Legislation signed earlier this month by Governor Gavin Newsom is intended to streamline California’s affordable housing finance system, lower construction costs and continue state funding for homelessness programs.
Assembly Bill 179, a housing budget trailer bill included in the 2026-27 state budget, changes how affordable housing projects obtain state financing and establishes new funding for disaster recovery, multifamily housing and local homelessness programs.
The Newsom administration said the legislation represents the next phase of its housing strategy, following environmental review changes approved in 2025 and other housing laws enacted since Newsom took office in 2019.
“When I took office in 2019, my goal was clear: to reverse decades of inaction on housing and homelessness and ensure there was enough housing and care for people to leave the streets,” Newsom said in a statement.
He credited state investments, partnerships with local governments and increased accountability for recent progress. He said the new legislation would reduce regulatory delays, expand financing options and help communities build housing more quickly.
The measure was signed as part of a state budget that the administration says is balanced without a projected deficit for the current or upcoming fiscal year. It preserves funding for several housing and homelessness initiatives, including the Homeless Housing, Assistance and Prevention program, commonly known as HHAP.
Affordable Housing Finance Changes
The legislation creates what state officials are calling a “One-Stop Shop” financing system for affordable housing developments.
Under the existing system, developers seeking public financing can be required to apply separately to multiple state agencies and undergo overlapping reviews. The new framework is intended to consolidate portions of the process, reduce duplication and shorten the time required to finance and approve projects.
The administration estimates that the financing changes, combined with modifications to development impact fees, could reduce affordable housing construction costs by $60,000 to $70,000 per unit. Those estimates have not yet been independently verified.
Officials said lower per-unit costs would allow existing state funding to support a larger number of homes.
The reforms come as state leaders prepare to ask voters to approve the proposed $11.25 billion Veterans and Affordable Housing Bond Act of 2026 later this year.
Disaster Rebuilding Assistance
The legislation also creates a Disaster Rebuilding Fund and allocates $100 million to reduce financing costs for homeowners rebuilding after wildfires and other disasters.
The program is intended to help affected homeowners obtain lower-cost financing to repair or reconstruct damaged homes.
Specific eligibility requirements and administrative details are expected to be established as the program is implemented.
Homelessness Funding and Local Requirements
The budget includes $900 million for another round of HHAP funding during the 2026-27 fiscal year.
The program provides flexible block grants to cities, counties and regional homelessness agencies for shelters, outreach, housing assistance and other services.
The new funding includes additional local matching requirements. It also requires cities with populations exceeding 300,000, along with the counties where those cities are located, to meet certain state “Prohousing” standards to receive funding directly.
The designation is awarded to jurisdictions that adopt policies intended to accelerate housing production, such as streamlined permitting, reduced development fees or increased residential density.
The administration said the requirements are designed to increase local investment and encourage policies that support additional housing construction.
Multifamily Housing Investments
The budget provides $500 million for enhanced state low-income housing tax credits and $200 million for the Multifamily Housing Program.
The tax credits are used to attract private investment in affordable housing developments. The Multifamily Housing Program provides financing for the construction, rehabilitation and preservation of rental housing for lower-income households.
Housing developers and local governments have argued that rising land, labor, material and financing costs have made affordable housing increasingly difficult to build without substantial public subsidies.
Housing Production Increases
California continues to face a housing shortage that has contributed to high rents, home prices and homelessness.
According to figures released by the Newsom administration, annual residential construction increased from about 70,000 homes in 2018 to approximately 111,000 in 2024, a 59% increase.
More than 682,000 homes have been built statewide since 2019, the administration said. Multifamily housing construction during the past five years was also higher than during any comparable five-year period in more than three decades.
State officials said housing streamlining laws enacted since 2019 reduced the average time between a development application and local entitlement approval from 160 days to 68 days in 2024, a decline of about 57%. The average period between entitlement and issuance of a building permit declined by 9%, according to the administration.
California jurisdictions have adopted housing plans intended to accommodate at least 3.6 million additional homes, including approximately 1.4 million affordable units. Adoption of those plans does not guarantee that the homes will be financed or constructed.
Homelessness Numbers Decline
The administration also cited recent federal and local data showing declines in homelessness.
Among 30 regional homelessness agencies that reported updated figures in 2025, unsheltered homelessness declined by 9%, according to the state.
Federal data cited by the administration showed California’s unsheltered homeless population decreased by 8,391 people, or 6.8%, during the most recent reporting period. The national decline was 2.9%.
California’s total homeless population declined by 2.8%, which the administration described as the state’s largest overall decrease since 2009.
State officials also said California recorded nationwide-leading reductions between 2023 and 2025 in homelessness among veterans, chronically homeless residents, young adults ages 18 to 24 and parents younger than 25.
Despite those improvements, California continues to have the nation’s largest homeless population, and housing remains unaffordable for many residents.
