California Legislative and Budget Outlook: A Session Shaped by Deadlines, Feasibility, and Transition

Article Contributor:  Holly Fraumeni de Jesus, Political Consultant, Lighthouse Public Affairs

As the 2026 legislative session begins, California policymakers are entering a compressed and consequential January. The Legislature reconvened on January 5, 2026, amid early bill-introduction deadlines and the Governor’s budget release on January 9. At the same time, proponents of 2026 ballot measures are racing toward the spring deadline to qualify initiatives for the November ballot, ensuring that housing, CEQA, and local finance debates will unfold simultaneously inside and outside the Capitol.

California’s housing and homelessness agenda remains tightly constrained by the state’s multi-year structural deficit, limiting the prospect of major new funding commitments in 2026. The one exception is the advancement of SB 417, a $10B bond measure to fund new and existing affordable homes, which cleared the Senate Housing Committee last week. Proponents aim to put the measure on the June primary ballot, which requires the legislature to pass the bill and for the Governor to sign it by January 22.

This measure is one of the few proposals for increased funding, as California is still projecting a $3B budget deficit. Given this, attention is increasingly focused on improving and streamlining program design, timing, and execution. The Governor’s 2026 budget focused on the ongoing reorganization of housing departments and implementation of the California Housing and Homelessness Agency (CHHA), approved during the 2025 legislative session and scheduled to take effect on July 1, 2026. The budget proposed “changes to improve alignment of affordable housing programs…to better coordinate state housing resources” and strengthening the state’s largest ongoing housing capital program, Affordable Housing and Sustainable Communities (AHSC), which will be receiving up to $560M annually from Cap-and-Invest proceeds.

Meanwhile, new committee membership was announced in late December 2025, with the new Senate Pro Tempore, Monique Limon, sworn into office on January 6th. Senator Scott Wiener is no longer a member of the Senate Housing or Local Government policy committees and the Chair of the Budget Committee. Senator John Laird now serves as Chair of the Senate Budget Committee, and Senator Melissa Hurtado chairs Budget Subcommittee No. 4 on State Administration, which oversees spending on state housing programs. Senator Jesse Arreguin now chairs the Senate Housing Committee, while Senator María Elena Durazo continues to chair the Senate Local Government Committee.

After years of aggressive land-use and permitting reform, the Legislature appears increasingly focused on whether projects can pencil financially. Rising construction costs, insurance constraints, and higher interest rates have shifted attention toward the capital stack and risk allocation. The newly formed Assembly Select Committee on Housing Finance and Affordability is expected to play a central role, examining cost drivers, financing tools, insurance availability, and the use of public land to unlock stalled projects at scale. Homeownership is emerging as a central theme, and Asm. Buffy Wicks (D-Oakland), Chair of the Assembly Appropriations Committee, has convened a group of colleagues to develop a package of bills aimed at expanding homeownership opportunities.

Several housing-related two-year bills that passed their house of origin in 2025 will resume movement this session, offering early signals of where lawmakers intend to focus. These include:

• AB 1294 (Haney), which would advance a universal application framework for housing project approvals, aiming to reduce duplicative local and state processes.
• AB 557 (McKinnor), which would extend timelines for factory-built housing reforms to allow additional coordination with the Department of Housing and Community Development.

In addition, several measures that stalled or evolved during the prior session are expected to re-emerge in revised form, underscoring the Legislature’s continued interest in refining, rather than reinventing, recent housing reforms. These include:

• AB 660 (Wilson), which seeks to streamline the post-entitlement phase of housing development by tightening permit review timelines and tying compliance to the Housing Accountability Act.
• AB 782 (Quirk-Silva), which would amend California law governing subdivisions to prohibit the Real Estate Commissioner from requiring duplicate financial security for improvements when a local agency has already required sufficient security for the same improvement, thereby preventing duplicative bonding requirements that can increase costs and delay housing projects.
• AB 1276 (Carrillo), which expands the protections of SB 330 (Skinner, 2019) to state and regional agencies to improve transparency, consistency, and predictability in the housing approval process across California. This bill also makes updates to the policies and standards governing statutory vested rights to provide greater clarity and predictability for housing projects.
• AB 1206 (Harbedian), which would require local agencies to establish preapproved single-family and multifamily housing plan programs, allowing qualifying housing plans to be posted publicly and then approved or denied ministerially within 30 days of use, streamlining the review process and potentially exempting qualifying housing from CEQA for small developments.

Meanwhile, several high-stakes housing-related ballot initiatives must meet the Secretary of State’s Spring 2026 deadline to appear on the November ballot:

• A State Homeownership Bond, sponsored by former Senate Majority Leader Bob Hertzberg, proposes a statewide investment to expand pathways to entry-level homeownership.
• A CEQA reform initiative, backed by the California Chamber of Commerce, aimed at curbing litigation abuse and streamlining approvals.
• A local tax and fee limitation measure, led by the Howard Jarvis Taxpayers Association, seeks to cap transfer taxes and raise voter thresholds for approving local revenues.

Even if not all qualify, their presence is already shaping legislative negotiations, reinforcing voter scrutiny of housing costs, approvals, and local finance authority.

Taken together, the opening months of 2026 suggest a Legislature less focused on sweeping new frameworks and more intent on making existing housing policy work under real-world fiscal and market conditions. With key deadlines, institutional transition, and ballot pressures converging, success this session will likely be measured by whether California can move from policy ambition to durable, financeable housing outcomes.