housing agenda is beginning to take clearer shape. While early hearings focused on resolving second-year bills and setting the tone for the year, recent activity reflects a Legislature increasingly focused not just on where housing can be built, but on how projects can be financed and delivered in a challenging economic environment. Fiscal constraints continue to limit new spending, placing greater emphasis on regulatory reform, cost reduction, and targeted investments to sustain production and address homelessness.

Second-Year Bills and Early Outcomes

Second-year legislation continues to move through the process, with mixed results. Asm. Ash Kalra’s (D-San Jose) rent regulation proposal, AB 1157, which would have expanded the 2019 Tenant Protection Act to more renters and lowered the amount rent can increase each year, failed for a second time and is now off the table for the remainder of the session, underscoring the continued difficulty of advancing expanded rent caps. In contrast, AB 1406 (Ward, D-San Diego), which could enable greater homeownership by addressing condominium development constraints, has advanced to the Senate.

Several additional second-year housing bills are expected to re-emerge in revised form, including AB 660 (Wilson, D-Suisun City), AB 782 (Quirk-Silva, D-La Palma), AB 1276 (Carrillo, D-Palmdale), AB 1206 (Harabedian, D-Pasadena), and AB 6 (Ward, D-San Diego). These bills broadly reflect continued legislative focus on streamlining approvals, supporting infill development, and addressing cost drivers.

Housing Bond and Fiscal Constraints

With the state facing a multi-year structural deficit, opportunities for significant new programmatic spending remain limited. Against this backdrop, SB 417 (Cabaldon, D-Napa), the proposed $10 billion housing bond, remains one of the few major funding proposals under consideration. The measure has advanced through early committees but was shifted from a potential June ballot to the November 2026 election; it is currently in the Assembly. Its Assembly counterpart, AB 736 (Wicks, D-Oakland), also remains active, positioning the bond as a central component of the state’s housing program strategy.

The governor’s housing agency reorganizational plan provides for some additional financial relief: under the proposed budget trailer bill, at least half of private activity bonds for rental projects would be set aside and automatically awarded to projects funded under the newly-formed Housing Development and Finance Committee (HDFC). This enables HDFC-funded projects to move forward with all their funding instead of encountering delays due to multiple funding application deadlines.

Several bills have been introduced to expand funding mechanisms for housing. This includes:

AB 2020 (Gabriel, D-Encino): would allow affordable housing developers to move project reserves across their portfolios to stabilize projects under extreme financial pressure.

AB 2074 (Haney, D-San Francisco): would create a new, lower-cost financing option for high-rise residential developments near major regional transit hubs through a new revolving loan fund.

Reducing Cost, Increasing Feasibility

Policymakers are also focused on the “cost stack” of housing development. Rising construction costs, higher interest rates, insurance challenges, and local fees are converging to make many projects financially infeasible, even in jurisdictions with supportive zoning and streamlined approvals. As a result, legislators are exploring policies aimed at improving project feasibility, including reforms to impact fees, adjustments to the Density Bonus Law, and new tools to support middle-income and for-sale housing.

Notable bills include:

SB 328 (Grayson, D-Orinda): would limit fees charged by the State for hazardous waste remediation.

AB 2748 (Quirk-Silva, D-La Palma): would exempt affordable housing developments from being electric vehicle charger-ready until 2037.

SB 1036 (Grayson, D-Orinda) would require all jurisdictions to provide impact fee credits or a reduced fee when a project redevelops a site with prior similar usage.

SB 1117 (Cervantes, D-Riverside): would change how jurisdictions calculate impact fees for ADUs, allowing fees only for units greater than 750 square feet.

AB 2089 (Ward, D-San Diego): would expand the existing welfare property tax exemption for nonprofit affordable housing developers established by SB 4 (2023, Ward) to properties that risk losing the exemption due to the loss of a nonprofit managing general partner.

SB 1415 (Arreguín, D-Oakland): would grant a partial welfare property tax exemption to properties that include low- and moderate-income housing, with the exemption amount based on the share of units in the development reserved for those households.

Construction Innovation Gains Traction

At the same time, construction innovation is moving from concept to policy priority. The Select Committee on Housing Construction Innovation, led by Assemblymember Buffy Wicks, has elevated modular, factory-built, and other industrialized construction approaches as potential cost-saving strategies. AB 1815 (Wicks, D-Oakland) aims to facilitate further factory-built housing by limiting the ability of local jurisdictions to impose building standards that exceed the state’s.

Moving Forward

Taken together, these developments suggest that the Legislature is adapting to a more constrained and complex housing environment. With limited new funding available, policymakers are increasingly focused on improving the feasibility of housing production, scaling innovation, and refining existing programs.

As the session continues and the new California Housing and Homelessness Agency prepares for operations beginning July 2026, the key question will be whether these efforts can translate into meaningful increases in housing supply and measurable progress on affordability and homelessness across the state.